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03 April 2020
On 25 March 2020 the US Trade Representative (USTR) published a Federal Register notice requesting comments on the removal of Section 301 tariffs from Chinese medical care products, including those that have previously been denied an exclusion, which are needed to respond to the COVID-19 outbreak.
Section 301 of the Trade Act 1974 (19 USC § 2411) authorises the president to take retaliatory action if it is determined that a trade act, policy or practice of a foreign government is unreasonable or discriminatory and burdens or restricts US commerce (for further details please see "Section 301 tariff developments affect US importers"). In retaliation for certain acts, policies and practices of the Chinese government relating to technology transfers, intellectual property and innovation, President Trump has used this authority to impose additional tariffs ranging between 7.5% and 25% on four lists of imported Chinese goods valued at approximately $370 billion annually.
As COVID-19 spreads across the United States, the administration is navigating how to reconcile these measures with its response to the growing pandemic. Although Trump has so far publicly resisted calls for broad tariff relief, the USTR is considering the removal of targeted products from the scope of the Section 301 tariffs.
Each Section 301 action regarding a new list of covered products has been accompanied by a process whereby interested parties could request that a product be excluded from the tariffs based on certain criteria – namely, that:
The USTR is reviewing requests for product exclusions from Lists 3 and 4A and has prioritised the review of exclusion requests concerning medical care products relating to the US response to COVID-19. This has recently resulted in new exclusions for certain personal protective equipment that has been in short supply, such as gloves, surgical masks and N95 respirators (for further details please see "Importation of personal protective equipment for COVID-19 treatment").(1) The USTR notes that certain other essential healthcare products, including ventilators, were never subject to the tariff or were previously excluded.
The USTR is now separately inviting public comments on whether to remove additional products, covered by any list, that are needed to address the COVID-19 outbreak. Similar to the list-based exclusion request processes, the party must identify the particular product of concern by including:
the ten-digit [Harmonised Tariff Schedule of the United States] subheading applicable to the product, and the identity of the particular product in terms of its functionality and physical characteristics (e.g., dimensions, material composition, or other characteristics).
However, instead of satisfying these three criteria, each comment must explain precisely how the product relates to the COVID-19 response. As the criteria are different, a product is eligible for removal even if an exclusion request for the product is pending or has been denied. Notably, the USTR will review not just products directly used to treat COVID-19 or limit the outbreak, but also products used in the production of needed medical care products.
Although comments will be accepted until at least 25 June 2020, the USTR advises that interested parties "should submit comments as promptly as possible" and, as has been seen with past exclusion processes, it will review the comments on a rolling basis. The USTR recommends that any response to a comment should be submitted within three days. Whereas the product exclusion request process for Lists 3 and 4A utilised the USTR exclusion portal, this process resembles the processes for Lists 1 and 2, for which the USTR accepted submissions via 'www.regulations.gov'. The docket number for this comment submission is USTR-2020-0014.
As manufacturers of medical care products increase production and unrelated supply chains shift to aid the global fight against COVID-19, parties should consider whether Section 301 tariffs are impeding their ability to contribute to the cause.
For further information on this topic please contact David R Hamill, Teresa Polino or Russell A Semmel at Arent Fox LLP by telephone (+1 202 857 6000) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org) The Arent Fox LLP website can be accessed at www.arentfox.com.
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