A new report urges Congress to expand Section 337 of the 1930 Tariff Act to better address the unfair trade practices China uses to capture market share in advanced industries.
The Information Technology & Innovation Foundation argues that “the new Washington consensus is that China is a threat, Chinese government trade policy actions are mostly unfair and predatory, and [China] is moving away, rather than toward, its WTO obligations.” The U.S. has pursued both offensive and defensive responses, but the former’s focus on boosting U.S. competitiveness “will ultimately be insufficient by itself” and the latter’s emphasis on inflicting pain on Beijing to spur policy changes is ineffective because “China is too powerful now” to be swayed by unilateral U.S. measures and multilateral efforts will lag as long as other nations see China as “an economic opportunity too important to give up.”
Instead, the ITIF states, the U.S. should “craft and implement a new set of trade defense instruments” that limit the benefits China gains from its unfair trade practices. Asserting that Section 301 tariffs, at least as they have been utilized in recent years, are an overly broad approach, the report states that Congress should instead amend Section 337 to make it easier to impose targeted exclusion orders against imports of goods and services from firms in non-market, non-rule-of-law economies (e.g., China) that systemically benefit from unfair government trade policies practices. While Section 337 is largely used today to litigate intellectual property rights violations, the report states that it was originally envisioned to help address unfair foreign trade practices and should therefore be used “much more vigorously” in that manner.
Statutory changes suggested by the report include the following.
- clarifying that forced technology transfer, closed domestic markets, subsidies, and virtually any other action from a non-market, non-rule-of-law nation that gives a significant competitive advantage to its firms is eligible for Section 337 investigations
- eliminating the requirement for injury to a domestic industry in unfair trade practices claims against non-market countries when those practices are pervasive and large
- permitting any federal agency to bring Section 337 cases and increasing funding for (1) the departments of Commerce and Justice to file such cases, (2) the ITC to handle such cases, and (3) U.S. Customs and Border Protection to enforce any resulting exclusion orders
- expanding the ITC’s authority to allow broader exclusionary orders against classes of products (not just individual items), including digital products
- making it more difficult to use Section 337 for IPR cases that could be brought to federal district court instead
- making it easier to prosecute Section 337 cases by (1) mandating lower standards of evidence in cases involving countries like China (e.g., applying a rebuttable presumption of guilt akin to the one contained in the Uyghur Forced Labor Prevention Act), (2) narrowing public interest standards, (3) allowing such cases even if they involve antidumping or countervailing duty issues, and (4) providing a substantial tax credit to companies for related expenses
For more information on Section 337 issues, please contact attorney Lee Sandler via email or at (305) 894-1000.
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