Key Question: Does USTR ‘Update’ Negate CTA Argument That Tariffs Are Illegal?
Despite three rounds of Section 301 tariffs on Chinese imports to the U.S., China “fundamentally” hasn’t curbed its unfair trade practices “and indeed appears to have taken further unreasonable actions in recent months,” alleged an Office of the U.S. Trade Representative 53-page “update” report Tuesday. One big question is whether release of the report negates a key CTA legal argument that USTR Robert Lighthizer ran afoul of the 1974 Trade Act when he imposed the third tranche of “retaliatory” tariffs without conducting a new Section 301 enforcement investigation.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
Tariffs in the third tranche “may be vulnerable to a legal challenge because they are not based on the required legal finding” of unfair Chinese trade practices, “and instead are retaliatory in nature and require a separate Section 301 investigation,” which Lighthizer “did not conduct,” said CTA in Sept. 6 comments to the USTR’s office (see 1809070032). Section 301 “authorizes actions following fact-based investigations, not the responses to China's retaliatory actions,” it said then.
It’s “not resolved” whether CTA will sue the Trump administration to block the tariffs, President Gary Shapiro told us at CES Unveiled New York (Ref:1811090029]). The 10 percent tariffs that took effect Sept. 24 on $200 billion worth of Chinese imports will rise automatically to 25 percent Jan. 1 “unless something is done,” said Shapiro. By that reference, Shapiro said CTA members were hoping for a breakthrough if President Donald Trump meets with Chinese President Xi Jinping during the G20 summit that opens Nov. 30 in Argentina.
CTA didn’t comment on the USTR’s release of the update report and whether it thinks that constitutes a new investigation, which CTA contends the law requires as the basis for retaliatory tariffs. A Chinese foreign ministry spokesperson denied the report’s allegations and said the China-U.S. “economic and trade cooperation” was designed for “mutual benefit and win-win results.” Though it’s “quite normal to have economic and trade frictions, the key is to resolve them through dialogue and consultation on the basis of mutual respect, equality and good faith,” he said.
Lighthizer’s office compiled the update “as part of its ongoing monitoring and enforcement effort,” said the report. “In preparing this update, USTR has relied upon publicly available material, and has consulted with other government agencies.” China “continues its policy and practice of conducting and supporting cyber-enabled theft and intrusions into the commercial networks of U.S. companies and those of other countries, as well as other means by which China attempts illegally to obtain information,” said the update. “This conduct provides the Chinese government with unauthorized access to intellectual property, including trade secrets, or confidential business information, as well as technical data, negotiating positions, and sensitive and proprietary internal business communications.”
Micron Technology was the "U.S. victim" in an espionage case brought this month against Fujian Jinhua, a tech company the Chinese government funded to the tune of $5 billion to produce DRAM chips, said the report. Citing a DOJ indictment, the report said Jinhua recruited employees at Micron’s Taiwan subsidiary to steal critical trade secrets worth up to $8.75 billion.
The report made no mention of Micron's fierce opposition to the administration's "retaliatory" tariffs on the memory modules it assembles in China and imports to the U.S. under the 8473.30.11.40 classification. The duties will cause "significant commercial harm" to Micron and its U.S. customers and do little to curb China's allegedly unfair trade practices, the company told the USTR in September.
Though the Chinese government this year imposed “relaxation” of some foreign ownership restrictions and other “incremental” improvements, it “has persisted in using foreign investment restrictions to require or pressure the transfer of technology from U.S. companies to Chinese entities,” said the report. China also continues to “direct and unfairly facilitate the systematic investment in, and acquisition of, U.S. companies and assets by Chinese entities, to obtain cutting-edge technologies and intellectual property and generate large-scale technology transfer in industries deemed important by state industrial plans.” it said.