Background

A World Trade Organization dispute settlement panel ruled Sept. 15 that the United States’ imposition of additional tariffs on $234 billion worth of imports from China violated U.S. obligations under WTO rules. U.S. officials decried the decision, although it will likely have no practical effect.

Following a Section 301 investigation, the Office of the U.S. Trade Representative determined that China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation are unreasonable and discriminatory. In response, USTR imposed an additional tariff of 25 percent on 818 products from China with a trade value of about $34 billion (List 1 goods) and then an additional 10 percent tariff (later increased to 25 percent) on another 5,745 products with a trade value of about $200 billion (List 3 goods). Most of these tariffs remain in place despite the granting of some exclusions and China’s imposition of its own retaliatory tariffs.

The WTO panel agreed with China that the Section 301 tariffs violated WTO rules because they (1) applied only to products originating from China, in violation of the most-favored-nation principle requiring WTO members to assess equal tariff rates on imports from other members, and (2) exceeded the U.S.’ bound tariff rates. The panel rejected the U.S. argument that the phase 1 trade agreement it reached with China earlier this year effectively resolved this dispute.

USTR Robert Lighthizer slammed the decision, which he said “confirms what the Trump Administration has been saying for four years: The WTO is completely inadequate to stop China’s harmful technology practices.” He noted that the panel “did not dispute the extensive evidence submitted by the United States of intellectual property theft by China” and asserted that the U.S. “must be allowed to defend itself against unfair trade practices.”

The ruling will likely have little to no immediate effect on the tariffs; among other things, a final resolution is currently precluded by the WTO Appellate Body’s inability to operate. However, it could be considered in a recently-filed federal case challenging the Section 301 tariffs on List 3 and List 4A goods that, if successful, could result in the refund of all such tariffs. Importers wishing to preserve their rights to such refunds must file their own independent cases by Sept. 18. For more information, or assistance filing your claim, please contact Larry Ordet at (305) 894-1003 or David Cohen at (202) 730-4955.

Copyright © 2020 Sandler, Travis & Rosenberg, P.A.; WorldTrade Interactive, Inc. All rights reserved.

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