2024-11634. Request for Comments on Proposed Modifications and Machinery Exclusion Process in Four-Year Review of Actions Taken in the Section 301 Investigation: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual ...

AGENCY:

Office of the United States Trade Representative (USTR).

ACTION:

Request for comments.

SUMMARY:

In a notice published on September 8, 2022, USTR announced that the July 6, 2018 and August 23, 2018 actions, as modified, in the section 301 investigation of China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation did not terminate on their four-year anniversary dates and would continue. The notice also announced that the U.S. Trade Representative would conduct a review of the actions. In connection with that review, and at the specific direction of the President, the U.S. Trade Representative is proposing modifications to the actions by adding or increasing ad valorem rates of duty, as directed by the President, for certain products of China in strategic sectors. In addition, the U.S. Trade Representative is proposing subheadings eligible for an exclusion process by which interested persons may request that particular machinery used in domestic manufacturing be temporarily excluded from these tariffs. The U.S. Trade Representative also is proposing to modify the actions by granting 19 temporary exclusions for certain solar manufacturing equipment. The products subject to these proposed modifications and the products being proposed for the exclusion process are set out in annexes to this notice. USTR is seeking public comments regarding the proposed modifications and exclusion process.

DATES:

May 29, 2024, at 12:01 a.m. EDT: The public docket on the web portal at https://comments.ustr.gov will open for interested persons to submit comments.

June 28, 2024, at 11:59 p.m. EST: To be assured of consideration, submit written comments on the public docket by this date.

ADDRESSES:

You must submit all comments through the online portal: https://comments.ustr.gov.

FOR FURTHER INFORMATION CONTACT:

Philip Butler and Megan Grimball, Chairs of the Section 301 Committee, [phone].

SUPPLEMENTARY INFORMATION:

A. Background

On August 24, 2017, the U.S. Trade Representative initiated an investigation into certain acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation under section 301 of the Trade Act of 1974, as amended (Trade Act) (19 U.S.C. 2411). See82 FR 40213. In a notice published on April 6, 2018, the U.S. Trade Representative determined that acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation were unreasonable or discriminatory, and burdened or restricted U.S. commerce, and thus were actionable under section 301(b) of the Trade Act (19 U.S.C. 2411(b)). See83 FR 14906.

Following a notice and comment process on the proposed action to be taken in the investigation, the U.S. Trade Representative took two actions under section 301 of the Trade Act: the July 6, 2018 action, covering an approximate annual trade value of $34 billion (List 1), and the August 23, 2018 action, covering an approximate annual trade value of $16 billion (List 2). See83 FR 28710 (July 6, 2018 action) and 83 FR 40823 (August 23, 2018 action). These actions subsequently were modified by imposing additional duties on supplemental lists of products, known as Lists 3 and 4, as well as by the temporary removal of duties on certain products through product exclusions.

On May 5, 2022, USTR announced that under section 307(c)(2) of the Trade Act (19 U.S.C. 2417(c)(2)), the July 6, 2018 and August 23, 2018 actions, as modified, were subject to possible termination on their respective four-year anniversary dates ( i.e., July 6, 2022, and August 23, 2022, respectively) and of the opportunity for representatives of domestic industries that benefit from the trade actions to request continuation of the actions during the last 60 days of such four-year periods. See87 FR 26797.

On September 8, 2022, USTR announced that the July 6, 2018 and August 23, 2018 actions, as modified, would remain in effect because at least one representative of a domestic industry that benefits from each action submitted to the U.S. Trade Representative a request for continuation of the actions. See87 FR 55073. The notice also announced that in accordance with section 307(c)(3) of the Trade Act (19 U.S.C. 2417(c)(3)), the U.S. Trade Representative would conduct a review of the July 6, 2018 and August 23, 2018 actions, as modified. See87 FR 55073.

To aid in this review, on November 15, 2022, USTR opened a docket for interested persons to submit comments with respect to a number of considerations concerning the review. See87 FR 62914. USTR received approximately 1,500 comments.

Pursuant to section 307(c)(3) of the Trade Act (19 U.S.C. 2417(c)(3)), and based on information obtained during the review, including the written submissions, USTR, in consultation with the Section 301 Committee, prepared a comprehensive report that included findings on the effectiveness of the July 6, 2018 and August 23, 2018 actions, as modified, 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 report, Four-Year Review of Actions Taken in the Section 301 Investigation: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation (the Report), was published on May 14, 2024, and is available on the USTR website at https://ustr.gov/​sites/​default/​files/​05.14.2024%20Four%20Year%20Review%20of%20China%20Tech%20Transfer%20Section%20301%20(Final).pdf. The Report is incorporated into this notice by reference.

