[Federal Register Volume 83, Number 184 (Friday, September 21, 2018)]
[Notices]
[Pages 47974-48192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-20610]



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Vol. 83

Friday,

No. 184

September 21, 2018

Part II





 Office of the United States Trade Representative





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Notice of Modification of Section 301 Action: China's Acts, Policies, 
and Practices Related to Technology Transfer, Intellectual Property, 
and Innovation; Notice

  Federal Register / Vol. 83 , No. 184 / Friday, September 21, 2018 / 
Notices  

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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE


Notice of Modification of Section 301 Action: China's Acts, 
Policies, and Practices Related to Technology Transfer, Intellectual 
Property, and Innovation

AGENCY: Office of the United States Trade Representative.

ACTION: Notice of modification of action.

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SUMMARY: In accordance with the specific direction of the President, 
the U.S. Trade Representative (Trade Representative) has determined to 
modify the prior action in this investigation by imposing additional 
duties on products of China classified in the subheadings of the 
Harmonized Tariff Schedule of the United States (HTSUS) set out in 
Annex A to this notice. The rate of additional duty is initially 10 
percent ad valorem. On January 1, 2019, the rate of additional duty 
will increase to 25 percent ad valorem.

DATES: 
    September 24, 2018: Additional duties at a rate of 10 percent ad 
valorem on the tariff subheadings set out in the Annexes to this notice 
are applicable with respect to products that are entered for 
consumption, or withdrawn from warehouse for consumption, on or after 
September 24, 2018.
    January 1, 2019: The rate of additional duty will increase to 25 
percent ad valorem with respect to products that are entered for 
consumption, or withdrawn from warehouse for consumption, on or after 
January 1, 2019.

FOR FURTHER INFORMATION CONTACT: For questions about this action, 
contact Assistant General Counsels Arthur Tsao or Megan Grimball, or 
Director of Industrial Goods Justin Hoffmann at (202) 395-5725. For 
questions on customs classification or implementation of additional 
duties on products identified in Annex A to this Notice, contact 
[email protected].

SUPPLEMENTARY INFORMATION: 

A. Prior Determinations in the Investigation

    On August 18, 2017, the Office of the U.S. Trade Representative 
(USTR) initiated an investigation into certain acts, policies, and 
practices of the Government of China related to technology transfer, 
intellectual property, and innovation (82 FR 40213). During the 
investigation, the Trade Representative determined that the acts 
policies, and practices of China under investigation are unreasonable 
or discriminatory and burden or restrict U.S. commerce, and are thus 
actionable under Section 301(b) of the Trade Act of 1974, as amended 
(Trade Act). See 83 FR 14906 (April 6, 2018). The Trade Representative 
further determined that it was appropriate and feasible to take the 
action of imposing an additional 25 percent duty on products of China 
with an annual trade value of approximately $50 billion. The additional 
duties were imposed in two tranches. Tranche 1 covered 818 tariff 
subheadings, with an approximate annual trade value of $34 billion. See 
83 FR 28710. Tranche 2 covered 279 tariff subheadings, with an 
approximate annual trade value of $16 billion. See 83 FR 40823.
    As set out in the above-referenced notices, the Trade 
Representative decided that one of the four categories of acts, 
policies, and practices covered in the investigation--in particular, 
China's technology licensing regulations--should be addressed through 
recourse to WTO dispute settlement. Accordingly, the United States 
initiated a WTO dispute by requesting consultations with the Government 
of China regarding certain aspects of China's technology regulations. 
China--Certain Measures Concerning the Protection of Intellectual 
Property Rights (DS542). Neither the prior action under Section 301, 
nor the supplemental action announced in this notice, relate to (or 
take into account harm caused by) this category of acts, policies, and 
practices of China.

B. Proposed Supplemental Action and Public Comment

    Near the end of the one-year period of investigation, China's 
statements and conduct indicated that action at a $50 billion level 
might not be sufficient to obtain the elimination of China's unfair and 
harmful policies. To address this eventuality, the Trade 
Representative, at the direction of the President, invited public 
comment on modifying the action taken in the investigation by adopting 
a supplemental action to impose an additional 10 percent duty on 
products from China classified in 6,031 tariff lines, with an annual 
trade value of approximately $200 billion. 83 FR 33608 (July 17 
notice). The Trade Representative subsequently announced that a 
supplemental action might involve an additional duty of 25 percent, and 
extended the public comment periods. 83 FR 38760 (August 7 notice).
    In response to the notices inviting comments on a possible 
supplemental action, interested persons filed over 6,000 written 
submissions. In addition, USTR and the Section 301 Committee held a 6-
day public hearing from August 20-27, 2018, at which approximately 350 
witnesses provided testimony and responded to questions. The public 
submissions and a transcript of the hearing are available on 
www.regulations.gov in docket number USTR-2018-0026.

