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SECTION 301 OF THE 1974 TRADE ACT

Jean Heilman Grier

I.     OVERVIEW OF SECTION 301

Section 301 of the Trade Act of 1974, as amended (19 U.S.C. § 2411), is the principal statutory authority under which the United States may impose trade sanctions against foreign countries that maintain acts, policies and practices that violate, or deny U.S. rights or benefits under, trade agreements, or are unjustifiable, unreasonable or discriminatory and burden or restrict U.S. commerce.

II.    SECTION 301 INVESTIGATION PROCEDURES

A.    Initiation of Section 301 Investigation.  A Section 301 investigation may be commenced in one of two ways:

1.    An interested party files a petition with the U.S. Trade Representative (USTR) requesting an investigation of a particular practice of a foreign country (and USTR determines within 45 days that an investigation is appropriate); or

2.     USTR self-initiates an investigation.

B.    Publication of Initiation.  USTR must publish its determination to initiate an investigation (or reasons for not initiating in the case of a petition) in the Federal Register.

C.    Public Comments and Public Hearing.  Where USTR initiates an investigation based on a petition, it must provide an opportunity for the public to comment, and hold a public hearing if requested.

D.    Consultations with the Foreign Government.  Upon initiation of an investigation, USTR must request consultations with the foreign government.

E.    Formal Dispute Settlement.  Where an investigation involves an alleged violation of a trade agreement (such as a World Trade Organization (WTO) agreement or the North American Free Trade Agreement (NAFTA)), USTR must follow the dispute settlement provisions set out in that agreement.

F.     Conclusion of Investigation.  USTR must conclude its investigation and make (and publish in the Federal Register) a determination of whether the foreign practice is actionable under Section 301 within 18 months after initiation of an investigation involving a trade agreement that includes a dispute settlement mechanism, or 30 days after conclusion of dispute settlement procedures, whichever comes first (or 12 months after initiation of an investigation in all other cases).

III.   SECTION 301 ACTION

A.    Mandatory Retaliatory Action.  Where USTR determines that a foreign government is violating or denying U.S. rights or benefits under a trade agreement, or its acts, policies or practices are unjustifiable and burden or restrict U.S. commerce, Section 301 requires retaliation unless an exception applies.

1.    Unjustifiable acts, policies and practices are those that violate, or are inconsistent with, the international legal rights of the United States, including denial of national treatment or most-favored-nation (MFN) treatment to U.S. exports, the right of establishment to U.S. enterprises or protection of intellectual property rights.

2.    The requirement for mandatory retaliation may be waived where:

a.    a WTO dispute settlement panel has found that the act, policy or practice does not violate, or deny U.S. rights under, a trade agreement;

b.    USTR finds that the foreign country is taking satisfactory measures to comply with a trade agreement;

c.    the foreign country has agreed either to eliminate or phase out the act, policy or practice, or to a satisfactory solution;

d     the foreign country has agreed to provide the United States with compensatory trade benefits;

e.    USTR finds "in extraordinary cases" that retaliatory action, would adversely impact the U.S. economy substantially disproportionate to benefits of such action; or

f.    the action would cause serious harm to the national security of the United States.

B.    Discretionary Retaliatory Action. Where USTR determines that a particular act, policy or practice of a foreign country is unreasonable or discriminatory and burdens or restricts U.S. commerce, it has discretion as to whether to take retaliatory action.

1.    An act, policy or practice is considered to be unreasonable if it is unfair and inequitable, even if it does not violate the international legal rights of the United States.

2.    Practices considered unreasonable include:

a.    denial of fair and equitable opportunities for the establishment of enterprises;

b.    denial of adequate and effective protection of intellectual property rights, even if the foreign country is in compliance with the WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS);

c.    denial of fair and equitable market opportunities, including a foreign government's toleration of systematic anticompetitive activities by or among enterprises in the foreign country;

d.    export targeting; and

e.    denial of worker rights.

3.    In determining whether a foreign practice is unreasonable, reciprocal opportunities in the United States for foreign nationals and firms must be considered.

4.    Practices of a foreign country will not be treated as unreasonable if USTR determines that such practices are not inconsistent with the level of the country's economic development.

5.    Discriminatory practices include acts, policies or practices that deny national or MFN treatment to U.S. goods, services or investment.

C.    Scope of Authorized Retaliatory Action.  Where USTR makes an affirmative determination that an act, policy or practice is actionable under Section 301, it may suspend or withdraw trade concessions, impose duties or other import restrictions, withdraw, limit or suspend benefits under the General System of Preferences, the Caribbean Basin Economic Recovery Act, or the Andean Trade Preference Act, and negotiate agreements to eliminate or phase out the act, , policy or practice or provide compensation for trade distortion.

