Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation

In a Federal Register Notice scheduled to be published Friday, August 30, 2019, the Office of the United States Trade Representative, in accordance with the specific direction of the President, announces it has determined to modify the action being taken in this Section 301 investigation by increasing the rate of additional duty from 10 to 15 percent for the products of China covered by the $300 billion tariff action published on August 20, 2019.

The burden or restriction on United States commerce of the acts, policies, and practices that are the subject of the Section 301 action continues to increase. China’s unfair acts, policies, and practices include not just its technology transfer and IP polices referenced in the notice of initiation in the investigation, but also China’s subsequent defensive actions taken to maintain those unfair acts, policies, and practices as determined in that investigation. China has determined to impose tariffs on a substantial majority of U.S. goods exported to China, with the goal of pressuring the United States to cease its efforts to obtain the elimination of China’s unfair policies. China has further taken or threatened to take additional countermeasures, including non-tariff measures, against commerce of the United States. For example, China has taken concrete steps to devalue its currency. See https://home.treasury.gov/news/press-releases/sm751. Most recently, shortly following the August 2019 announcement of the $300 billion action, China responded by announcing further tariffs on U.S. goods, starting September 1, 2019. In short, instead of addressing the underlying problems, China has increased tariffs and adopted or threatened additional retaliation to further protect the unreasonable acts, policies, and practices identified in the investigation, resulting in increased harm to the U.S. economy

The leaders of the United States and China met on December 1, 2018, and agreed to hold negotiations on a range of issues, including those covered in this Section 301 investigation. See https://www.whitehouse.gov/briefings-statements/statement-press-secretary-regarding-presidents-working-dinner-china/. Since the meeting on December 1, 2018, the United States and China have engaged in additional rounds of negotiation on these issues, including meetings in March, April, May, and July 2019. At certain times in these discussions, China has offered specific commitments that were constructive towards reaching a resolution of this matter. However, China more recently has retreated from these commitments, indicating that the action currently being taken is not effective in obtaining the elimination of the unfair acts, policies, and practices covered in the investigation. And as noted, China’s specific response to the $300 billion action at a 10 percent rate of additional duty was not to address U.S. concerns, but rather to impose further retaliatory tariffs on U.S. commerce.

For these reasons, and in accordance with the specific direction of the President, the U.S. Trade Representative has determined to modify the action being taken in the investigation by increasing the rate of additional duty from 10 percent ad valorem to 15 percent ad valorem on the goods of China specified in Annex A and Annex C of the August 20 notice.