Updated January 7, 2021
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 prioritized
China’s acts, policies, and practices related to technology
the review of exclusion requests concerning medical
transfer, intellectual property (IP), and innovation are
products, resulting in new exclusions and extensions for
unreasonable or discriminatory and burden or restrict U.S.
some personal protective equipment (PPE) in short supply.
commerce. To counter them and obtain their elimination,
Separately, the USTR also requested public comments on
the Trump Administration imposed, under Section 301, four
whether to remove additional products covered by any list
rounds of increased tariffs on approximately two-thirds of
that are relevant to the U.S. response to the COVID-19
U.S. imports from China. However, to avoid harm to U.S.
pandemic. As a result, it recently granted new exclusions
interests, the USTR instituted “tariff exclusions†for certain
for certain medical-care products.
U.S. imports that would otherwise be subject to tariffs. This
is the first time that the agency has established an exclusion
Figure 1. Section 301 Exclusions
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, 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.
The agency 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 latest action in
response to the Coronavirus Disease 2019 (COVID-19)
pandemic suggests new exclusions might be limited in
Source: CRS with information from the Office of the USTR.
scope to medical supplies related to the COVID-19
Note: Figures may not reflect amendments to product-specific exclusions and
pandemic, and not be aimed at providing broader tariff
do not include requests submitted on or after March 25, 2020, in response to
relief.
85 FR 16987. However, exclusions granted to date and noted here may have
Background
been informed by those requests.
Section 301 Tariff Exclusion Process
In August 2017, long-standing concerns over China’s
policies on IP, subsidies, technology, and innovation led the
The tariff exclusion process enabled interested parties—
USTR to launch an investigation—under Section 301—into
including law firms, trade associations, and customs
those policies and their impact on U.S. stakeholders. The
brokers—to petition for an exemption from the Section 301
investigation concluded that four broad policies or practices
tariff increases for specific imports classified within a 10-
justified U.S. action: (1) China’s forced technology transfer
digit Harmonized Tariff Schedule of the United States
requirements, (2) cyber-enabled theft of U.S. IP and trade
(HTSUS) subheading. The time window to submit new
secrets, (3) discriminatory and non-market-based licensing
exclusion requests is now closed, but the USTR reportedly
practices, and (4) state-funded strategic acquisition of U.S.
continues to consider extensions of exclusions already
assets. Subsequently, as part of its efforts to pressure China
granted. While the USTR approved, on average, 35% of
to change these practices, the United States imposed
new requests under the first two actions, the approval rates
additional tariffs, of up to 25%, on certain U.S. imports
under the third and fourth actions were 5% and 7%,
from China under four separate actions (per Lists 1, 2, 3,
respectively.
and 4).
According to the USTR, all requests are evaluated on a
During the Section 301 notice, hearing, and comment
case-by-case basis. The agency has indicated that, in
period on proposed tariff increases, the USTR heard
determining which requests to grant, it considers the
numerous U.S. stakeholders who expressed concerns about
following: (1) availability of the product in question from
how additional tariffs could affect their businesses, as well
non-Chinese sources, (2) attempts by the importer to source
as U.S. consumers. In response, for each Section 301 action
the product from the United States or third countries, (3) the
regarding a new list of covered products, the USTR created
extent to which the imposition of Section 301 tariffs on the
a process whereby interested parties could request that a
particular product will cause severe economic harm to the
particular product be excluded from the tariffs, subject to
importer or other U.S. interests, and (4) the strategic
certain criteria. Title III of the Trade Act of 1974 does not
importance of the product to “Made in China 2025†or other
outline a formal process for exclusions or require the USTR
Chinese industrial programs. Past exclusions also have been
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Section 301: Tariff Exclusions on U.S. Imports from China
granted for reasons that are thought to include, among
pandemic in the United States. Specifically, the agency
others, U.S. national security interests and demonstrable
requested comments on whether to remove Section 301
economic hardship from the tariffs for small businesses.
duties on “medical-care products†related to the COVID-19
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 closed on June 25, 2020. Comments could be
on pending requests through Federal Register notices. The
submitted regarding any medical product subject to Section
“index†on the “USTR Exclusion Portal†also indicates the
301 tariffs, whether or not it was subject to a pending or
status of each request in the review process. When the
denied exclusion request. The notice asked that comments
“explain precisely how the product relates to the response
USTR has issued an exclusion, it has generally been valid
for one year after the exclusion notice is published in the
to the COVID-19 outbreak,†but it provided no further
Federal Register and retroactive to the imposition of the
guidance on the types of products that the USTR considers
to be “medical
tariffs (with the starting date varying by applicable list).
