On August 18, 2017, the Office of the United States Trade Representative (USTR) launched a formal investigation pursuant to Section 301 of the Tariff Act of 1974 on the People’s Republic of China (PRC). The probe sought to determine whether the acts, policies, and practices of the PRC related to technology transfer, intellectual property, trade secrets, and innovation were discriminatory towards U.S. firms and undermined the United States’ ability to compete fairly in the global market. Section 301 allows the President to seek removal of any act, policy, or practice of a foreign government that violates an international agreement or that unfairly burdens or restricts U.S. commerce.

On March 22, President Trump issued a Memorandum stating the USTR found PRC actions do undermine U.S. firms’ ability to compete fairly in the global market by (1) requiring or pressuring U.S. companies to transfer technology to Chinese companies; (2) imposing restrictions on, and intervening in, U.S. firms’ investments and activities, including through restrictions on technology licensing terms; (3) obtaining cutting-edge technology by directing and facilitating the investment and acquisition of U.S. companies by Chinese companies; and (4) conducting and supporting intrusions and theft from the computer networks of U.S. companies.

In response, the President has directed the USTR to address these violations via a combination of retaliatory tariffs, World Trade Organization (WTO) dispute settlement, and the Department of the Treasury to address via investment restrictions.

Tariffs

The Memorandum directed the USTR to consider additional tariffs on certain Chinese importations. The proposed list of goods and corresponding tariff increases will be released within 15 days followed by a period of notice and comment and currently are scheduled for publication in the Federal Register on March 27, 2018. Publication of the list for public notice and comment will trigger a 60-day period during which items could be removed from the list (and others added). After the close of the 60-day public comment period, USTR will finalize the list and notify to begin collecting the 25% additional duties (in addition to any Most Favored Nation duties and/or antidumping/countervailing duty measures that may apply to the same imports from China).

Though this list is pending release, it has been anticipated that it may impact up to $60 billion worth of Chinese goods across a number of industries. Sectors subject to proposed tariffs will include aerospace, information communication technology, and machinery. The scope of potential coverage to electronics, apparel, footwear, and home goods industries is not yet known.

Investment Restrictions

Increased restrictions on Chinese investments as they relate to “industries or technologies deemed important to the United States” is also to be addressed. In that regard, the Memorandum directed the Secretary of the Treasury to propose executive branch action. U.S. officials have commented that the investment restrictions contemplated will be “complementary” to those overseen by the Committee on Foreign Investment in the United States (CFIUS), managed by Treasury.

WTO Dispute Settlement

The Memorandum directs the USTR to pursue dispute settlement at the WTO on matters relating to China’s “discriminatory technology licensing practices.”

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Photo of Daniel Cannistra Daniel Cannistra

Dan Cannistra is a partner in the firm’s Washington, D.C. office. His practice focuses on legislative, executive and regulatory representation of domestic and international clients on a broad spectrum of international trade matters. Dan has represented domestic and foreign companies in over 75

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Dan Cannistra is a partner in the firm’s Washington, D.C. office. His practice focuses on legislative, executive and regulatory representation of domestic and international clients on a broad spectrum of international trade matters. Dan has represented domestic and foreign companies in over 75 U.S. antidumping and countervailing duty cases before the U.S. Department of Commerce and the U.S. International Trade Commission under the Tariff Act of 1930. Many of these matters involved appeals to the U.S. Court of International Trade, the U.S. Court of Appeals for the Federal Circuit, binational panels under the North American Free Trade Agreement (NAFTA), and dispute settlement proceedings before the World Trade Organization (WTO). Dan has also represented clients in antidumping proceedings in the European Union, Canada, Mexico, Brazil, India, Thailand, Singapore, Guatemala and Taiwan.

Prior to joining Crowell & Moring, Dan was a director in a national accounting firm providing customs and international trade guidance to multinational clients related to the supply and distribution of goods and services across international borders. Areas of specialization included antidumping and countervailing duties and policy, trade remedies and litigation, free trade agreements and negotiations, classification and valuation, and international trade and development.

Dan’s government appointments include service to U.S. Trade Representative on the roster of international trade practitioners to resolve antidumping disputes involving NAFTA members. For the European Commission, Dan provided advice and training on international trade and antidumping methodology and practice. In addition, Dan has served as an international trade consultant to the governments of Guatemala and Singapore, providing technical advice to these governments on the application of international trade regulations consistent with international law and World Trade Organization agreements and the General Agreement on Tariffs and Trade, Agreement on Antidumping.

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Photo of Robert L. LaFrankie Robert L. LaFrankie

Robert L. LaFrankie is a partner in Crowell & Moring’s International Trade Group and resident in the firm’s Washington, D.C. office. Bob regularly advises manufacturers, exporters, and importers in all aspects of international trade and customs proceedings before various government agencies, courts, and…

Robert L. LaFrankie is a partner in Crowell & Moring’s International Trade Group and resident in the firm’s Washington, D.C. office. Bob regularly advises manufacturers, exporters, and importers in all aspects of international trade and customs proceedings before various government agencies, courts, and international tribunals. He focuses on trade-related litigation and counseling, including trade remedy proceedings and U.S. Customs compliance and enforcement issues. Bob has successfully defended numerous clients located throughout Asia, Europe, and the Americas that produce or import a diverse range of products, including flat-rolled and specialty steel products and components, chemicals and plastics, frozen and canned food products, paper products, motor vehicle parts and components, specialty valves and valve systems, disposable lighters, petrochemical and renewable fuels, anti-friction bearings, and other manufactured products. In addition to litigation and compliance counseling, Bob engages in strategic trade remedy and customs planning activities for clients, particularly for companies with global sourcing, manufacturing, and export/import operations. He also advises companies with regard to NAFTA compliance issues and related audits of client facilities.

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