Notice of Extension of Certain Exclusions: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation

AGENCY:

Office of the United States Trade Representative (USTR).

ACTION:

Notice.

SUMMARY:

In prior notices, the U.S. Trade Representative modified the actions in the section 301 investigation of China's acts, policies, and practices related to technology transfer, intellectual property, and innovation by excluding from additional duties certain products of China. The current 429 product specific exclusions (352 previously reinstated exclusions and 77 COVID-related exclusions) are scheduled to expire on May 31, 2024. This notice announces the U.S. Trade Representative's determination to provide a 14-day transition period for all current exclusions, extending them through June 14, 2024, and to extend certain exclusions through May 31, 2025.

DATES:

To provide a transition period, this notice extends all exclusions scheduled to expire on May 31, 2024, through June 14, 2024. Those exclusions receiving further extension are listed in Annex C to this notice and are extended through May 31, 2025.

FOR FURTHER INFORMATION CONTACT:

For general questions about this notice, contact Senior Associate General Counsel Philip Butler or Assistant General Counsel Edward Marcus at (202) 395-5725. For specific questions on customs classification or implementation of the product exclusions, contact traderemedy@cbp.dhs.gov.

SUPPLEMENTARY INFORMATION:

A. Background

In the course of this investigation, the U.S. Trade Representative has imposed additional duties on products of China in four tranches. See83 FR 28719 (June 20, 2018); 83 FR 40823 (August 16, 2018); 83 FR 47974 (September 21, 2018), as modified by 83 FR 49153 (September 28, 2018); and 84 FR 43304 (August 20, 2019), as modified by 84 FR 69447 (December 18, 2019) and 85 FR 3741 (January 22, 2020).

For each tranche of additional duties, the U.S. Trade Representative established a process by which interested persons could request the temporary exclusion of particular products subject to the action. These exclusions were granted for a limited time and, with few exceptions, most expired in 2019 and 2020.

Reinstated Exclusions

On October 8, 2021, the U.S. Trade Representative invited the public to submit comments on whether to temporarily reinstate certain exclusions previously granted and extended. See86 FR 56345 (October 8, 2021). On March 28, 2022, the U.S. Trade Representative determined to temporarily reinstate 352 expired exclusions through December 31, 2022. See87 FR 17380 (March 28, 2022) (March 28 notice). The 352 exclusions were subsequently extended through September 30, 2023. See87 FR 78187 (December 21, 2022).

COVID-Related Exclusions

On March 25, 2020, USTR requested public comments on proposed modifications to exclude from additional duties certain medical-care products related to the U.S. response to COVID. See85 FR 16987 (March 25, 2020). In light of ongoing efforts to combat COVID, on December 29, 2020, USTR announced 99 product exclusions for medical-care products and products related to the U.S. COVID response. See85 FR 85831 (December 20, 2020) (December 20 notice). For additional background on previous COVID-related extensions, see prior notices issued in the investigation, including: 86 FR 13785 (March 10, 2021), 86 FR 63438 (November 16, 2021), 87 FR 33871 (June 3, 2022), and 87 FR 73383 (November 29, 2022). On May 17, 2023, the U.S. Trade Representative determined to extend 77 of the COVID-related exclusions through September 30, 2023. See88 FR 31580 (May 17, 2023).

Four-Year Review

In accordance with section 307(c)(3) of the Trade Act of 1974 (19 U.S.C. 2417(c)(3)), on September 8, 2022, USTR announced that it would be conducting a review of the July 6, 2018 and August 23, 2018 actions, as modified. See87 FR 26797 (May 5, 2022); 87 FR 55073 (September 8, 2022). In a notice published on October 17, 2022 (87 FR 62914), USTR announced that it was opening a docket on November 15, 2022, for interested persons to submit comments on the review, including whether certain tariff headings (including those with product-specific exclusions) should remain covered by the actions.

To allow for consideration under the statutory review, on September 11, 2023, the U.S. Trade Representative determined to extend all current exclusions through December 31, 2023. See88 FR 62423 (September 11, 2023).

Consideration of Further Extension of Exclusions

In light of public comments submitted in the four-year review, on December 29, 2023, USTR invited public comments on whether to further extend any of the current exclusions and announced an interim extension of the exclusions through May 31, 2024. See88 FR 90225 (December 29, 2023) (the December 29 notice).

