Updated March 16, 2021
Section 301: Tariff Exclusions on U.S. Imports from China
In 2018, the U.S. Trade Representative (USTR) determined,
With the COVID-19 pandemic, the agency has prioritized
pursuant to an investigation under “Section 301” (Title III
the review of exclusion requests concerning medical
of the Trade Act of 1974, 19 U.S.C. §§2411-2420), that
products, resulting in new exclusions and extensions for
China’s acts, policies, and practices related to technology
some personal protective equipment (PPE) in short supply.
transfer, intellectual property (IP), and innovation are
Separately, the USTR also requested public comments on
unreasonable or discriminatory and burden or restrict U.S.
whether to remove additional products covered by any list
commerce. To counter them and obtain their elimination,
that are relevant to the U.S. response to the COVID-19
the Trump Administration imposed, under Section 301, four
pandemic. As a result, it has recently granted new
rounds of increased tariffs on approximately two-thirds of
exclusions for certain medical-care products.
U.S. imports from China. However, to avoid harm to U.S.
Figure 1. Section 301 Exclusions
interests, the USTR instituted “tariff exclusions” for certain
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.
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 actions in response to the
Source: CRS with information from the Office of the USTR.
Coronavirus Disease 2019 (COVID-19) pandemic suggest
Note: Figures may not reflect amendments to product-specific exclusions and
that new exclusions and extensions might be limited in
do not include requests submitted on or after March 25, 2020, in response to
85 FR 16987. However, exclusions granted to date and noted here may have
scope to medical supplies related to the pandemic, and not
been informed by those requests.
be aimed at providing broader tariff relief.
Background
Section 301 Tariff Exclusion Process
The tariff exclusion process enabled interested parties—
In August 2017, long-standing concerns over China’s
including law firms and trade associations—to petition for
policies on IP, subsidies, technology, and innovation led the
an exemption from the Section 301 tariff increases for
USTR to launch an investigation—under Section 301—into
specific imports classified within a 10-digit Harmonized
those policies and their impact on U.S. stakeholders. The
Tariff Schedule of the United States (HTSUS) subheading.
investigation concluded that four broad policies or practices
The time window to submit new exclusion requests is
justified U.S. action: (1) China’s forced technology transfer
closed, but the USTR reportedly continues to consider
requirements, (2) cyber-enabled theft of U.S. IP and trade
extensions of exclusions already granted. While the USTR
secrets, (3) discriminatory and non-market-based licensing
approved, on average, 35% of new requests under the first
practices, and (4) state-funded strategic acquisition of U.S.
two actions, the approval rates under the third and fourth
assets. Subsequently, as part of its efforts to pressure China
actions were 5% and 7%, respectively.
to change these practices, the United States imposed
additional tariffs, of up to 25%, on certain U.S. imports
According to the USTR, all requests are evaluated on a
from China under four separate actions (per Lists 1-4).
case-by-case basis. The agency has indicated that, in
determining which requests to grant, it considers the
During the Section 301 notice, hearing, and comment
following: (1) availability of the product in question from
period on proposed tariff increases, the USTR heard
non-Chinese sources, (2) attempts by the importer to source
numerous U.S. stakeholders who expressed concerns about
the product from the United States or third countries, (3) the
how additional tariffs could affect their businesses, as well
extent to which the imposition of Section 301 tariffs on the
as U.S. consumers. In response, for each Section 301 action
particular product will cause severe economic harm to the
regarding a new list of covered products, the USTR created
importer or other U.S. interests, and (4) the strategic
a process whereby interested parties could request that a
importance of the product to “Made in China 2025” or other
particular product be excluded from the tariffs, subject to
Chinese industrial programs. Past exclusions also have been
certain criteria. Title III of the Trade Act of 1974 does not
granted for reasons that are thought to include, among
outline a formal process for exclusions or require the USTR
others, U.S. national security interests and demonstrable
to establish one. The determination to do so appears to be
economic hardship from the tariffs for small businesses.
solely at the USTR’s discretion.
https://crsreports.congress.gov
Section 301: Tariff Exclusions on U.S. Imports from China
There is no timetable for providing responses to filed
duties on “medical-care products” related to the COVID-19
requests, but the agency periodically announces decisions
response. Accordingly, the USTR opened a new comment
on pending requests through Federal Register notices. The
period, which closed on June 25, 2020. Comments could be
“index” on the “USTR Exclusion Portal” also indicates the
submitted regarding any medical product subject to Section
status of each request in the review process. When the
301 tariffs, whether or not it was subject to a pending or
USTR has issued an exclusion, it has generally been valid
denied exclusion request. The notice asked that comments
for one year after the exclusion notice is published in the
“explain precisely how the product relates to the response
Federal Register and retroactive to the imposition of the
to the COVID-19 outbreak,” but it provided no further
tariffs (with the starting date varying by applicable list).
guidance on the types of products that the USTR considers
Exclusions are not specific to the requestor, so any party
to be “medical-care products.” The review of comments
importing a product covered by an exclusion may do so
was to run parallel to, and was not to affect, any ongoing
under the exclusion and request retroactive tariff refunds
product exclusion requests that were still under review.
from U.S. Customs and Border Protection (CBP).
