Tariffs and Trade Remedies


Previous Page


What Are The Available Responses to Unfair Trade Practices? 

Information Courtesy Congressional Research Service, IF11016

What is U.S. tariff policy?

The Constitution empowers Congress to set tariffs—a customs duty levied on imports and exports; this power has been partially delegated to the President. While historically tariffs were used as a primary means of collecting government revenue, today developed countries like the United States rely on other means for generating revenue. U.S. Customs and Border Protection (CBP) administers the collection of tariffs at U.S. ports of entry—in FY2020, CBP collected $74 billion in tariffs (just 2% of total federal revenue), up from $35 billion in FY2017.

Over the past 80 years, the United States used its tariff policy to encourage global trade liberalization toward various ends, such as increasing global trade, supporting global peace and economic prosperity, and opening markets for U.S. exports. Toward these ends, the United States has reduced or eliminated many of its tariffs through bilateral and multilateral trade negotiations and agreements (see “Trade Negotiations and Agreements”). Beginning in 1934, Congress began periodically authorizing the President to negotiate reciprocal reductions in tariffs bilaterally. Following World War II, the United States encouraged tariff reduction globally by supporting a rules-based trading system under the GATT and the WTO. By 2012, global tariffs had fallen to less than 7% on average. As of 2019, the simple mean of U.S. tariffs applied across all products was 3.3%, the lowest among the top five global economies by GDP. Roughly 70% of all products enter the United States duty free. The Trump Administration was critical of low-tariff policies and made greater use of its discretionary authority to increase tariffs on certain goods imported from key U.S. trading partners.

What are the main U.S. trade remedy laws?

U.S. trade laws include trade remedies used by the United States to mitigate the adverse impact of various foreign trade practices on domestic industries and workers. The two most frequently used trade remedies aimed at unfair trade practices are antidumping (AD) and countervailing duty (CVD) laws. These laws are administered primarily through the Department of Commerce’s International Trade Administration (ITA), which determines the existence and amount of dumping or subsidies, and the U.S. International Trade Commission (ITC), which determines the injury or threat thereof to U.S. industries. Other trade remedy laws include Section 201 of the Trade Act of 1974, which focuses on import surges of fairly traded goods; Section 301 of the Trade Act of 1974, which focuses on violations of trade agreements or other foreign practices found to be unjustifiable and restrict U.S. commerce; and Section 337 of the Tariff Act of 1930, which focuses on patent and copyright infringements, and counterfeit goods. All laws must comply with U.S. WTO obligations, including articles under the GATT, known as the Antidumping Agreement, Agreement on Subsidies and Countervailing Measures, and the Agreement on Safeguards.

Supporters of trade remedies say that they are necessary to shield U.S. industries and workers from unfair competition. Others, including some importers and downstream industries, are concerned that AD/CVD actions can serve as disguised protectionism and create inefficiencies in the global trading system by raising prices on imported goods.

What is the purpose of the antidumping law?

Antidumping (AD) is the most frequently used U.S. trade remedy law. Dumping generally refers to an unfair trade practice in which an exporter sells goods in one export market at lower prices than comparable goods sold in the home market or in other export markets. Companies sometimes dump products to gain market share, deter competition, or get rid of industrial overcapacity. U.S. law provides for the assessment and collection of AD duties when an administrative determination is made by the ITA that foreign goods are being sold at “less than fair value” in the United States, and if the ITC determines that such imports cause material injury to a U.S. industry or the threat thereof. AD orders are not permanent and are subject to annual review if requested by an interested party, and a sunset review every five years. As of November 2020, the United States had more than 400 AD orders in place; about one-third were against China.

What is the purpose of the countervailing duty law?

After AD, countervailing duties (CVD) are the most frequently used U.S. trade remedies. The purpose of CVDs are to offset injurious competitive advantage that foreign manufacturers or exporters might enjoy over U.S. producers as a result of receiving a subsidy from the government or another public entity. Countervailing duties are designed to offset the net amount of the foreign subsidy and are levied upon imports of the subsidized goods into the United States. Although AD and CVDs are intended to remedy fundamentally different kinds of unfair trade, the procedures for both investigations are similar. As of November 2020, the United States had 143 CVD orders in place, half of which were against China.

What is the Section 201 safeguards law?

Section 201 of the Trade Act of 1974 (19 U.S.C. §2251, as amended) authorizes the President to restrict temporarily imports that are found to cause or threaten serious injury to domestic industry. So-called “safeguard” actions are designed to provide temporary relief—for example, through additional tariffs or quotas—to facilitate “positive adjustment” of a domestic industry to import competition.136 Unlike AD and CVD cases, no allegation of “unfair” trade practices is required to trigger a safeguard investigation. The ITC conducts an investigation, generally initiated by petition filed by a trade association, company, or union representing a U.S. industry. If the ITC finds imports are a substantial cause of serious injury, it makes recommendations on temporary relief to the President, who takes the final action on whether or not to implement the recommendations.

In 2017, two safeguard investigations were initiated under the Trump Administration. In January 2018, President Trump imposed a four-year safeguard measure on imports of solar cells and a three-year safeguard on large residential washing machines. Prior to these safeguard actions, the last safeguard investigation was in 2001 over steel products. From 1975 to 2001, the ITC conducted 73 investigations; the ITC determined in the negative in 32 cases and in the affirmative in 34 cases (6 cases ended in ties). The President imposed some type of safeguard measure in 19 cases during this time.

