The Breakdown – Section 232 and Sections 301

Posted on August 28, 2018

Section 232: What is it?

In 1962, Congress passed a piece of legislation called the Trade Expansion Act which was generally intended to do just that, expand trade.  It gave President Kennedy the authority to cut or eliminate tariffs on many goods. The purpose of this act, like all others, is to benefit the people and buried within it were clauses to do just that. 

Section 232 of the Trade Expansion Act of 1962 authorizes the Secretary of Commerce to conduct comprehensive investigations to determine the effects of imports on the national security of the United States. 

What does it mean and how is it enforced?

The Secretary of Commerce will submit a report to the President within 270 days of initiation, with their determination of whether the imports in question pose a threat to national security. The President can either agree or disagree with the Secretary and if necessary, act to adjust the imports of an article.  This generally means imposing tariffs and is why we are now hearing about the “Section 232 Tariffs that Trump has imposed on steel and aluminum.”

Please note that Section 232 measures are based on the country of origin, not the country of export. As of June 1, 2018 all countries of origin except Argentina, Australia, Brazil and South Korea are subject to Section 232 Steel tariffs. Additionally, all countries except Argentina and Australia are subject to Section 232 Aluminum tariffs.

Along with reporting the regular Chapters 72, 73, and 76 of the HTS classification for imported merchandise, importers must also declare the HTS  9903.80.01 for affected steel products and 9903.85.01 respectively.

Section 301: What is it?

A few years after the Trade Expansion Act, the Trade Act of 1974 was passed. This provided the authority to reduce trade barriers, improve relationships with developing economies. Additionally, fitting our interest now, the act provided for US action against foreign countries whose import activities unfairly disadvantage American labor and industry.  This is where we are getting the “retaliatory Section 301 Tariffs on China” from.

Under Section 301, the Office of the United States Trade Representative (USTR) initiated an investigation into the Chinese government’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.

What does it mean and how is it enforced?

After the USTR investigated and reviewed evidence, they concluded that China had participated in practices that caused an “unreasonable and discriminatory burden to restrict US commerce.”  They found that China had forced American companies to transfer technologies to Chinese companies by using pressure, joint venture requirements, administrative review, and licensing processes. The agency found that the damage to the US economy from these specific practices is in excess of $50 billion per year.  The response from the USTR has been to propose a 25% duty on certain products of China with an annual trade value in proportion to the harm caused to the US economy resulting from China’s unfair trade practices. 

To date, two lists have gone into effect impacting $50 billion dollars of Chinese merchandise. List 1, impacting $34 billion dollars of Chinese merchandise, went into effect on July 6, 2018. List 2, effecting $16 billion dollars in Chinese merchandise, went into effect on August 23, 2018. The USTR has released a third list proposing a 25% tariff on an additional $200 billion dollars of imported Chinese merchandise. List three is currently undergoing public hearings.

So, when someone refers to the “steel and aluminum tariffs” they are referring to the Section 232 Tariffs that currently carry a 25% duty on Steel and 10% duty on Aluminum products that have been imposed to ensure national security.  And when someone speaks about the “new Chinese tariffs” they are referring to the Section 301 Tariffs imposed as an economic sanction against China for their unfair technology acquisition practices when dealing with US companies. 

Contributor: Ryan Smith 

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