Updated May 26, 2022
Section 301 Tariff Exclusions on U.S. Imports from China
In 2018, the U.S. Trade Representative (USTR) determined,
Figure 1. Section 301 Exclusions
pursuant to an investigation under “Section 301” (Title III
of the Trade Act of 1974, 19 U.S.C. §§2411-2420), that
China’s acts, policies, and practices related to technology
transfer, intellectual property (IP), and innovation were
unreasonable or discriminatory and burdened or restricted
U.S. commerce. In order to counter them and obtain their
elimination, the Trump Administration used Section 301
authorities to impose four rounds of increased tariffs on
about two-thirds of U.S. imports from China. However, to
avoid harm to U.S. interests, the USTR introduced a new
policy allowing stakeholders to request “tariff exclusions”
for U.S. imports that would otherwise have been subject to
tariffs. Some policymakers and stakeholders have raised
concerns about the implementation of the exclusion request
process.

Source: CRS with information from the Office of the USTR.
In particular, some Member of Congress have questioned
Note: Figures may not reflect amendments to product-specific exclusions and
USTR’s ability to “pick winners and losers” through
do not include requests submitted on or after March 25, 2020, in response to
granting or denying requests or have pushed for broad tariff
85 FR 16987. However, exclusions granted through December 2020 and noted
here may have been informed by those requests.
relief amid concerns about the negative impact of tariffs on
the U.S. economy. This has been the case particularly in the
During the Section 301 notice, hearing, and comment
aftermath of the COVID-19 pandemic, which has affected
period on proposed tariff increases, the USTR heard from
the United States’ ability to obtain certain products
numerous U.S. stakeholders who expressed concerns about
domestically or from countries other than China. Other
how additional tariffs could affect U.S. businesses and
Members oppose granting any exclusions on the ground
consumers. In response, for each new list of covered
that doing so may undermine Section 301’s effectiveness at
products, the USTR created a process whereby interested
addressing China’s unfair trade practices or hinder U.S.
parties could request that a particular product be excluded
efforts to incentivize domestic manufacturing of certain
from the tariffs, subject to certain criteria. Title III of the
critical goods. The agency established an exclusion process
Trade Act of 1974 does not outline a formal process for
for each of the four stages of tariff increases under Section
exclusions or require the USTR to establish one. The
301, as well as opportunities for interested parties to submit
determination to do so appears to be solely at the USTR’s
comments on whether to extend or reinstate exclusions.
discretion.
With the COVID-19 pandemic, the agency began to
The Biden Administration continues to review its trade
strategy for China. Actions by the USTR during 2021 and
prioritize the review of exclusion requests concerning
medical products in short supply. Separately, the USTR
early 2022 were not aimed at providing broader tariff relief.
also requested public comments on whether to remove
They were limited to extending unexpired exclusions on
medical supplies relevant to combatting the COVID-19
additional products covered by any list that were relevant to
the U.S. response to the pandemic. As a result, it granted
pandemic and reinstating certain exclusions that were
new exclusions or extensions for certain of these products.
previously extended. In May 2022, the agency announced a
review of all Section 301 actions against China.
Section 301 Tariff Exclusion Process
Background
The tariff exclusion process enabled interested parties—
including law firms and trade associations—to petition for
In August 2017, long-standing concerns over China’s
an exemption from the Section 301 tariff increases for
policies on IP, subsidies, technology, and innovation led the
specific imports classified within a 10-digit Harmonized
USTR to launch an investigation—under Section 301—into
Tariff Schedule of the United States (HTSUS) subheading.
those policies and their impact on U.S. stakeholders. The
The time window to submit requests is closed, but the
investigation concluded that four broad policies or practices
USTR is reviewing all actions related to the investigation,
justified U.S. action: (1) China’s forced technology transfer
including decisions on whether and how to accept new
requirements, (2) cyber-enabled theft of U.S. IP and trade
exclusion requests (see “Four-Year Review Process”
secrets, (3) discriminatory and non-market-based licensing
discussion below). While the USTR approved, on average,
practices, and (4) state-funded strategic acquisition of U.S.
35% of new requests under the first two actions, the
assets. Subsequently, as part of its efforts to pressure China
approval rates under the third and fourth actions were 5%
to change these practices, the United States imposed
and 7%, respectively.
additional tariffs, of up to 25%, on certain U.S. imports
from China in four separate lists (Lists 1-4A).
According to the USTR, all requests were evaluated on a
case-by-case basis. The agency indicated that, in
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Section 301 Tariff Exclusions on U.S. Imports from China
determining which requests to grant, it considered the
exclusion may file a claim. Importers whose goods entered
following: (1) availability of the product in question from
or were withdrawn from warehouse for consumption on or
non-Chinese sources; (2) attempts by the importer to source
after October 12, 2021, may request tariff refunds from
the product from the United States or third countries; (3) the
U.S. Customs and Border Protection (CBP), provided that
extent to which the imposition of Section 301 tariffs on the
CBP has not already calculated the final duties owed by the
particular product will cause severe economic harm to the
time the importers file the refund claim.
importer or other U.S. interests; and (4) the strategic
