Updated October 26, 2020
Section 301: Tariff Exclusions on U.S. Imports from China
In 2018, the U.S. Trade Representative (USTR) determined,
to establish one. The determination to do so appears to be
pursuant to an investigation under “Section 301” (Title III
solely at the USTR’s discretion.
of the Trade Act of 1974, 19 U.S.C. §§2411-2420), that
With the COVID-19 pandemic, the agency has recently
China’s acts, policies, and practices related to technology
prioritized the review of exclusion requests concerning
transfer, intellectual property (IP), and innovation are
medical products, resulting in new exclusions for some
unreasonable or discriminatory and burden or restrict U.S.
personal protective equipment (PPE) in short supply.
commerce. To counter them and obtain their elimination,
Separately, the USTR recently requested public comments
the Trump Administration imposed, under Section 301, four
on whether to remove additional products covered by any
rounds of increased tariffs on approximately two-thirds of
list that are relevant to the U.S. response to COVID-19.
U.S. imports from China. However, to avoid harm to U.S.
interests, the USTR instituted “tariff exclusions” for certain
Figure 1. Section 301 Exclusions
U.S. imports that would otherwise be subject to tariffs. This
is the first time that the agency has established an exclusion
request process, and several Members of Congress have
raised concerns about its implementation.
In particular, some Members have questioned USTR’s
ability to “pick winners and losers” through granting or
denying requests or have pushed for broad tariff relief amid
concerns about the negative impact of tariffs on the U.S.
economy. Others, however, not wanting to undermine the
use of Section 301 to address China’s unfair trade practices,
have discouraged the USTR from granting tariff exclusions
at all. To date, the agency has established an exclusion
process for each of the four stages of tariff increases under

Section 301—all of which have now closed. The USTR’s
Source: CRS with information from the Office of the USTR.
latest action in response to the Coronavirus Disease 2019
Note: Figures may not reflect amendments to product specific exclusions and
(COVID-19) pandemic seems to indicate that new
do not include requests submitted on or after 03/25/2020 in response to 85
exclusions might be limited in scope to medical supplies
FR 16987. However, exclusions granted to date and noted here may have been
informed by those requests.
related to COVID-19, and not be aimed at providing
broader tariff relief.
Section 301 Tariff Exclusion Process
Background
The tariff exclusion process enabled interested parties—
including law firms, trade associations, and customs
In August 2017, long-standing concerns over China’s
brokers—to petition for an exemption from the Section 301
policies on IP, subsidies, technology, and innovation led the
tariff increases for specific imports classified within a 10-
USTR to launch an investigation—under Section 301—into
digit Harmonized Tariff Schedule of the United States
those policies and their impact on U.S. stakeholders. The
(HTSUS) subheading. The time window to submit new
investigation concluded that four broad policies or practices
exclusion requests is now closed, but the USTR is
justified U.S. action: (1) China’s forced technology transfer
considering extensions of exclusions granted from Lists 1,
requirements, (2) cyber-enabled theft of U.S. IP and trade
2, 3, and 4. While the USTR approved, on average, 35% of
secrets, (3) discriminatory and non-market-based licensing
requests under the first two actions, the approval rates under
practices, and (4) state-funded strategic acquisition of U.S.
the third and four actions were 5% and 7%, respectively.
assets. Subsequently, as part of its efforts to pressure China
to change these practices, the United States imposed
According to the USTR, all requests are evaluated on a
additional tariffs, of up to 25%, on certain U.S. imports
case-by-case basis. The agency has indicated that, in
from China under four separate actions (per Lists 1, 2, 3,
determining which requests to grant, it considers the
and 4).
following: (1) availability of the product in question from
non-Chinese sources, (2) attempts by the importer to source
During the Section 301 notice, hearing, and comment
the product from the United States or third countries, (3) the
period on proposed tariff increases, the USTR heard
extent to which the imposition of Section 301 tariffs on the
numerous U.S. stakeholders who expressed concerns about
particular product will cause severe economic harm to the
how additional tariffs could affect their businesses, as well
importer or other U.S. interests, and (4) the strategic
as U.S. consumers. In response, for each Section 301 action
importance of the product to “Made in China 2025” or other
regarding a new list of covered products, the USTR created
Chinese industrial programs. Past exclusions also have been
a process whereby interested parties could request that a
granted for reasons that are thought to include, among
particular product be excluded from the tariffs, subject to
others, U.S. national security interests and demonstrable
certain criteria. Title III of the Trade Act of 1974 does not
economic hardship from the tariffs for small businesses.
outline a formal process for exclusions or require the USTR
https://crsreports.congress.gov

