Section 301 Country Review Could Complicate Life of Importers, Lawyer Says
The signals that tariffs will not go up on $200 billion worth of Chinese imports on March 2 is a small relief for businesses, according to Venable partner Lindsay Meyer, but they're still challenged by the difficulty "of forecasting what the second half of this year will present." Some importers that work with Venable are getting their suppliers to shoulder some of the additional tariff costs; others are declining to enter two-year contracts unless there's the ability to reopen the deals if tariffs increase. "The companies, they’re making their plans cautiously," she said. "I think the anxiety level isn’t at a level 10 that it was, but it certainly hasn’t dropped down below 5."
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It's not just China tariffs that could be a shoe to drop; there's the possibility of tariffs on autos and auto parts, as well as how the Office of the U.S. Trade Representative could punish other countries that it says are not honoring intellectual property protections. A public hearing on the annual Section 301 country review will be held Feb. 27.
"You’ve got commercial entities and non-governmental entities in the U.S. that use this opportunity of the annual review to assert challenges that their individual companies are facing in an individual country," Meyer said. And for USTR, it's "an opportunity to push the needle," she said.
Last year, for the first time, Canada was added to the priority watch list, where China, India and others have been for years. Meyer said that's largely because of online sales of pharmaceuticals, with distribution happening from Canada, though generally the ability of bad actors to backdoor counterfeits through Canada concerns USTR. Meyer said it's unlikely the administration will impose tariffs or other penalties on Canada, as it did with China because of Section 301 concerns. "Are we going to encourage them with the carrot or hammer them with the stick? I don't think they’re going to hammer them with the stick," she said.
India could be another matter, she said. There are long-term irritants with India, including price controls on certain medical devices, which is also a problem that USTR named as a possible reason to change India's benefits under the Generalized System of Preferences. India is the largest beneficiary of that program.
"This administration looks for multiple touchpoints," Meyer said, and Section 301 and GSP could both be tools to get India to shift policies. She said she doesn't know if the Trump administration would remove India from GSP, but said, "I could see it being significantly reduced." She said even if India adjusted price caps on medical devices, she thinks it would only buy India time, not satisfy USTR.