2018-13248. Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation

AGENCY:

Office of the United States Trade Representative.

ACTION:

Notice of action, request for comments, and notice of public hearing.

SUMMARY:

The U.S. Trade Representative (Trade Representative) has determined that appropriate action in this investigation includes the imposition of an additional ad valorem duty of 25 percent on products from China classified in the subheadings of the Harmonized Tariff Schedule of the United States (HTSUS) set out in Annex A of this notice. The Trade Representative has further determined to establish a process by which U.S. stakeholders may request that particular products classified within a covered tariff subheading in Annex A be excluded from these additional duties. Further, the Office of the U.S. Trade Representative (USTR) is seeking public comment and will hold a public hearing regarding a proposed additional action in this investigation. The proposed additional action is the imposition of an ad valorem duty of 25 percent on products of China classified in the HTSUS subheadings set out in Annex C of this notice.

DATES:

Applicable date of duties: The additional duties set out in Annex A to this notice are applicable with respect to products that are entered for consumption, or withdrawn from warehouse for consumption, on or after July 6, 2018.

Comment and hearing deadline: To be assured of consideration, you must submit comments and responses with respect to the proposed list of products in Annex C to this notice in accordance with the following schedule:

June 29, 2018: Due date for filing requests to appear and a summary of expected testimony at the public hearing and for filing pre-hearing submissions.

July 23, 2018: Due date for submission of written comments.

July 24, 2018: The Section 301 Committee will convene a public hearing in the main hearing room of the U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436 beginning at 9:30 a.m.

July 31, 2018: Due date for submission of post-hearing rebuttal comments.

ADDRESSES:

USTR strongly prefers electronic submissions made through the Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments in sections D, E, and F below. The docket number is USTR-2018-0018.

FOR FURTHER INFORMATION CONTACT:

For questions about the ongoing investigation, action, or proposed additional action, contact USTR Assistant General Counsel Arthur Tsao at [phone]. For questions on customs classification or implementation of additional duties on products identified in Annex A to this Notice, contact [e-mail].

SUPPLEMENTARY INFORMATION:

A. Proceedings in the Investigation

On August 18, 2017, the Trade Representative initiated an investigation into the government of China's acts, policies, and practices related to technology transfer, intellectual property, and innovation. See 82 FR 40213. The proceedings in the investigation up through the Trade Representative's determination that China's acts, policies, and practices are actionable under section 301(b) of the Trade Act of 1974 (19 U.S.C. 2411(b)) are set out in the notice published at 83 FR 14906 (April 6, 2018).

The April 6, 2018 notice invited public comment on a proposed action in the investigation: The imposition of an additional ad valorem duty of 25% on products from China classified in a list of 1,333 tariff subheadings. As explained in the notice, the value of the products on the list was approximately $50 billion in terms of estimated annual trade value for calendar year 2018, and the level is appropriate both in light of the estimated harm to the U.S. economy, and to obtain elimination of China's harmful acts, policies, and practices. Interested persons were invited to provide comments on the following:

• The specific products to be subject to increased duties, including whether products listed in the Annex to the April 6 notice should be retained or removed, or whether products not currently on the list should be added.
• The level of the increase, if any, in the rate of duty.
• The appropriate aggregate level of trade to be covered by additional duties.

In response to the notice of proposed action, interested persons filed approximately 3,200 written submissions. USTR and the Section 301 Committee held a three-day public hearing on May 15-17, 2018. During the hearing, 121 witnesses provided testimony and responded to questions. Interested parties also had the opportunity to provide rebuttal submissions, and approximately 295 rebuttal submissions were filed. The public submissions and a transcript of the hearing are available on www.regulations.gov in docket number USTR-2018-0005.

B. Determination on Appropriate Action

In the April 6, 2018 notice, the Trade Representative announced his determination that the acts, policies, and practices under investigation are unreasonable or discriminatory and burden or restrict U.S. commerce, and are thus actionable under section 301(b) of the Trade Act of 1974 (19 U.S.C. 2411(b)). Upon a determination of actionability, section 301(b) provides for the Trade Representative to take all appropriate and feasible action authorized under section 301(c) of the Trade Act of 1974 (19 U.S.C. 2411(c)), subject to the specific direction, if any, of the President regarding such action, and all other appropriate and feasible action within the power of the President that the President may direct the Trade Representative to take under section 301(b), to obtain the elimination of that act, policy, or practice.