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link to page 1 Section 301: Tariff Exclusions on U.S. Imports from China
There is no timetable for providing responses to filed
response. Accordingly, the USTR opened a new comment
requests, but the agency periodically announces decisions
period, which remained open until June 25, 2020.
on pending requests through Federal Register notices. The
Comments could be submitted regarding any medical
“index” on the “USTR Exclusion Portal” also indicates the
product subject to Section 301 tariffs, whether or not it was
status of each request in the review process. When the
subject to a pending or denied exclusion request.
USTR issues an exclusion, it is generally valid for one year
The notice provided no further guidance on the types of
after the exclusion notice is published in the Federal
products that the USTR considers to be “medical-care
Register and retroactive to the imposition of the tariffs
products.” In terms of the substance of the comments, they
(with the starting date varying by applicable list).
had to “identify [specifically] the particular product of
Exclusions are not specific to the requestor, so any party
concern and explain precisely how the product relates to the
importing a product covered by an exclusion may do so
response to the COVID-19 outbreak.” For example,
under the exclusion and request retroactive tariff refunds
comments could “address whether a product is directly used
from U.S. Customs and Border Protection.
to treat COVID-19 or to limit the outbreak, and/or whether
Through January 31, 2020, the USTR received a total of
the product is used in the production of needed medical-
52,746 exclusion requests, pertinent to all four actions. Of
care products.” In addition, comments were asked to
these, 6,804 (13%) have been granted and 45,942 (87%)
include, to the extent possible, the 10-digit “subheading of
have been denied (as of October 25, 2020) (Figure 1).
the HTSUS applicable to the product, and the identity of the
Specifically, the exclusions are reflected in approximately
particular product in terms of its functionality and physical
89 10-digit HTSUS tariff subheadings and 2,120 specially
characteristics (e.g., dimensions, material composition, or
prepared product descriptions—all of which cover 6,804
other characteristics).”
separate requests. Because most exclusions apply to
The review of comments is to run parallel to, and is not to
specific products within a relevant subheading—not to
affect, any ongoing product exclusion requests still under
entire subheadings, CRS could not determine the exact
review. The USTR has not indicated what form the
amount of trade covered by the exclusions. The USTR has
response will take or when it will respond to comments—
also issued extensions to certain exclusions that have
only that it will review them on a rolling basis. These
expired or are set to expire soon. These apply to 42 (of the
comments may already be informing product exclusion
89) HTSUS subheadings and 507 (of the 2,120) specially
decisions, or may lead to the establishment of a new formal
prepared product descriptions.
exclusion process, akin to that used for Lists 3 and 4, but
COVID-19 and Medical-Care Products
strictly for medical products.
The USTR announced on March 20, 2020, that, prior to the
Issues for Congress
COVID-19 outbreak, the agency had been working with the
In recent years, some Members have raised the issue with
U.S. Department of Health and Human Services “to ensure
the USTR of establishing or streamlining an exclusion
that critical medicines and other essential medical products
process during hearings and in letters to the USTR. For
were not subject to additional Section 301 tariffs.”
instance, for the third and largest action (List 3), a
Consequently, the United States had not imposed tariffs on
bipartisan group of more than 160 Representatives urged
certain critical products, such as ventilators, oxygen masks,
the Trump Administration to consider granting exclusions.
and nebulizers. Moreover, the USTR indicated that, in
Subsequently, the joint explanatory statement to the
recent months, it has prioritized the review of requests for
FY2019 appropriations law (P.L. 116-6) directed the USTR
exclusions on medical care products, resulting in exclusions
to establish a product exclusion process for that third stage
granted on basic medical supplies, including gloves, soaps,
of tariffs within 30 days of the law’s enactment. During the
facemasks, surgical drapes, and hospital gowns.
first session of the 116th Congress, some Members
Since March 2020, the USTR has exempted certain medical
introduced legislation to limit USTR’s discretion on
products from Section 301 tariffs in several rounds of
whether and how to grant or deny exclusion requests. These
exclusions. CRS could not determine exactly how many of
proposals included the American Business Tariff Relief Act
them have been exempted on the basis of COVID-19
of 2019 (S. 2362) and the Import Tax Relief Act of 2019 (S.
concerns, as the USTR does not specify the rationale for
577/H.R. 1452).
granting exclusions in its announcements. While some
As the Administration makes more active use of Section
products can be easily identified, there are others with
301 authorities to pressure other countries to eliminate their
known or potential medical uses—or inputs for the
trade barriers, Congress could consider amending Section
manufacture thereof—that have received exclusions but
301. For example, it could establish a formal product
whose ultimate purpose cannot always be ascertained from
exclusion process or set specific guidelines for when and
HTSUS subheadings or the provided product descriptions
how to grant exclusions. This could potentially promote
(e.g., organic chemicals or textiles for the manufacture of
transparency, consistency, and proper application of
pharmaceuticals or PPE).
standards in reviewing exclusion requests, thereby helping
New Exclusion Process?
to ensure that the USTR carries out Section 301 objectives
On March 25, 2020, the USTR published a Federal
as prescribed by Congress.
Register notice seeking comments to determine if further
modifications to the Section 301 tariffs on U.S. imports of
Andres B. Schwarzenberg, Analyst in International Trade
from China are necessary to respond to the COVID-19
and Finance
pandemic in the United States. Specifically, the agency
IF11582
requested comments on whether to remove Section 301
duties on “medical-care products” related to the COVID-19
https://crsreports.congress.gov

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Section 301: Tariff Exclusions on U.S. Imports from China


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https://crsreports.congress.gov | IF11582 · VERSION 5 · UPDATED

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