[Federal Register Volume 84, Number 161 (Tuesday, August 20, 2019)]
[Notices]
[Pages 43304-43471]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17865]



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Vol. 84

Tuesday,

No. 161

August 20, 2019

Part III





 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. 84, No. 161 / Tuesday, August 20, 2019 / 
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 action being taken in this Section 301 investigation by 
imposing additional duties of 10 percent ad valorem on products of 
China classified in the tariff subheadings set out in the Annexes to 
this notice.

DATES: Additional duties at a rate of 10 percent ad valorem on the 
tariff subheadings set out in Annex A to this notice are applicable 
with respect to products that are entered for consumption, or withdrawn 
from warehouse for consumption, on or after September 1, 2019. 
Additional duties at a rate of 10 percent ad valorem on the tariff 
subheadings set out in Annex C to this notice are applicable with 
respect to products that are entered for consumption, or withdrawn from 
warehouse for consumption, on or after December 15, 2019.

FOR FURTHER INFORMATION CONTACT: For questions about this action, 
contact Associate General Counsel Arthur Tsao or Assistant General 
Counsel 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 the 
Annexes to this notice, contact [email protected].

SUPPLEMENTARY INFORMATION:

A. Prior Determinations in the Investigation

    On August 18, 2017, the Trade Representative 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. In April 2018, the Trade 
Representative published a notice of a determination 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). 83 FR 14906.
    At the direction of the President, the Trade Representative 
determined to take actions resulting in the imposition of an additional 
25 percent ad valorem duty on products of China with an annual 
aggregate trade value of approximately $250 billion. The additional 
duties were imposed in three tranches. Tranche 1 covered 818 tariff 
subheadings, with an approximate annual trade value of $34 billion. See 
83 FR 28710 (June 20, 2018). Tranche 2 covered 279 tariff subheadings, 
with an approximate annual trade value of $16 billion. See 83 FR 40823 
(August 16, 2018). Tranche 3 covered 5,733 tariff subheadings, with an 
approximate annual trade value of $200 billion. See 83 FR 47974 
(September 21, 2018); 83 FR 49153 (September 28, 2018); and 84 FR 20459 
(May 9, 2019).
    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, 
relating to 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 actions under 
Section 301, nor the 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 Modification of Action and Public Comment

    As of May 2019. China's statements and conduct indicated that 
action at a $250 billion level was insufficient to obtain the 
elimination of China's unfair and harmful policies. Thus, on May 17, 
2019, the Trade Representative, at the direction of the President, 
invited public comment on modifying the action taken in the 
investigation by adopting an action to impose up to an additional 25 
percent duty on products from China classified in 3,805 full and 
partial tariff subheadings, with an annual trade value of approximately 
$300 billion. 84 FR 22564 (May 17 notice).
    In response to the May 17 notice inviting comments on a possible 
action, interested persons filed nearly 3,000 written submissions. In 
addition, USTR and the Section 301 Committee held a seven-day public 
hearing from June 17 to June 25, 2019, at which over 300 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-2019-0004.

C. Modification of Action

    The Section 301 statute (set out in Sections 301 to 308 of the 
Trade Act) (19 U.S.C. 2411-2418) includes authority for the Trade 
Representative to modify the action being taken in an investigation. In 
particular, Section 307(a)(1) authorizes the Trade Representative to 
modify or terminate any action taken under Section 301, subject to the 
specific direction, if any, of the President if: The burden or 
restriction on United States commerce of the acts, policies, and 
practices, that are the subject of the action has increased or 
decreased, or the action is being taken under Section 301(b) and is no 
longer appropriate.
    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. China's unfair acts, policies, and practices 
include not just its 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 unfair acts, 
policies, and practices as determined in that investigation. China has 
decided to impose tariffs on approximately $110 billion worth of U.S. 
goods, with the goal of pressuring the United States to cease its 
efforts to obtain the elimination of China's unfair policies. China has 
further taken or threatened to take additional countermeasures, 
including non-tariff measures, against commerce of the United States. 
In short, instead of addressing the underlying problems, China has 
increased tariffs and adopted or threatened additional retaliation to 
further protect the unreasonable acts, policies, and practices 
identified in the investigation, resulting in increased harm to the 
U.S. economy.
    China's response has shown that the current action no longer is 
appropriate. The United States is engaging with China with the goal of 
obtaining the elimination of the acts, policies, and practices covered 
in the investigation. The leaders of the United States and China met on 
December 1, 2018, and agreed to hold negotiations on a range of issues, 
including those covered in this Section 301 investigation. See https://www.whitehouse.gov/briefings-statements/statement-press-secretary-regarding-presidents-working-dinner-china/. Since the meeting on 
December 1, the United States and China have

