All Hands on Deck: USTR Initiates Section 301 Investigation into China’s Practices on Maritime, Logistics, and Shipbuilding Sector

Read the Federal Register notice here.

Section 301 is a statutory provision that grants the President authority to take measures against countries found to engage in “unjustifiable” or “unreasonable” acts, policies, or practices that “burden or restrict[]” US commerce. 

This follows the March 12, submission by five labor unions (petitioners) of a petition to the USTR requesting the investigation. Petitioners alleged that China has engaged in a “campaign to dominate” the maritime, logistics, and shipbuilding sectors dating back to 2001. The acts alleged by petitioners included, among other things, grants, tax benefits, certain forms of preferential financing, and various domestic interventions in support of Chinese industry. Petitioners claim that these actions harm US industry and present threats to US economic and national security.

The petitioners requested the following actions be taken under Section 301: (1) “a fee on vessels built in China that dock at US ports”; (2) use of the proceeds to establish a “shipbuilding revitalization fund”; (3) “actions to support stronger demand for US-built vessels”; (4) “actions to address China’s drive to dominate port and logistics infrastructure platforms and equipment”; and (5) “negotiations with other major shipbuilding countries to address any concerns about their own government support programs and coordinate measures to address China’s… practices.”

The USTR is not limited to these remedies should its investigation into the allegations result in an affirmative finding that some or all of China’s actions with regard to advancing its maritime, logistics, and shipbuilding industry are unjustifiable or unreasonable and burden or restrict US commerce. Section 301 provides USTR with broad authority to address such actions (under direction of the President, if any), including suspension of benefits of trade agreements, fees, or restrictions on services, import duties and import restrictions, or entering into binding agreements with the foreign government to eliminate the conduct or compensate the US with trade benefits. It also authorizes “all other appropriate and feasible action within the power of the President that the President may direct the Trade Representative to take.” USTR could also choose to take no action.

The USTR has invited comments from the public with a deadline of May 22, to be submitted via regulations.gov and has set up a process for submissions of comments that include business confidential information. It notes particular interest in comments relating to, among other things: “China's acts, policies, and practices targeting the maritime, logistics, and shipbuilding sectors for dominance[;] whether China's acts, policies, and practices targeting the maritime, logistics, and shipbuilding sectors for dominance are unreasonable or discriminatory[;] China's efforts to dominate the global maritime, logistics, and shipbuilding sectors, including the upstream and downstream supply chain, as well as shipping services[;] information on other acts, policies, and practices of China relating to the maritime, logistics and shipbuilding sectors, including [a range of specific policies and actions; and] whether China's acts, policies, and practices burden or restrict US commerce, and if so, the nature and level of the burden or restriction.” 

A public hearing will be held on May 29 and may be continued on May 31 if needed. Requests to appear at that hearing along with a summary of the testimony to be presented are due May 22. Post-hearing rebuttal comments may be filed seven days after the last day of the public hearing. 

The USTR has up to 12 months after the investigation begins to make its determination. If the USTR determines that retaliatory action is appropriate, that action must be implemented within 30 days, though waivers are allowed to extend the timeline. Section 301 actions terminate automatically after four years, but requests to continue the action can be made.

If you would like more information, please contact any ArentFox Schiff International Trade and Investment Group member.