As detailed in the Report, the U.S. Trade Representative has found that:

The section 301 actions have been effective in encouraging China to take steps toward eliminating some of its technology transfer-related acts, policies, and practices, and have reduced some of the exposure of U.S. persons and businesses to these technology transfer-related acts, policies, and practices.

China has not eliminated many of its technology transfer-related acts, policies, and practices, which continue to impose a burden or restriction on U.S. commerce. Instead of pursuing fundamental reform, China has persisted, and even become more aggressive, particularly through cyber intrusions and cybertheft, in its attempts to acquire and absorb foreign technology, which further burden or restrict U.S. commerce.

Economic analyses generally find that the duties have had small negative effects on U.S. aggregate economic welfare, positive impacts on U.S. production in the ten sectors most directly affected by the duties, and minimal impacts on economy-wide prices and employment.

Economic analyses, including the principal U.S. Government analysis published by the U.S. International Trade Commission, generally find that the Section 301 tariffs have contributed to reducing U.S. imports of goods from China and increasing imports from alternate sources, including U.S. allies and partners, thereby potentially supporting U.S. supply chain diversification and resilience.

Based on these findings, the U.S. Trade Representative recommended to the President that section 301 tariffs on covered products be maintained. To further encourage China to eliminate the investigated acts, policies, and practices, the U.S. Trade Representative recommended enhancing the effectiveness of the tariff actions by adding or increasing section 301 tariffs on certain products in strategic sectors. The proposed modification includes products targeted by China for dominance, or are products in sectors where the United States has recently made significant investments.

Taking into consideration the U.S. Trade Representative's findings and recommendations, on May 14, 2024, the President issued a Memorandum that directed the U.S. Trade Representative to: “maintain, as appropriate and consistent with this memorandum, the ad valorem rates of duty and lists of products subject to the [actions] taken under the [s]ection 301 investigation” and “[t]o further encourage China to eliminate the acts, policies, and practices at issue, and to counteract the burden or restriction of these acts, policies, and practices, the Trade Representative shall modify the [actions taken in the investigation] to increase [s]ection 301 ad valorem rates of duty” for certain specified products of China. See https://www.whitehouse.gov/​briefing-room/​presidential-actions/​2024/​05/​14/​memorandum-on-actions-by-the-united-states-related-to-the-statutory-4-year-review-of-the-section-301-investigation-of-chinas-acts-policies-and-practices-related-to-technology-transfer-intellectua/​. The President's Memorandum specified categories of products for proposed tariff increases, tariff rates for those products, and year for tariff increases.

The President also directed the U.S. Trade Representative to establish a process by which interested persons may request that particular machinery used in domestic manufacturing classified within a subheading under Chapters 84 and 85 of the Harmonized Tariff Schedule of the United States (HTSUS) be temporarily excluded from section 301 tariffs, and that the U.S. Trade Representative prioritize, in particular, exclusions for certain solar manufacturing equipment.

B. Proposed Modifications to the Actions

Pursuant to sections 307(c) and 307(a)(1) of the Trade Act (19 U.S.C. 2417(c), (a)(1)), the U.S. Trade Representative may modify or terminate any action, subject to the specific direction, if any, of the President with respect to such action, that is being taken under Section 301 if the burden or restriction on United States commerce of the acts, policies, and practices that are the subject of such action has increased or decreased, or such action is being taken under section 301(b) and no longer is appropriate. Section 301(c)(3)(B) of the Trade Act (19 U.S.C. 2411(c)(3)(B)) authorizes the U.S. Trade Representative to take action against any goods or economic sector of the foreign country concerned regardless of whether or not such goods or economic sector are involved in the act, policy, or practice subject to investigation. In accordance with sections 307(c) and 307(a)(1)(B) and (C) of the Trade Act (19 U.S.C. 2417(c), (a)(1)(B) and (C)), and in accordance with the specific direction of the President, the U.S. Trade Representative is proposing certain modifications to the actions.

