The 3 C’s on 301’s: China, Congress and the Courts

From the day the previous USTR found cause to take action against China following the agency’s investigation,

Section 301 trade remedy duties have posed financial, regulatory and legal challenges for importers of affected goods.

Companies long accustomed to zero percent ad valorem duty were coping with figures from 7.5% – 25% seemingly overnight. All while simultaneously trying to navigate the crash and surge in freight rates, carrier performance, and congestion caused by the pandemic.

At the time, the duties were intended to be in response to China’s behavior – corporate espionage, loss of American jobs, intellectual property theft, and other unfair trade practices. The tensions (and the number of products impacted) increased with each retaliatory ratcheting by the Chinese, leading at the end of the previous administration to having four lists of products and a fifth which, had it been imposed, would have led to overnight price hikes on mobile phones and other technology,  immediately catching the attention of American consumers.

Today, the list of exclusions has been narrowed to mostly COVID-related medical products. The USTR in mid-November moved to extend for a period of six months a list of 81 products rather than the 90-day extensions they had been awarding to that point. They also removed 18 products from those lists.

For importers who took advantage of the retroactive and finite breaks offered by Section 301 exclusions, they are seeking relief and wanting to once again be able to request extensions and receive retroactive refunds. In some cases, domestic industries are weighing in much the same way they would in an antidumping or countervailing duty case, claiming that importers clamoring for exemptions because of a lack of domestic production just aren’t looking hard enough for a source.

While this plays out in the Executive Branch, Congress is evaluating whether or not there are legislative remedies and directives they can impose that would re-open and offer exclusions to products or hear from industries whose concerns were ignored at the time the lists were developed and promulgated. Would they be removed in their entirety? Given the Biden Administration’s intent to pressure China on a number of fronts including human rights, Hong Kong, Taiwan and the Taiwan Strait, it seems unlikely. 

Meanwhile, thousands of cases have been consolidated and are pending before the Court of International Trade challenging Lists 3 and 4a. The plaintiffs’ argument centers around the fact that the lists were ineligible to be created and promulgated. If they prevail, billions of dollars in duties could be refunded. Oral arguments have been set for February 1st of next year and if the government loses, they will undoubtedly appeal.

BIG Logistics knows that while the focus for supply chains right now is on the number of ships waiting to be unloaded or the potential risks of constrained feeder supply in the Pearl River Delta, regulatory issues like Section 301 that impact importers’ bottom lines require continuous monitoring and our customs brokerage department is focused on ensuring both compliance and regulatory awareness for this important issue.