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engaged in additional rounds of negotiation on these issues, including 
meetings in March, April, and May of 2019. Shortly before the May 2019 
meetings, China retreated from specific commitments made in previous 
rounds. China also has imposed further retaliatory action against U.S. 
commerce. The United States and China held another round of meetings 
from July 29 to July 31, 2019. At the conclusion of that round, China 
remained unwilling to return to the specific commitments it had offered 
in prior rounds of negotiations. Furthermore, as found by the 
Department of the Treasury, China has taken concrete steps to devalue 
its currency. See https://home.treasury.gov/news/press-releases/sm751.
    For these reasons, and in accordance with the specific direction of 
the President, the Trade Representative has determined to modify the 
action being taken in the investigation by adopting additional tariffs 
of 10 percent ad valorem on goods of China with an annual trade value 
of approximately $300 billion, as set out in the Annexes to this 
notice. The Trade Representative's determination takes account of the 
public comments and the testimony from the seven-day public hearing, as 
well as the advice of the interagency Section 301 committee and 
appropriate advisory committees.
    Certain tariff subheadings proposed in the May 17 notice have been 
removed from the final list of tariff subheadings subject to additional 
duties, based on health, safety, national security, and other factors. 
In addition, the tariff subheadings subject to the 10 percent 
additional duties are separated into two lists with different effective 
dates--Annex A contains the formal Harmonized Tariff Schedule of the 
United States (HTSUS) language for list 1, and Annex B contains an 
informal description of the products in list 1. Annex C contains the 
formal HTSUS language for list 2, and Annex D contains an informal 
description of the products in list 2.
    List 1 includes tariff subheadings where China's share of U.S. 
imports from the world is less than 75 percent for each subheading. For 
list 1, the additional duty of 10 percent ad valorem is effective 
September 1, 2019.
    List 2 includes products where China's share of U.S. imports from 
the world is 75 percent or greater for each subheading. To provide a 
longer adjustment period for U.S. interested persons, the additional 
duty of 10 percent ad valorem for list 2 is delayed until December 15, 
2019.
    In order to implement this determination, effective September 1, 
2019, subchapter III of chapter 99 of the HTSUS is modified by Annexes 
A and C of this notice. Products of China that are provided for in the 
HTSUS headings 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 1, 2019, shall be 
subject to an additional duty of 10 percent ad valorem. Products of 
China that are provided for in the HTSUS headings established by Annex 
C 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 December 15, 2019, shall be subject to an additional duty of 10 
percent ad valorem.
    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 1, 2019, 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.
    Any product listed in Annex C, 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 December 15, 2019, 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 also has decided that USTR will establish 
a process by which interested persons may request that particular 
products classified within an HTSUS subheading covered by Annex A and 
Annex C be excluded from the additional duties. USTR will publish a 
separate notice describing the product exclusion process, including the 
procedures for submitting exclusion requests, and an opportunity for 
interested persons to submit oppositions to a request.
    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 May 17 notice.

Joseph Barloon,
General Counsel, Office of the U.S. Trade Representative.
BILLING CODE 3290-F9-P

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[FR Doc. 2019-17865 Filed 8-19-19; 8:45 am]
BILLING CODE 3290-F9-C