In response to these comments and the advice from
Through January 31, 2020, the USTR received a total of
advisory committees, on December 22, 2020, the USTR
52,746 exclusion requests, pertinent to all four actions. Of
determined to extend 80 product exclusions on medical-
these, 6,804 (13%) were granted and 45,942 (87%) were
care products that were set to expire on December 31, 2020
denied (Figure 1). Specifically, the exclusions are reflected
(until March 31, 2021) and to grant new tariff exclusions on
in 99 10-digit HTSUS tariff subheadings and 2,129
additional medical-care products. These new exclusions
specially prepared product descriptions—all of which cover
(originally effective from January 1 through March 31,
6,804 separate requests. Because most exclusions apply to
2021) were reflected in 10 10-digit HTSUS tariff
specific products within a relevant subheading—not to
subheadings and 9 specially prepared product descriptions,
entire subheadings, CRS could not determine the exact
including clinical thermometers, disinfectants, surgical
amount of trade covered by the exclusions. The USTR also
gowns, and face shields. On March 5, 2021, the USTR
issued extensions to certain exclusions. They apply to 52
extended—through September 30, 2021—the 99 product
(of the 99) HTSUS subheadings and 516 (of the 2,129)
exclusions included in the December 2020 announcement.
specially prepared product descriptions. These extensions
Issues for Congress
have expired or are set to expire in September 2021. (These
In recent years, some Members have raised the issue with
figures reflect the new exclusions and extensions granted in
the USTR of establishing or streamlining an exclusion
December 2020 and discussed below.)
process during hearings and in letters to the USTR. For
COVID-19 and Medical-Care Products
instance, for the third and largest action (List 3), a
The USTR announced in March 2020 that, prior to the
bipartisan group of more than 160 Representatives urged
COVID-19 outbreak, the agency had been working with the
the Trump Administration to consider granting exclusions.
U.S. Department of Health and Human Services “to ensure
Subsequently, the joint explanatory statement to the
that critical medicines and other essential medical products
FY2019 appropriations law (P.L. 116-6) directed the USTR
were not subject to additional Section 301 tariffs.”
to establish a product exclusion process for that third stage
Consequently, the United States had not imposed tariffs on
of tariffs within 30 days of the law’s enactment. During the
certain critical products, such as ventilators, oxygen masks,
116th Congress, some Members introduced legislation to
and nebulizers. The USTR indicated that, in recent months,
limit USTR’s discretion on whether and how to grant or
it had prioritized the review of requests for exclusions on
deny exclusion requests. These proposals included the
medical care products, resulting in exclusions granted on
American Business Tariff Relief Act of 2019 (S. 2362) and
basic medical supplies, including gloves, soaps, facemasks,
the Import Tax Relief Act of 2019 (S. 577/H.R. 1452).
surgical drapes, and hospital gowns.
As the Biden Administration reviews the Section 301
Since March 2020, the USTR has exempted certain medical
actions against China and possibly makes use of Section
products from Section 301 tariffs in several rounds of
301 authorities in a number of ongoing investigations
exclusions. CRS could not determine exactly how many of
initiated under the Trump Administration (e.g., against
them have been exempted on the basis of COVID-19
France and Vietnam), Congress could consider amending
concerns, as the USTR does not specify the rationale for
Title III of the Trade Act of 1974. For example, it could
granting exclusions in its announcements. While some
require greater congressional consultation or approval
products can be easily identified, there are others with
before trade restrictions are imposed, modified, or waived
known or potential medical uses—or inputs for the
pursuant to Section 301 or establish a formal product
manufacture thereof—that have received exclusions but
exclusion process. Alternatively, it could engage with the
whose ultimate purpose cannot always be ascertained from
Administration to develop and implement specific
HTSUS subheadings or the provided product descriptions
guidelines for when and how to grant and extend
(e.g., organic chemicals or textiles for the manufacture of
exclusions. This could potentially promote transparency,
pharmaceuticals or PPE).
consistency, and proper application of standards in
Recent New Exclusions and Extensions
reviewing exclusion requests, thereby helping to ensure that
On March 25, 2020, the USTR published a Federal
the USTR carries out Section 301 objectives as prescribed
Register notice seeking comments to determine if further
by Congress.
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
requested comments on whether to remove Section 301
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 9 · UPDATED