Four-Year Review Process
importance of the product to “Made in China 2025” or other
On May 3, 2022, the USTR began the statutory four-year
Chinese industrial programs. Past exclusions were also
review of the Section 301 actions taken against China. The
granted for reasons that are thought to include, among
agency determined that two separate actions had been taken
others, U.S. national security interests and demonstrable
as part of the investigation (Lists 1 and 2), and that they had
economic hardship from the tariffs for small businesses.
been subsequently modified by imposing additional duties
Through January 2020, the USTR received a total of 52,746
on supplemental lists of products (Lists 3 and 4A), as well
exclusion requests, pertinent to all actions. Of these, 6,804
as by temporarily removing or suspending duties on some
(13%) were granted and 45,942 (87%) were denied. (CRS
of them through exclusions. It announced that the first step
could not determine the total number of specific requests
of this review process would be to notify representatives of
submitted between March and June 2020 or how many
domestic industries that benefit from the trade actions (as
were granted or denied.) Specifically, the exclusions were
modified) of their possible termination, and to offer these
reflected in 99 10-digit HTSUS tariff subheadings and
stakeholders the opportunity to request their continuation.
2,129 specially prepared product descriptions—all of which
They may submit requests between May 7 and July 5, 2022
cover at least 6,804 separate requests (Figure 1). Because
(for List 1) and June 24 and August 22, 2022 (for List 2).
most exclusions applied to specific products within a
relevant subheading, not to entire subheadings, CRS could
The USTR is set to announce in subsequent Federal
not determine the exact amount of trade covered by the
Register notices whether it received a request for
exclusions. Separately, the USTR also issued extensions to
continuation of the actions from stakeholders. If the agency
certain exclusions. They applied to about 52 (of the 99)
receives such a request, the USTR would announce the
HTSUS subheadings and 516 (of the 2,129) specially
continuation of the action and undertake a review of it. As
prepared product descriptions. These extensions have
part of that review, the USTR has indicated that it would
expired or are set to expire December 2022.
open a separate portal for interested parties to submit
COVID-19 and Medical-Care Products
comments on, among other matters, (1) the effectiveness of
the action in achieving its objectives, (2) the effects of such
In light of the spread of the Delta variant in summer 2021
actions on the U.S. economy, including on consumers, and
and developments in the production capacity of U.S.-based
(3) other potential actions that could be taken.
manufacturers to satisfy various national needs, the USTR
Issues for Congress
concluded a review of public comments on whether 99
exclusions on medical-care and/or COVID-19 response
In recent years, some Members have introduced legislation
products needed to be extended for six months. (These 99
to amend Title III of the Trade Act of 1974, while also
exclusions were originally announced in December 2020.)
raising the issue of establishing or streamlining an
In response to comments and the advice from advisory
exclusion process during hearings and in letters to the
committees, the USTR determined in November 2021 to
USTR. Some of the legislative proposals have included
extend 81 of the 99 exclusions through May 31, 2022. In
measures to require greater congressional consultation or
March 2022, around 35 of these were further extended
approval before trade restrictions are imposed, modified, or
through December 2022 as part of the reinstatement process
waived pursuant to Section 301 or to establish a formal
announced in October 2021 (see below). For more detail,
product exclusion process. More recently, in June 2021, the
see CRS Report R46954, COVID-19 and Access to Medical
Senate passed the United States Innovation and
Products: Implications of Section 301 Tariffs.
Competition Act of 2021 (S. 1260), which, if enacted,
Reinstating Previous Tariff Exclusions
would suspend tariffs certain goods and formalize a process
for excluding imports from Section 301 tariffs.
In October 2021, the USTR published a Federal Register
As the Biden Administration reviews the actions against
notice seeking comments on whether to reopen the process
China and possibly makes use of Section 301 authorities
by which U.S. stakeholders could apply for Section 301
(e.g., to counter or obtain the elimination of other Chinese
tariffs exclusions. Specifically, the agency requested
practices that may disadvantage or discriminate against
comments on whether to reinstate 549 exclusions that had
U.S. firms and workers), Congress could also engage with
expired or were set to expire soon. The agency collected
the Administration to develop and implement guidelines for
comments until December 2021. Parties were not able to
when and how to grant and extend exclusions. This could
petition the USTR for new exclusions or extensions to
potentially promote transparency, consistency, and proper
expired exclusions that were not previously extended.
application of standards in reviewing requests, thereby
In March 2022, the USTR concluded its exclusion review
helping to ensure that the USTR carries out Section 301
process and announced that it would reinstate or further
objectives as prescribed by Congress.
extend 352 of the 549 eligible exclusions. The exclusions
are retroactive to October 12, 2021 and are set to expire on
Andres B. Schwarzenberg, Analyst in International Trade
December 31, 2022. Exclusions apply generally to specified
and Finance
products, so any party importing a product covered by an
IF11582
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Section 301 Tariff Exclusions on U.S. Imports from China


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https://crsreports.congress.gov | IF11582 · VERSION 13 · UPDATED

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