On May 29, 2018, the President made the following statement:

“Under Section 301 of the Trade Act of 1974, the United States will impose a 25 percent tariff on $50 billion of goods imported from China containing industrially significant technology, including those related to the `Made in China 2025' program. The final list of covered imports will be announced by June 15, 2018, and tariffs will be imposed on those imports shortly thereafter.” Statement on Steps to Protect Domestic Technology and Intellectual Property from China's Discriminatory and Burdensome Trade Practices (https://www.whitehouse.gov/​briefings-statements/​statement-steps-protect-domestic-technology-intellectual-property-chinas-discriminatory-burdensome-trade-practices).

USTR and the Section 301 Committee have carefully reviewed the public comments and the testimony from the three-day public hearing. In addition, and consistent with the Presidential directive, USTR and the interagency Section 301 Committee have carefully reviewed the extent to which the tariff subheadings in the April 6, 2018 notice include products containing industrially significant technology, including technologies and products related to the “Made in China 2025” program. Based on this review process, the Trade Representative has determined to narrow the proposed list in the April 6, 2018 notice to 818 tariff subheadings, with an approximate annual trade value of $34 billion.

Pursuant to sections 301(b), 301(c), and 304(a) of the Trade Act of 1974 (19 U.S.C. 2411(b), 2411(c), and 2414(a)), the Trade Representative determines that appropriate and feasible action in this investigation includes the imposition of an additional ad valorem duty of 25 percent on products of China covered in the tariff subheadings listed in Annex A to this notice. Annex B to this notice contains the same list of tariff subheadings, with unofficial descriptions of the types of products covered in each subheading.

In order to implement this determination, effective July 6, 2018, subchapter III of chapter 99 of the HTSUS is modified by Annex A of this notice. Products of China that are provided for in new HTSUS heading 9903.88.01, as established by Annex A of this notice that are entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on July 6, 2018, shall be subject to an additional duty of 25 percent ad valorem. The rates of duty applicable to products of China that are provided for in new HTSUS heading 9903.88.01 shall apply in addition to all other applicable duties, fees, exactions, and charges.

Any product listed in Annex A, except any product that is eligible for admission under `domestic status' as defined in 19 CFR 146.43, which is subject to the additional duty imposed by this determination, and that is admitted into a U.S. foreign trade zone on or after 12:01 a.m. eastern daylight time on July 6, 2018, only may be admitted as `privileged foreign status' as defined in 19 CFR 146.41. Such products will be subject upon entry for consumption to any ad valorem rates of duty or quantitative limitations related to the classification under the applicable HTSUS subheading.

During the notice and comment process, a number of interested persons asserted that specific products within a particular tariff subheading were only available from China, that imposition of additional duties on the specific products would cause severe economic harm to a U.S. interest, and that the specific products were not strategically important or related to the “Made in China 2025” program. In light of such concerns, and pursuant to sections 301(b), 301(c), 304(a), and 307(a) of the Trade Act of 1974 (19 U.S.C. 2411(b), 2411(c), 2414(a), and 2417(a)), the Trade Representative has determined that USTR will establish a process by which U.S. stakeholders may request that particular products classified within an HTSUS subheading listed in Annex A be excluded from these additional duties. USTR will publish a separate notice describing the product exclusion process, including the procedures for submitting exclusion requests, and an opportunity for interested persons to submit oppositions to a request.

C. Proposed Determination on Additional Action

Based on a review of the public comments and the review of tariff subheadings that cover industrially significant technology, USTR has identified additional tariff subheadings that would be appropriate for action in the form of the imposition of an additional 25 percent ad valorem duty. The list of possible additional products covers 284 tariff subheadings, and is set out in Annex C to this notice.

The subheadings listed in Annex C have an approximate annual trade value of $16 billion. Including these tariff subheadings in the Section 301 action would maintain the effectiveness of a $50 billion trade action. The list of products in Annex C will undergo further review in a public notice and comment process, including a hearing. After completion of this process, USTR will issue a determination on the additional products subject to additional duties.

D. Requests for Public Comments

In accordance with section 304(b) of the Trade Act (19 U.S.C. 2414(b)), USTR invites comments from interested persons with respect to the proposed additional action of imposing an additional 25 percent ad valorem duty on the products classified in the list of tariff subheadings in Annex C of this notice. To be assured of consideration, you must submit written comments on this proposed additional action in response to China's acts, policies, and practices by July 23, 2018, and post-hearing rebuttal comments by July 31, 2018.

