Section 301 Tariffs

What are Section 301 Tariffs?

Section 301 of the Trade Act of 1974, commonly referred to today as “Section 301” or the “China tariffs,” is a powerful tool. This statutory provision allows the U.S. government to impose trade sanctions on foreign countries that the U.S. Trade Representative (USTR) has determined violate U.S. trade agreements or engage in unfair practices that burden U.S. commerce. Section 301 can be invoked in response to different practices, such as intellectual property theft, forced technology transfers, discriminatory practices, or restrictive market access policies. Administered by the USTR and heavily enforced by U.S. Customs and Border Protection (CBP), Section 301 enables the U.S. to take decisive action, including imposing punitive tariffs, restricting imports, or withdrawing trade agreement concessions. If a violation is confirmed, the USTR must act swiftly, often implementing retaliatory measures within 30 days.

To address issues with foreign trade practices under Section 301, the USTR can:

Impose duties or other import restrictions.
Withdraw or suspend trade agreement concessions.
Negotiate a binding agreement with the foreign government to eliminate the unfair practice or compensate the U.S. with satisfactory trade benefits.

In recent years, Section 301 has primarily been used to impose higher tariffs on Chinese-origin goods, significantly impacting U.S. businesses that rely on imports from China. This development came after a USTR investigation in 2017 found that China’s trade practices – such as forced technology transfers and intellectual property violations – unfairly burdened U.S. commerce. As a result, under President Trump, the U.S. imposed tariffs on billions of dollars of Chinese imports, ranging from 7.5% to 25%, divided into four lists covering thousands of products. The importer of record in the U.S. is responsible for paying these tariffs.

To mitigate these impacts on U.S. importers, the USTR offers a tariff exclusion process, allowing stakeholders to request exemptions from Section 301 tariffs for specific imports if:

the product is not available from other sources,
the tariffs cause severe economic harm, or
the product is vital for national security.

This process requires businesses to classify their goods correctly under the Harmonized Tariff Schedule of the United States (HTSUS) and petition for exclusions where applicable.

How do Section 301 Tariffs impact businesses?

The tariffs imposed under Section 301, particularly on Chinese-origin goods, have had significant financial implications for U.S. businesses, especially those reliant on Chinese manufacturing. The increase in tariffs has raised costs for importers in various industries, such as electronics, automotive, and consumer goods. As a result, many businesses have had to restructure their supply chains, relocate manufacturing and production, or seek alternative suppliers.

Businesses must stay informed about ongoing Section 301 actions, regularly review Federal Register notices for updates, and consider using tariff exclusions if eligible. Importers must also ensure that their products are correctly classified under the HTSUS, as misclassification can result in customs penalties and delays. Additionally, businesses should monitor retaliatory tariffs imposed by foreign countries, which could impact their export markets.

How can Schulz Trade Law PLLC (STL) help clients with Section 301 Tariffs?

Schulz Trade Law PLLC (STL) trade attorneys and advisors help businesses navigate the complexities of Section 301 investigations and tariff exclusions. Our attorneys and trade analysts assist with due diligence, classification exclusion requests, strategic planning, nearshoring, Prior Disclosures, and compliance audits to help mitigate risks associated with Section 301. CBP continues to enforce Section 301 compliance heavily. By leveraging STL’s trade expertise, companies can effectively manage the challenges of Section 301 and prevent potential violations.