Many Factors Weigh on Administration to Change China Tariffs, Lawyers Say
While the Biden administration faces very little legal constraint to continuing the Section 301 tariffs on the vast majority of Chinese imports, trade experts at the Wiley firm said that the administration is under pressure for a variety of reasons to make a decision on whether they are going to change their approach to the tariffs. So far, the Office of the U.S. Trade Representative has reinstated fewer than 500 exclusions, either due to the COVID-19 pandemic or to a limited review, and has not offered to renew the bulk of the 2,129 exclusions that were granted during the previous administration.
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Importers didn't win on their central argument at the Court of International Trade, that the List 3 and List 4A tariffs were outside the administration's statutory authority, but USTR was directed to explain how it took comments into account, and to do so by late June.
Wiley partner Maureen Thorson said, during a webinar May 12 about the future of sections 301, 232 and 201 tariffs, that it's possible USTR will ask for more time on providing that explanation. But, she said, the CIT directive, and the formal review of whether the tariffs should continue past the four-year mark "create a group of pressures on the Biden administration to make a determination as to how they want to really implement and administer these tariffs on a going-forward basis."
Tim Brightbill, a Wiley partner in international trade, also talked about the China tariffs on the webinar. "So you have some elements of the administration expressing concern that the tariffs may be contributing to inflation. You have other elements of the administration that are trying to address the broader problem of China and the problematic aspects of the Chinese economy, from state-owned enterprises to subsidies to overcapacity, to the global Belt and Road Initiative," he said. "And agencies like the [Office of the] U.S. Trade Representative simply don't want to give up the leverage of having Section 301 tariffs on hundreds of billions of dollars of Chinese goods until those problems are addressed."
When USTR does its review, it asks domestic industry if anyone is benefiting from the tariffs, and if any firm wants them to continue. Then, it must evaluate if the tariffs have been effective, and how they have affected consumers.
"There's no real statutory deadline for how long that review should take or what has to happen, if anything, if USTR finds the tariffs are ineffective or only partially effective," Thorson said. "One of the things that's not really clear right now is whether USTR is going to go through the tariffs on a line-by-line basis. Will they say, well, we got a request for continuation from a domestic producer of tennis balls. So we'll keep the tennis ball tariffs in place. But we didn't get any requests for continuation from a tennis racket producer. So we'll take them off tennis rackets."
She said there is judicial precedent that suggests USTR doesn't have to be that literal about retaining the tariffs.
Brightbill also talked about the changes that could come to Section 232 tariffs on aluminum and steel. He said he doesn't expect any more countries to get out from under the Section 232 tariffs on steel and aluminum, or to get to renegotiate their quota terms, at least not in the near future. Steel from Japan, the EU and the U.K. is subject to tariff rate quotas, product-by-product; South Korean and Brazilian steel, in comparison, is subject to hard-limit quotas.
"About 18% of steel imports generally are subject to Section 232 tariffs at this point," Brightbill said, because most imported steel comes in either under product exclusions, under the quotas, or from Canada and Mexico, which are not subject to any tariffs or quotas.
He did say that he expects the Bureau of Industry and Security could "streamline or simplify the [Section 232] product exclusion process, which is very burdensome for everyone involved," as a result of the comments it received on the exclusion process. The Commerce Department received those comments through late March.
"There have been proposals to limit the president's authority under Section 232. But I would say that while those proposals seem to have had some traction a couple of years ago, I think it's less likely today that any type of legislation to limit the president's authority with respect to national security would be enacted," he said. The main champions of those bills -- Sens. Rob Portman, R-Ohio, and Pat Toomey, R-Pa., and Rep. Ron Kind, D-Wis. -- are all retiring at the end of the year. However, Sen. Mike Crapo, R-Idaho, who will be the chairman of the Senate Finance Committee if Republicans gain a majority in the Senate, has co-sponsored a reform bill. A bill that does not address current tariffs but still gives Congress more of a say on future actions does have sponsorship from Rep. Terri Sewell, D-Ala., and Rep. Jackie Walorski, R-Ind., both prominent House Ways and Means Committee members.