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by Merriam Mashatt and Matthew Howard

NEW INFORMATION SOURCE FOR U.S. BUSINESSES AFFECTED BY INCREASED U.S. IMPORT DUTIES. It is the responsibility of the U.S. government to make sure that foreign governments abide by their trade agreement commitments. In order to accomplish this, the U.S. Trade Representative (USTR) must at times impose penalty duties on imported products from specific countries. This was done twice in 1999, and as a result, the price of goods being imported by some U.S. businesses more than doubled.

To provide U.S. businesses with improved knowledge of impending U.S. government actions to increase import duties, the Department of Commerce has established an early warning mechanism called 301 Alert at trade.gov/301alert . This timely notification will provide U.S. businesses with an opportunity to protect their economic interests by participating in the process surrounding Section 301 decisions. 

WHAT IS SECTION 301? Section 301 of the Trade Act of 1974 provides the United States with the authority to enforce trade agreements, resolve trade disputes and open foreign markets to U.S. goods and services. Section 301 is the principal statutory authority under which the United States may impose trade sanctions on foreign countries that either violate trade agreements or otherwise maintain laws or practices that are unjustifiable and restrict U.S. commerce. When an investigation involves an alleged violation of a trade agreement (such as the World Trade Organization (WTO) Agreement or the North American Trade Agreement (NAFTA)), USTR must follow the consultation and dispute settlement procedures set out in that particular agreement. If the United States finds it necessary to increase duties because of a violation of the WTO, USTR will seek authority from the WTO's Dispute Settlement Body to suspend trade concessions previously granted to the foreign country. Such actions include increasing import duties. For more information about Section 301, go to the web site trade.gov/legal/301.html .

WHY ARE DUTIES RAISED UNDER SECTION 301? USTR increases duties on foreign country imports to respond to damage done to U.S. exports by foreign country's unfair trade practices. One of the primary goals of U.S. trade policy is to ensure that American businesses and consumers fully enjoy the benefits of international trade agreements such as the WTO. Unfortunately, there are times when foreign governments violate trade agreements and cause considerable harm to U.S. exporters.

The first step in a Section 301 action is to request consultations with the foreign government in order to encourage them to remove the offending practice. In most cases, negotiations are enough to convince the country to comply with its international obligations.

The offending country may also offer compensation to the United States in lieu of removing the unfair trade practice, which may be in the form of lower duties on other products exported by U.S. firms to that country. 

As a last resort, when negotiations fail or compensation offered is not adequate, USTR may take action, including raising import duties on a foreign country's products. 

WHAT IS THE PROCESS OF SELECTING GOODS SUBJECT TO INCREASED DUTIES? The United States Government develops a list of products imported from the offending country on which U.S. duties may be raised. The interagency Section 301 Committee, which is chaired by USTR and includes the Department of Commerce, first develops a preliminary list of products. The two objectives are to notify the public about the products under consideration and to minimize the adverse impact of raised import duties on U.S. economic interests, including importers, consumers, firms and workers. To notify the public and to assist the government in determining the impact on U.S. economic interests, the USTR publishes the preliminary list in the Federal Register (FR) and includes it on its web site. At this point in the process, the public, including firms and workers which might be disadvantaged by the higher import duties or restricted services, have an opportunity to provide comments in writing and at a public hearing, the date of which appears in the FR notice. 

After the Section 301 Committee reviews and analyzes all the public comments, it develops a final list of products which can only be drawn from the preliminary list. In developing the final list, the Committee selects goods or services of the foreign country in an amount that is equivalent to the burden or restriction being imposed by that country on U.S. exporters or other U.S. businesses. During this process, the Committee makes every effort to minimize the potential harmful effects on U.S. businesses and consumers.

HOW CAN SMEs PROVIDE INPUT? The FR notice announcing the preliminary list provides detailed instructions on submitting public comments. Additionally, SMEs can participate in the public hearings on the preliminary lists, which are also announced in the FR notice. Since the U.S. Government relies heavily on public comments to remove inappropriate items before the final list is produced, it is imperative for SMEs to provide the most comprehensive input possible. 

HOW DOES THE SECTION 301 ALERT HELP SMEs? The new Section 301 Alert system provides another means to notify the business community about an impending action which may affect them. The web site, which is free of charge, incorporates an automatic alert of pending U.S. Government actions. Section 301 Alert contains information on finding HTS numbers, as well as links to other site with more in-depth information on the Section 301 law.

HOW DOES THE WEB SITE WORK? Businesses can either visit trade.gov/301alert regularly to determine if public comments are being sought for impending actions, or they can join the site's automatic e-mail service to receive updates on the following Section 301 actions: 

  • If negotiations with the country are successful, 301 Alert would notify all registered users of the concessions and/or settlement reached; 
  • If negotiations fail, 301 Alert sends an automatic e-mail to all registered users informing them of the preliminary list and the public comment period;
  • When USTR publishes the final list, 301 Alert would immediately notify all registered users of the final retaliation list of products to be subject to higher duties.

For more information on Section 301 Alert please contact Merriam Mashatt (202) 482-5677 or Matthew Howard (202) 482-4558.


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