In this second round of comments on the proposed action to be taken in the investigation, USTR requests that comments be limited to the proposed additional action of imposing additional duties on the products classified in the tariff subheadings in Annex C. In other words, USTR is inviting comments on maintaining or removing a subheading currently listed in Annex C, not on the tariff subheadings in Annex A, or any other subheading.

USTR requests that commenters address specifically whether imposing increased duties on a particular subheading listed in Annex C would be practicable or effective to obtain the elimination of China's acts, policies, and practices, and whether maintaining or imposing additional duties on a particular product listed in Annex C would cause disproportionate economic harm to U.S. interests, including small- or medium-sized businesses and consumers.

E. Hearing Participation

The Section 301 Committee will convene a public hearing in the Main Hearing Room of the U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436, beginning at 9:30 a.m. on July 24, 2018. You must submit requests to appear at the hearing by June 29, 2018. The request to appear must include a summary of testimony, and may be accompanied by a pre-hearing submission. Participation in this second hearing on the additional action in the investigation will be limited to issues involving the products covered in the tariff subheadings in Annex C. Accordingly, requests to appear at the hearing must identify the specific tariff subheadings in Annex C that the witness intends to address. Remarks at the hearing may be no longer than five minutes to allow for possible questions from the Section 301 Committee.

All requests to appear at the hearing must be in English and sent electronically via www.regulations.gov. To submit a request to appear via www.regulations.gov,, enter docket number USTR-2018-0018 on the home page and click “search.” The site will provide a search-results page listing all documents associated with this docket. Find a reference to this notice and click on the link titled “Comment Now!”. In the “Comment” field, include the name, address, email address, and telephone number of the person presenting the testimony. Attach a summary of the testimony, and a pre-hearing submission if provided, by using the “Upload File” field. The file name should include both the name of the person who will be presenting testimony and the entity they will be representing. In addition, please submit a request to appear and summary of testimony by email to [e-mail]. In the subject line of the email, please include the name of the person who will be presenting the testimony, followed by “request to appear”. Please also include the name, address, email address, and telephone number of the person presenting testimony in the body of the email message.

F. Procedures for Written Submissions

All submissions must be in English and sent electronically via www.regulations.gov. To submit comments via www.regulations.gov,, enter docket number USTR-2018-0018 on the home page and click “search.” The site will provide a search-results page listing all documents associated with this docket. Find a reference to this notice and click on the link titled “Comment Now!” For further information on using the www.regulations.gov website, please consult the resources provided on the website by clicking on “How to Use Regulations.gov” on the bottom of the home page. We will not accept hand-delivered submissions.

The www.regulations.gov website allows users to submit comments by filling in a “Comment” field or by attaching a document using an “Upload File” field. USTR prefers that you submit comments in an attached document. If you attach a document, it is sufficient to type “see attached” in the “Comment” field. USTR prefers submissions in Microsoft Word (.doc) or Adobe Acrobat (.pdf). If you use an application other than those two, please indicate the name of the application in the “Comment” field.

File names should reflect the name of the person or entity submitting the comments. Please do not attach separate cover letters to electronic submissions; rather, include any information that might appear in a cover letter in the comments themselves. Similarly, to the extent possible, please include any exhibits, annexes, or other attachments in the same file as the comment itself, rather than submitting them as separate files.

For any comments submitted electronically containing business confidential information, the file name of the business confidential version should begin with the characters “BC”. Any page containing business confidential information 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 business confidential. If you request business confidential treatment, you must certify in writing that disclosure of the information would endanger trade secrets or profitability, and that the information would not customarily be released to the public. Filers of submissions containing business confidential information also must submit a public version of their comments. The file name of the public version should begin with the character “P”. The “BC” and “P” should be followed by the name of the person or entity submitting the comments or rebuttal comments. If these procedures are not sufficient to protect business confidential information or otherwise protect business interests, please contact the USTR Tech Transfer Section 301 line at [phone] to discuss whether alternative arrangements are possible.

USTR will post submissions in the docket for public inspection, except business confidential information. You can view submissions on the https://www.regulations.gov website by entering docket number USTR-2018-0018 in the search field on the home page.

Robert Lighthizer,

United States Trade Representative.