1.    Retaliatory action may be taken against any goods or economic sector on a non-discriminatory basis or solely against the foreign country involved and without regard to whether such goods or economic sector were involved in the act, policy or practice that is the subject of the determination.

2.    The retaliatory action must be devised to affect goods and services of the foreign country in an amount equivalent in value to the burden or restriction imposed on U.S. commerce by the foreign country.

3.    Actions may be taken that are within the President's power with respect to trade in any goods or services, or with respect to any area of pertinent relations with the foreign country.

D.     Development of Retaliatory Action.  Where a determination is made to take retaliatory action, a damage estimate is prepared, assessing the level of damage to U.S. industry resulting from the foreign act, policy or practice, and proposed retaliation list is developed and published in the Federal Register, inviting public comments.  A public hearing is normally held on the proposed list. Based on the public comments, a final retaliation list is prepared, published and implemented.

E.    Implementation of Retaliatory Action.  USTR must implement the retaliatory action within 30 days of the determination, except in certain circumstances, including where substantial progress is being made in negotiations with the foreign country; or a delay is necessary or desirable to obtain U.S. rights or a satisfactory solution.

F.    Termination of Retaliatory Action.  Any action taken pursuant to Section 301 terminates automatically after 4 years unless the petitioner or other representative of the domestic industry requests continuation.

G.    Carousel Retaliation.  Based on a May 2000 amendment of the Section 301 provisions, USTR is required to review retaliation lists and to revise retaliation, in whole or in part, 120 days after its initial effective date, and every 180 days thereafter, in cases where a WTO member has failed to implement a WTO Dispute Settlement Body recommendation in a dispute settlement proceeding.

IV.    "SPECIAL 301" (Section 1303 of Omnibus Trade and Competitiveness Act of 1988)

A.    Description.  Section 301 is designed to enhance the United States' ability to negotiate improvements in foreign intellectual property regimes.

B.    Annual Review.  By April 30 of each year, USTR must identify foreign countries that deny "adequate and effective" protection of intellectual property rights (IPR) or "fair and equitable market access" to U.S. persons relying upon IPR protection.

1.    USTR must designate as "priority foreign countries" those countries whose acts, policies or practices are "the most onerous or egregious" and have the greatest adverse impact on relevant U.S. products, and that have not entered into, or are not making significant progress in, negotiations to provide adequate and effective IPR protection..

2.    Countries not designated as "priority foreign countries" may be placed on "priority watch" or "watch" lists if their intellectual property laws or enforcement practices are of major concern to the United States.

3.    A country may be identified as denying adequate and effective IPR protection, even if it is in compliance with the TRIPS Agreement.

C.    Investigations of Priority Countries.  USTR must normally self-initiate Section 301 investigations of the priority foreign countries within 30 days of identification, unless USTR determines that initiation of an investigation would be detrimental to U.S. economic interests.  The procedural and other requirements of Section 301 authority generally apply to these cases, except that investigations must be concluded and determinations made on whether the measures are actionable within six months in cases where it does not consider a trade agreement to be involved (nine months are allowed for cases that are especially complicated or where the foreign government is taking appropriate action).

D.    Affirmative Determination.  An affirmative determination is treated as a Section 301 determination and the Section 301 provisions for retaliation apply.

V.    "TELECOMMUNICATIONS 301" (Section 1377 of Omnibus Trade and Competitiveness Act of 1988)

A.    Description.  Its primary objective is to ensure that countries fulfill their commitments to open their telecommunications markets.

B.    Annual Review of Trade Agreements.  By March 31 of each year, USTR must review all trade agreements involving telecommunications products or services to determine whether the foreign country is in compliance with the terms of the agreement, or otherwise denies within the context of the agreement mutually advantageous market opportunities to U.S. telecommunications products and services.

C.    1377 Determination.  An affirmative determination is treated as a violation of a trade agreement under Section 301, for which retaliation is mandatory and must be targeted at telecommunications products and services of the foreign country involved, unless actions against other economic sectors would be more effective in achieving compliance with the agreement.

VI.   "SUPER 301"

A.    Authority.  The Super 301 process was initially mandated by the Omnibus Trade and Competitiveness Act of 1988 (for a two-year period). It was re-instituted by Executive Order in 1994 for a two-year period, and extended in 1995 to calendar years 1996 and 1997.  On April 1999, Super 301 was again re-instituted by Executive Order for the years of 1999-2001. It expired and has not been renewed.

B.    Description.  Super 301 required USTR to identify priority foreign country practices, the elimination of which were likely to have the most significant potential to increase U.S. exports.  Within 90 days after identification of priority foreign practices, USTR was required to initiate Section 301 investigations of any priority practices identified in the report.

For further information, please contact:

E-mail: occic@doc.gov

March 2005

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