Consistent with the President's direction to increase section 301 tariff rates on certain categories of products, included in Annex A to this notice are 382 HTSUS subheadings and 5 statistical reporting numbers of the HTSUS, with an approximate annual trade value of $18 billion (2023). The President has directed that increases for certain products take effect in 2024, 2025, and 2026. The U.S. Trade Representative is proposing that increases in 2024 be effective August 1, 2024, and that increases in 2025 and 2026 be effective January 1 of the corresponding year.

In addition to the proposed modifications in Annex A, consistent with the President's direction, the U.S. Trade Representative is establishing an exclusion process by which interested persons may request that particular machinery used in domestic manufacturing and classified within certain subheadings under Chapters 84 and 85 of HTSUS be temporarily excluded from section 301 tariffs. The HTSUS subheadings eligible for consideration of temporary exclusion are set forth in Annex B to this notice. Procedures for requesting exclusions under this process will be published in a separate notice. Exclusions granted through this process will be effective through May 31, 2025.

Finally, to support domestic production and decrease reliance on China in a strategic sector, the U.S. Trade Representative is proposing 19 temporary exclusions for solar manufacturing equipment. The proposed temporary exclusions are set forth in Annex C to this notice. The proposed exclusions will be effective the date of this notice and through May 31, 2025.

C. Request for Public Comments

In accordance with section 307(a)(2) of the Trade Act (19 U.S.C. 2417(a)(2)), USTR invites comments from interested persons with respect to the proposed modifications. To be assured of consideration, you must submit written comments by June 28, 2024.

With respect to USTR's proposed modifications to Section 301 tariff rates on certain products from China listed in Annex A, interested persons are invited to comment on:

The effectiveness of the proposed modification in obtaining the elimination of, or in counteracting, China's acts, policies, and practices related to technology transfer, intellectual property, and innovation.

The effects of the proposed modification on the U.S. economy, including consumers.

The scope of the product description to cover ship-to-shore cranes under subheading 8426.19.00 (transporter cranes, gantry cranes and bridge cranes).

With respect to facemasks, medical gloves, syringes and needles, whether the tariff rates should be higher than the proposed rates.

With respect to facemasks, whether additional statistical reporting codes under tariff subheading 6307.90.98 should be included.

Whether the tariff subheadings identified for each product and sector adequately cover the products and sectors included in the President's direction to the U.S. Trade Representative.

With respect to the exclusion process, USTR seeks comments on whether the subheadings listed in Annex B should or should not be eligible for consideration in the machinery exclusion process and whether Annex B omits certain subheadings under Chapters 84 and 85 that cover machinery used in domestic manufacturing that should be included.

With respect to the proposed solar manufacturing machinery exclusions in Annex C, USTR requests comments on the scope of each exclusion, including any suggested amendments to the product description.

In order to facilitate preparation of comments prior to the May 29 opening of the web portal, USTR intends to post a copy of questions for the docket by May 24, 2024. The questions will be posted at https://comments.ustr.gov.

D. Procedures for Written Submissions

You must submit written comments using the appropriate docket on the portal at https://comments.ustr.gov/​. To submit written comments, use the docket on the portal entitled Request for Comments: Proposed Modifications to the Section 301 Actions and Proposed Exclusion Process, docket number USTR-2024-0007.

You do not need to establish an account to submit comments. The first screen of the docket allows you to enter identification and contact information. Third party organizations such as law firms, trade associations, or customs brokers, should identify the full legal name of the organization they represent, and identify the primary point of contact for the submission. Information fields are optional; however, your comment may not be considered if insufficient information is provided.

Fields with a gray Business Confidential Information (BCI) notation are for BCI that will not be made publicly available. Fields with a green (Public) notation will be viewable by the public.

After entering the identification and contact information, you can complete the remainder of the comment, or any portion of it by clicking `Next.' You may upload documents at the end of the form and indicate whether USTR should treat the documents as business confidential or public information.

Any page containing BCI must be clearly marked `BUSINESS CONFIDENTIAL' on the top of that page and the submission should clearly indicate, via brackets, highlighting, or other means, the specific information that is BCI. If you request business confidential treatment, you must certify in writing that the information would not customarily be released to the public.

Parties uploading attachments containing BCI also must submit a public version of their comments. If these procedures are not sufficient to protect BCI or otherwise protect business interests, please contact the USTR Section 301 support line at [phone] to discuss whether alternative arrangements are possible.

USTR will post attachments uploaded to the docket for public inspection, except for properly designated BCI. You can view submissions on USTR's electronic portal at https://comments.ustr.gov.

Juan Millan,

Acting General Counsel, Office of the United States Trade Representative.