The Section 301 Process
Overview of Section 301
Title III of the Trade Act of 1974 (Sections 301 through 310, 19 U.S.C. §§2411-2420), titled “Relief from Unfair Trade Practices,” is often collectively referred to as “Section 301.” Section 301 provides a statutory means by which the United States imposes trade sanctions on foreign countries that violate U.S. trade agreements or engage in acts that are “unjustifiable” or “unreasonable” and burden U.S. commerce. Prior to 1995, the United States used Section 301 extensively to pressure other countries to eliminate trade barriers and open their markets to U.S. exports. The creation of an enforceable dispute settlement mechanism in the WTO, strongly supported by the United States, significantly reduced U.S. use of Section 301. While the United States retains the flexibility to seek recourse for foreign unfair trade practices in the WTO or under Section 301, a determination to bypass WTO dispute settlement and impose retaliatory measures (if any) in response to a Section 301 investigation may be challenged at the WTO.
Section 301 Cases
There have been 130 cases under Section 301 since the law’s enactment in 1974, of which 35 have been initiated since the WTO’s establishment in 1995. These cases have primarily targeted the European Union (EU), concerning mostly agricultural trade. The EU is followed by Canada, Japan, and South Korea. Prior to 2017, the last Section 301 investigation took place in 2013 and involved Ukraine’s practices regarding IPR. Given the political situation in Ukraine, the USTR determined that no action was appropriate at the time. The last investigation prior to the Trump Administration resulting in retaliation (i.e., tariffs) took place in 2009 and involved Canada’s compliance with the 2006 U.S.-Canada Softwood Lumber Agreement. Per a U.S.-Canadian understanding, the USTR suspended the tariffs in 2010.
During the Trump Administration, the USTR initiated six new investigations (see text box). Two investigations have resulted in the imposition of tariffs to date, on U.S. imports from China and the EU. The U.S. action against the EU— unlike that against China—was based on a WTO dispute in which the USTR anticipated being allowed to retaliate.
Recent Section 301 Proceedings
Date of Initiation. August 2017.
Issue. China’s technology transfer, IP, and innovation policies/practices. Finding. Four Chinese IPR-related practices are unreasonable (or discriminatory) and burden (or restrict) U.S. commerce and justified U.S. action: (1) forced technology transfer requirements, (2) cyber-enabled theft of U.S. IP and trade secrets, (3) discriminatory licensing practices, and (4) state-funded strategic acquisition of U.S. assets.
Action T aken. Additional tariffs, ranging from 7. 5% to approximately $370 billion worth of U.S. imports from China.
WTO Procedures. WTO case DS542. (See also DS543 / DS565 / DS587.)
Date of Initiation. April 2019.
Issue. EU (including the UK) subsidies on large civil aircraft; violation of U.S. rights under the WTO Agreement; and EU’s failure to implement WTO Dispute Settlement (DS) panel recommendations concerning certain subsidies to the EU large civil aircraft industry.
Finding. EU and certain member states have denied U.S. rights under the WTO Agreement and have failed to bring WTO-inconsistent subsidies into compliance with WTO rules.
Action Taken. Suspended (until July 2021). Additional tariffs of 15% or 25% on $7.5 billion worth of U.S. imports from the EU.
WTO Procedures. WTO case DS316. (See also DS353.)
Date of Initiation. July 2019.
Issue. France’s digital services tax (DST).
Finding. The DST discriminates against major U.S. digital companies and is inconsistent with prevailing international tax policy principles.
Action Taken. Suspended (indefinitely, as of January 2021). Additional tariffs of 25% on $1.3 billion worth of U.S. imports from France.
Foreign Digital Services Taxes
Date of Initiation. July 2020.
Issue. The DSTs adopted or under consideration by Austria, Brazil, the Czech Republic, the EU, India, Indonesia, Italy, Spain, Turkey, and the UK. Findings. The DSTs of Austria, India, Italy, Spain, Turkey, and the UK discriminate against major U.S. digital companies and are inconsistent with prevailing international tax policy principles. Investigations with respect to Brazil, the Czech Republic, the EU, and Indonesia were terminated. Action Taken. Suspended (until November 2021). Additional tariffs of 25% on approximately $2.1 billion worth of U.S. imports from six countries: Austria ($65 million), India ($119 million), Italy ($386 million), Spain ($324 million), Turkey ($310 million), and the UK ($887 million).
Date of Initiation. October 2020.
Issue. Vietnam’s policies/practices related to the valuation of its currency. Finding. Vietnam’s acts, policies, and practices related to currency valuation, including excessive foreign exchange market interventions, taken in their totality, are unreasonable and burden or restrict U.S. commerce. Action Taken. None (as of June 2021).
Date of Initiation. October 2020.
Issue. Vietnam’s policies/practices related to the import and use of timber that is illegally harvested or traded.
Investigation. Ongoing. Virtual public hearing held in December 2020.