C. Determination To Take Supplemental Action

    The Section 301 statute (set out in sections 301 to 308 of the 
Trade) includes authority for the Trade Representative to modify the 
action being taken under Section 301. In particular, Section 307(a)(1) 
provides in relevant part that the Trade Representative may modify or 
terminate any action, subject to the specific direction, if any, of the 
President with respect to such action, that is being taken under 
[Section 301] if the burden or restriction on United States commerce of 
the denial [of] rights, or of the acts, policies, and practices, that 
are the subject of such action has increased or decreased (paragraph 
B), or such action is being taken under section [301(b)] of this title 
and is no longer appropriate (paragraph C).
    Under paragraph B, the burden or restriction on United States 
commerce of the acts, policies, and practices that are the subject of 
the Section 301 action continues to increase, including following the 
one-year investigation period. Furthermore, China's unfair acts, 
policies, and practices include not just its specific technology 
transfer and IP polices referenced in the notice of initiation in the 
investigation, but also China's subsequent defensive actions taken to 
maintain those policies. China has decided to impose approximately $50 
billion in tariffs on U.S. goods, with the goal of encouraging the 
United States to drop its efforts to obtain the elimination of China's 
unfair policies. Thus, instead of addressing the underlying problems, 
China has increased tariffs to further protect the unreasonable acts, 
policies, and practices identified in the investigation, resulting in 
increased harm to the U.S. economy.
    Under paragraph C, ``action is being taken under section [301(b)] 
of this title and is no longer appropriate.'' The term ``appropriate'' 
refers to Section 301(b), which requires the Trade Representative to 
``take all appropriate and feasible action authorized under [section 
301(c)] to obtain the elimination of [the] act, policy, or practice.'' 
The specific action that will obtain the elimination of an act, policy, 
or practice is a matter of

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predictive judgment, to be exercised by the Trade Representative, 
subject to any specific direction of the President. The judgment during 
the period of investigation, based on then-available information, was 
that a $50 billion action would be effective in obtaining the 
elimination of China's policies.
    China's response, however, has shown that the current action no 
longer is appropriate. China has made clear--both in public statements 
and in government-to-government communications--that it will not change 
its policies in response to the current Section 301 action. Indeed, 
China denies that it has any problems with respect to its policies 
involving technology transfer and intellectual property. The United 
States has raised U.S. concerns repeatedly with China, including in 
Ministerial level discussions, but China has been unwilling to offer 
meaningful modifications to its unfair practices. Furthermore, China 
openly has responded to the current action by choosing to cause further 
harm to the U.S. economy, by increasing duties on U.S. exports to 
China.
    The President has exercised his authority under Section 307 to 
direct the Trade Representative to modify the prior action in the 
investigation by adopting the supplemental action set out in this 
notice. This direction is referenced in a Statement from the President 
issued on September 17, 2018.

    Today, following seven weeks of public notice, hearings, and 
extensive opportunities for comment, I directed the United States 
Trade Representative (USTR) to proceed with placing additional 
tariffs on roughly $200 billion of imports from China. The tariffs 
will take effect on September 24, 2018, and be set at a level of 10 
percent until the end of the year. On January 1, the tariffs will 
rise to 25 percent.'' https://www.whitehouse.gov/briefings-statements/statement-from-the-president-4/.

    USTR and the Section 301 Committee have carefully reviewed the 
public comments and the testimony from the six-day public hearing. 
Based on this review process, the Trade Representative, at the 
direction of the President, has determined not to include certain 
tariff subheadings listed in the Annex to the July 17 notice, resulting 
in 5,745 full and partial tariff subheadings with an approximate annual 
trade value of $200 billion.
    Pursuant to Section 307(a)(1) of the Trade Act, the Trade 
Representative, in accordance with the direction of the President, has 
determined to modify the prior action in this investigation by imposing 
additional duties on products of China classified in the full and 
partial subheadings of the HTSUS set out in Annex A to this notice, 
while maintaining the prior action. As set out in Annex A to this 
notice, the rate of additional duty is initially 10 percent ad valorem, 
effective September 24, 2018. As set out in Annex B to this notice, the 
rate of additional duty will increase to 25 percent ad valorem on 
January 1, 2019. Annex C to this notice contains the same list of 
tariff subheadings, with unofficial descriptions of the types of 
products covered in each subheading.
    In order to implement this determination, effective September 24, 
2018, subchapter III of chapter 99 of the HTSUS is modified by Annex A 
and Annex B of this notice. Products of China that are provided for in 
new HTSUS headings as established by Annex A to this notice that are 
entered for consumption, or withdrawn from warehouse for consumption, 
on or after 12:01 a.m. eastern daylight time on September 24, 2018, 
shall be subject to an additional duty of 10 percent ad valorem. As 
provided in Annex B, the rate of additional duty shall increase to 25 
percent for goods that are entered for consumption, or withdrawn from 
warehouse for consumption, on or after 12:01 a.m. eastern standard time 
on January 1, 2019.
    Any product listed in Annex A, except any product that is eligible 
for admission under `domestic status' as defined in 19 CFR 146.43, 
which is subject to the additional duty imposed by this determination, 
and that is admitted into a U.S. foreign trade zone on or after 12:01 
a.m. eastern daylight time on September 24, 2018, only may be admitted 
as `privileged foreign status' as defined in 19 CFR 146.41. Such 
products will be subject upon entry for consumption to any ad valorem 
rates of duty or quantitative limitations related to the classification 
under the applicable HTSUS subheading.
    The Trade Representative will continue to consider the actions 
taken in this investigation. In the event that further modifications 
are appropriate, the Trade Representative intends to take into account 
the extensive public comments and testimony previously provided in 
response to the July 17 and August 7 notices.

Robert E. Lighthizer,
United States Trade Representative.

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[FR Doc. 2018-20610 Filed 9-20-18; 8:45 am]
 BILLING CODE 3290-F8-P