The Biden administration has announced a
package of policy measures to protect the US steel, aluminum, and shipbuilding
industries from what they allege are unfair trade practices by China and
calling the industries critical to economic and national security.1 The most significant new actions in
the announcement are that the Office of the United States Trade Representative
("USTR") will (1) raise the current Section 301 tariffs on Chinese
steel and aluminum; (2) initiate a new Section 301 investigation targeting the
Chinese shipbuilding, maritime, and logistics sectors; and (3) intensify
efforts to combat alleged transshipment of Chinese steel through Mexico.
President Biden unveiled the actions during meetings with US labor unions in
Pittsburgh, Pennsylvania on April 17, 2024.
Increasing Section 301
tariffs on Chinese steel and aluminum
USTR will implement President Biden's call for higher tariffs on China
by tripling the current Section 301 tariffs applied to Chinese steel and
aluminum products from the current average of 7.5% to an average of 22.5%. USTR
is now conducting a mandatory four-year review of the Section 301 tariff action.2 The
Biden administration will likely use the completion of the four-year review to
implement the tariff increases. Imports of Chinese steel and aluminum are also
subject to Section 232 tariffs of 25% and 10%, respectively. Combining the
Section 232 tariffs with the increased Section 301 tariffs will yield average
tariff rates of around 47.5% for steel products and of around 32.5% for
aluminum products. Some of these products are also subject to antidumping
duties ("ADD") and countervailing duties ("CVD"), which
would further increase the tariff level.
The four-year review, which USTR announced in May 2022, is in its second
phase and appears near completion. USTR collected public comments for phase two
between November 2022 and January 2023, receiving 1,497 submissions from the
public.3 Since the comment docket closed, there have been no further
updates from USTR on the review, other than occasional references to how it is
still ongoing. Though Section 301 requires USTR to initiate a review of Section
301 actions every four years to keep the action active, the law does not
contain a comprehensive timeline for completing the reviews. In testimony
before the House Ways and Means Committee on April 16, 2024, Ambassador
Katherine Tai said USTR would complete the review soon in response to
complaints about the slow pace, though she did not specify a timeline.4 The
White House, relying on the review to implement these higher tariffs, also
suggests the completion of the review is imminent.
USTR will have to determine that President Biden's requested tariff
increases are consistent with the eventual outcome of the Section 301 four-year
review. Upon that determination, USTR will then have final discretion on the
specifics of how the increase will be implemented. President Biden's statement
includes no details on the action, other than "calling for USTR to
consider enhancing the effectiveness of [Section 301] tariffs on Chinese steel
and aluminum products by tripling them." Despite those additional legal
steps, the general nature of the outcome appears assured. More information on
the tariffs for each specific steel and aluminum product subject to the Section
301 duties will become available when USTR announces the outcome of the
four-year review.
Initiating the China
shipbuilding Section 301 investigation
As announced by President Biden, USTR has initiated a Section 301
investigation of China's acts, policies, and practices supporting its maritime,
logistics, and shipbuilding sectors.5 The investigation responds to a
petition filed on March 12, 2024, by a group of leading US labor unions.6 The
petitioners are calling on USTR to restrict Chinese-built commercial ships by
various actions, arguing that such restrictions would help the US commercial
shipbuilding industry (and the steel industry that supplies it) expand
production.
Section 301 investigations
Now that the investigation has begun, the interagency Section 301
Committee will seek public input, hold hearings, and request consultations with
the Chinese government.7 Written comments and requests to
appear at the public hearing should be submitted by May 22, 2024. The hearing
will occur on May 29, 2024. USTR is specifically seeking comments on: China's
policies targeting the maritime, logistics, and shipbuilding sector; whether
China's policies are unreasonable or discriminatory; China's efforts to
dominate shipping-related activities; other Chinese policies affecting the
shipping sector that USTR might want to include in the investigation; whether
China's policies are burdening or restricting US commerce; the determinations
required under Section 304 of the Trade Act; and any other views on the
petition.
Section 301 of the Trade Act of 1974 assigns authorities to USTR for
investigating foreign government practices that are "unjustifiable and
burdens or restricts United States commerce" and taking appropriate action
to obtain remediation of the burdensome practice. Since the creation of the
World Trade Organization's ("WTO") dispute settlement system in 1995,
however, USTR has typically only used Section 301 processes to develop cases
for WTO dispute settlement. Unilateral Section 301 actions resumed under the
Trump administration, but the Biden administration has so far refrained from
initiating new unilateral actions.
Initiating the investigation does not make any commitment to the final
determination or any ensuing policy actions. Section 301 investigations take up
to one year to complete, meaning USTR will not reach a decision until after the
November elections. A negative determination would end the matter. If USTR
determines that there is a trade violation, then there is an additional process
for determining the appropriate response.
Section 301 remedies
If the government reaches a positive determination, deciding on policy
actions would be challenging in this context. USTR has broad discretion on how
it approaches Section 301 investigations and remedies. The statute generally
favors a tariff in proportion to the injury as the remedy, but also allows for
a broader set of import and service provision restrictions that are within the
powers of the president. For international shipping, where vessels are usually
based in third countries and only temporarily enter the United States to unload
cargo, a tariff targeting imports of Chinese-built vessels would have little
practical use.
Recognizing that limitation, the petitioners are seeking remedies beyond
typical Section 301 tariffs, asking the government to impose an entry fee on
Chinese-built ships unloading cargo in US ports, providing subsidies to US
shipbuilders, expanding cabotage restrictions under the Jones Act, and
requiring US exports to be carried on US-built ships. Some of these proposed
remedies are likely beyond the president's authorities in a Section 301
investigation and would require an act of Congress. Some members of Congress
have expressed support, pressuring USTR to initiate the investigation and
proposing legislation similar to the remedies the petitioners are seeking. For
example, a bipartisan group of Senators and Representatives re-introduced the
Energizing American Shipbuilding Act in December 2023.8 The bill
would require that US crude oil and natural gas exports be carried on US-built
ships. The petitioners have referenced the bill favorably as a potential remedy
to their concerns.