The United States Trade Representative (USTR) announced last week that they would extend exclusions for Section 301 tariffs on products imported from China until December 31st. This effectively extends the current exclusions for three months from the original expiration date on September 30th. This extension includes 352 product exclusions and 77 exclusions for COVID-related products.
The tariffs (and exclusions) were initially implemented by the Trump Administration and inherited by the Biden Administration. The justification for the tariffs included (according to USTR):
- China uses foreign ownership restrictions, such as joint venture requirements and foreign equity limitations, and various administrative review and licensing processes, to require or pressure technology transfer from U.S. companies.
- China's regime of technology regulations forces U.S. companies seeking to license technologies to Chinese entities to do so on non-market-based terms that favor Chinese recipients.
- China directs and unfairly facilitates the systematic investment in, and acquisition of, U.S. companies and assets by Chinese companies to obtain cutting-edge technologies and intellectual property and generate the transfer of technology to Chinese companies.
- China conducts and supports unauthorized intrusions into, and theft from, the computer networks of U.S. companies to access their sensitive commercial information and trade secrets.
The USTR is currently conducting a four-year review of the tariffs to evaluate “actions in achieving the objectives of the investigation, other actions that could be taken, and the effects of such actions on the United States economy, including consumers.” The USTR received close to 1500 comments during a public comment period in advance of the four-year review, which is scheduled to be finalized and released this Fall.
While only short-term, the recent extension is a relief for those industries whose products have been administratively excluded from the tariff list. However, products that have not been granted exclusions see some opportunity for the review to include a new, more transparent exclusion process.
Buried in the Federal Register notice was a justification for the extension that will only bring more uncertainty to a process already filled with lots of uncertainty: “to provide a transition period for the expiring exclusions and to allow for further consideration under the four-year review."
Of course, this could mean many (or all) possibilities. But, the ultimate decision to move forward with terminating exclusions, opening a new process, extending the exclusions further (or some combination) rests on a broad range of issues – the geopolitical situation surrounding China, the impact to the U.S. economy, and the 2024 election (to name a few). The three-month extension should not be interpreted as a decision already made, but more just a real possibility that changes could be on the horizon, although not as a dramatic as a full end to the tariffs.