The December 29 notice provided that, in considering possible extensions, USTR would evaluate each exclusion on a case-by-case basis, with the focus of the evaluation on the availability of products covered by the exclusion from sources outside of China, efforts undertaken to source products covered by the exclusion from the United States or third countries, and whether further extension of a particular exclusion would aid in shifting sourcing outside of China. See88 FR 90225. The notice also provided that USTR would consider the impact on U.S. interests of extending or not extending an exclusion and the goal of obtaining the elimination of China's acts, policies, and practices covered in the investigation.

USTR opened a 30-day docket on January 22, 2024, and requested that commenters address the availability of products covered by the exclusion outside of China, plans to shift their sourcing outside of China in 2024, efforts undertaken to source products from the United States or third countries, and why additional time is needed to shift sourcing out of China and the timeline, if any, expected for sourcing to shift outside of China.

B. Determination to Further Extend Certain Exclusions

Based on evaluation of the factors set out in the December 29 notice, and pursuant to sections 301(b), 301(c), and 307(a) of the Trade Act of 1974, as amended, the U.S. Trade Representative has determined to further modify the action to extend the exclusions listed in Annex C to this notice through May 31, 2025. The U.S. Trade Representative has found that extending these exclusions will support efforts to shift sourcing out of China, or provide additional time where, despite efforts to source products from alternative sources, availability of the product outside of China remains limited.

The U.S. Trade Representative has determined not to extend the remaining exclusions beyond the 14-day transition period. These exclusions are listed in Annex D to this notice. The list includes 102 exclusions where no public comments requested further extension. For the remaining exclusions, public comments do not demonstrate that further extending the exclusion would aid efforts to shift sourcing out of China in the near term or do not demonstrate that products covered by the exclusion are unavailable outside of China.

For example, the U.S. Trade Representative has declined to further extend exclusions where comments indicated that importers had no plans to shift sourcing out of China in 2024 (or at all). Similarly, the U.S. Trade Representative has declined to further extend exclusions where, despite more than four years of temporary exclusion, commenters reported that they had taken few or no steps to shift sourcing out of China. This includes comments that, without further explanation, asserted that they were considering alternative sources, or reported plans to shift sourcing, but failed to adequately explain efforts undertaken or why additional time was needed.

The U.S. Trade Representative also declined to further extend exclusions where opposing comments indicated availability from domestic sources or third country sources. This includes opposing comments from domestic producers reporting available capacity and opposing comments from importers who previously benefitted from the exclusion reporting successful efforts to shift to alternative sources. Extending these exclusions may undercut those efforts, including recent investments in domestic capacity.

The U.S. Trade Representative also declined to extend exclusions where claims of unavailability were based on the product being unavailable at the price of Chinese sources. In many instances, comments simply asserted that products were unavailable because China remained the lowest cost source. Extending those exclusions would likely delay the commenters' efforts to find alternative sourcing and continue their dependence on Chinese suppliers and products, which undermines the goal of obtaining the elimination of China's acts, policies, and practices covered in the investigation.

Similarly, many comments asserted that a product was unavailable outside of China due to costs associated with finding alternative sources or based on the limited availability of certain product specifications or comparable quality outside of China. Without additional explanation of efforts undertaken or how further extending the exclusion would aid efforts to shift sourcing, the U.S. Trade Representative declined to extend these exclusions.

The U.S. Trade Representative's consideration to extend certain exclusions takes into account public comments submitted in response to the December 29 notice, public comments submitted in the four-year review, confidential import data provided by U.S. Customs and Border Protection, the advice of advisory committees, and the advice of the interagency section 301 Committee.

As stated above, to provide a transition period for the expiring exclusions, the U.S. Trade Representative has determined to extend all current exclusions through June 14, 2024. See Annex A and Annex B to this notice. The exclusions listed in Annex C to this notice are further extended through May 31, 2025. The exclusions listed in Annex D are not being extended beyond the 14-day transition period.

The extensions announced in the notice are available for any product that meets the description in the product exclusion. Further, the scope of each exclusion and modification is governed by the scope of the ten-digit Harmonized Tariff Schedule of the United States (HTSUS) subheadings and product descriptions in the Annexes of this notice. U.S. Customs and Border Protection will issue instructions on entry guidance and implementation.