-care products.†The review of comments
Exclusions are not specific to the requestor, so any party
was to run parallel to, and was not to affect, any ongoing
importing a product covered by an exclusion may do so
product exclusion requests that were still under review.
under the exclusion and request retroactive tariff refunds
In response to these comments and the advice from
from U.S. Customs and Border Protection (CBP).
advisory committees, on December 22, 2020, the USTR
Through January 31, 2020, the USTR received a total of
determined to extend certain product exclusions on
52,746 exclusion requests, pertinent to all four actions. Of
medical-care products that were set to expire on December
these, 6,804 (13%) were granted and 45,942 (87%) were
31, 2020 (until March 31, 2020) and to grant new tariff
denied (Figure 1). Specifically, the exclusions are reflected
exclusions on additional medical-care products. The new
in 89 10-digit HTSUS tariff subheadings and 2,120
exclusions are reflected in 10 10-digit HTSUS tariff
specially prepared product descriptions—all of which cover
subheadings and 9 specially prepared product descriptions,
6,804 separate requests. Because most exclusions apply to
including clinical thermometers, disinfectants, surgical
specific products within a relevant subheading—not to
gowns, and face shields. The new exclusions will be
entire subheadings, CRS could not determine the exact
effective from January 1 through March 31, 2021. Because
amount of trade covered by the exclusions. The USTR has
these are new, importers will not be able to obtain refunds
also issued extensions to certain exclusions. They apply to
from CBP of past duties paid on the covered products.
42 (of the 89) HTSUS subheadings and 507 (of the 2,120)
Issues for Congress
specially prepared product descriptions. These extensions
In recent years, some Members have raised the issue with
have expired or are set to expire in March 2021.
the USTR of establishing or streamlining an exclusion
COVID-19 and Medical-Care Products
process during hearings and in letters to the USTR. For
The USTR announced in March 2020 that, prior to the
instance, for the third and largest action (List 3), a
COVID-19 outbreak, the agency had been working with the
bipartisan group of more than 160 Representatives urged
U.S. Department of Health and Human Services “to ensure
the Trump Administration to consider granting exclusions.
that critical medicines and other essential medical products
Subsequently, the joint explanatory statement to the
were not subject to additional Section 301 tariffs.â€
FY2019 appropriations law (P.L. 116-6) directed the USTR
Consequently, the United States had not imposed tariffs on
to establish a product exclusion process for that third stage
of tariffs within 30 days of the law’s enactment.
certain critical products, such as ventilators, oxygen masks,
During the
and nebulizers. The USTR indicated that, in recent months,
first session of the 116th Congress, some Members
it has prioritized the review of requests for exclusions on
introduced legislation to limit USTR’s discretion on
medical care products, resulting in exclusions granted on
whether and how to grant or deny exclusion requests. These
basic medical supplies, including gloves, soaps, facemasks,
proposals included the American Business Tariff Relief Act
surgical drapes, and hospital gowns.
of 2019 (S. 2362) and the Import Tax Relief Act of 2019 (S.
577/H.R. 1452).
Since March 2020, the USTR has exempted certain medical
products from Section 301 tariffs in several rounds of
As the Trump Administration contemplates making use of
exclusions. CRS could not determine exactly how many of
Section 301 authorities in a number of ongoing cases (e.g.,
them have been exempted on the basis of COVID-19
against France and Vietnam), Congress could consider
concerns, as the USTR does not specify the rationale for
amending Section 301. For example, it could establish a
granting exclusions in its announcements. While some
formal product exclusion process or set specific guidelines
products can be easily identified, there are others with
for when and how to grant exclusions. This could
known or potential medical uses—or inputs for the
potentially promote transparency, consistency, and proper
manufacture thereof—that have received exclusions but
application of standards in reviewing exclusion requests,
whose ultimate purpose cannot always be ascertained from
thereby helping to ensure that the USTR carries out Section
HTSUS subheadings or the provided product descriptions
301 objectives as prescribed by Congress.
(e.g., organic chemicals or textiles for the manufacture of
For more detail, see CRS Report R46604, Section 301 of
pharmaceuticals or PPE).
the Trade Act of 1974: Origin, Evolution, and Use, by
New Exclusions
Andres B. Schwarzenberg.
On March 25, 2020, the USTR published a Federal
Register notice seeking comments to determine if further
Andres B. Schwarzenberg, Analyst in International Trade
modifications to the Section 301 tariffs on U.S. imports of
and Finance
from China are necessary to respond to the COVID-19
IF11582
https://crsreports.congress.gov
Section 301: Tariff Exclusions on U.S. Imports from China
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https://crsreports.congress.gov | IF11582 · VERSION 8 · UPDATED