What is Section 232 of the Trade Expansion Act of 1962?

Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862, as amended) is often called the “national security clause,” because it provides the President with the ability to impose restrictions on imports that the Secretary of Commerce determines are being imported in “such quantities or under such circumstances as to threaten to impair the national security.” If requested or upon self-initiation, the Commerce Department’s Bureau of Industry and Security (BIS) consults with the Secretary of Defense and other agencies, and conducts the investigation. Section 232 specifies the factors that Commerce must consider regarding the impact of the U.S. imports on national security. Depending on the findings, the President has the discretion to impose tariffs, quotas, or other measures to offset the adverse effect, subject to few limits.

Prior to the Trump Administration, Commerce initiated 26 Section 232 investigations, beginning in 1963. The Trump Administration opened eight investigations. In March 2018, President Trump imposed a 25% tariff on steel imports and a 10% tariff on aluminum imports from most countries, and took nontrade measures to address threats posed by imports of uranium, titanium sponge, and grain-oriented electrical steel imports. The Administration did not act on an investigation into autos and auto parts, terminated an investigation into mobile cranes, and an investigation of vanadium was ongoing.

What is Section 301 of the Trade Act of 1974?

Section 301 of the Trade Act of 1974 (19 U.S.C. §2411) grants the Office of the United States Trade Representative (USTR) a range of responsibilities and authorities to investigate and take action to enforce U.S. rights under trade agreements and respond to certain foreign trade practices. Specifically, Section 301 provides a statutory means by which the United States imposes penalties or trade restrictions (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 advocated by the United States, significantly reduced U.S. use of Section 301. While the United States retains the flexibility to determine whether to seek recourse for foreign unfair trade practices in the WTO and/or act unilaterally, the USTR’s decision to bypass WTO dispute settlement and impose retaliatory measures (if any), may be challenged at the WTO.

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. Historically, Section 301 cases have targeted primarily the European Union (EU), which accounts for about 30% of all cases— concerning mostly agricultural trade. Prior to 2017, that is, the start of the Trump Administration, the last Section 301 investigation took place in 2013 and involved Ukraine’s practices regarding intellectual property rights. The last case that resulted in retaliation (e.g., the imposition of tariffs) took place in 2009 and involved Canada’s compliance with the 2006 U.S.-Canada Softwood Lumber Agreement. During the Trump Administration, the USTR initiated six new investigations against China, the EU, France, a group of 10 trading partners, and two against Vietnam.

What is Section 337 of the Tariff Act of 1930?

Section 337 of the Tariff Act of 1930, as amended (19 U.S.C. §1337), prohibits unfair acts or unfair methods of competition in importing goods or selling imports in the United States. In recent decades, the statute has become increasingly used for IPR enforcement. Section 337 prohibits imports that infringe U.S. patents (including patented processes), copyrights, trademarks, mask work rights in semiconductor products (such as integrated circuit designs), or protected vessel hull design rights. The import or sale of an infringing product is illegal only if U.S. industry is producing an article covered by the relevant IPR or in the process of establishing such production. The transmission of digital data across borders is not considered an “article” and, therefore, not covered under Section 337. Unlike other trade remedies, no proof of injury due to the import is required for cases related to IPR infringement.

The U.S. International Trade Commission (ITC) is responsible for Section 337 investigations, which are mostly based on complaints filed by private parties. If a violation is found, the ITC may issue an exclusion order (enforced by the U.S. Customs and Border Protection) and/or cease- and-desist order (enforced by ITC), subject to presidential disapproval. In FY2020, 24 exclusion orders (up from 15 in FY2019) and 45 cease and desist orders (up from 16 in FY2019) were issued. The number of active Section 337 investigations conducted by the ITC has trended upward over the past decade. In FY2020, there were 120 active investigations, compared to 70 in FY2006.

What is Section 307 of the Tariff Act of 1930?

Section 307 of the Tariff Act of 1930, as amended (19 U.S.C. §1307) prohibits U.S. imports of any product that was mined, produced, or manufactured wholly or in part by forced labor, including forced or indentured child labor. U.S. Customs and Border Protection (CBP) enforces the prohibition. Any individual who has reason to believe that any good that is being, or is likely to be, imported is produced by forced labor may communicate that belief to CBP. Following an investigation, if the Commissioner of CBP finds the information “reasonably but not conclusively indicates” that imports may be the product of forced labor, then she or he is to issue an order to withhold release of such goods (WRO), which bar entry into the United States.

Amid concerns in recent decades over the statute’s lack of use, Congress amended Section 307 in 2015 to make it easier to block the entry of products of forced labor by removing the so-called, “consumptive demand” exception. This exception had permitted imports of goods that were not domestically produced in such quantities as to meet U.S. consumption needs. Between 2000 and 2015, CBP had issued zero WROs. Since 2016, CBP has increased the use of Section 307, issuing nearly 30 WROs, with 16 against products from China. In the past, WROs were typically limited to specific manufacturers and producers. Recently, however, CBP has also issued broader industry, regional, and countrywide orders. Some stakeholders and Members of Congress advocate for greater use of broader enforcement actions.