December, 2016 - January, 2017

alt text here

Section 301, or, How do I Get a Foreign Government to Open its Borders?

Mark K. Neville, Jr.

The purpose behind most trade remedy laws is to guard against the importation of articles into the United States that are causing injury or disruption or to implement corrective actions if there have been such importations. The antidumping and countervailing duty laws spring immediately to mind as remedies for unfair competition, and the safeguards provision is available to protect US industry against market disruption caused by surges in import volumes.1 Section 337 is also a weapon for redress, aimed at unfair acts in the importation of articles, principally infringements of intellectual property rights, especially patent rights.2

So, what if you are a US company that has hopes of expanding into overseas markets? Based upon a record of success in the US, or perhaps within the wider NAFTA market, the chance to reach new customers in, say, Asia or Europe may seem like the next logical step. A superior product, a good pricing model, a solid logistics plan, a well conceived marketing and sales strategy—check on all of them. What you may not have counted on is being blocked from entering the foreign market. I don’t mean the responses of your competitors, that was predictable and in fact you have factored that into your strategy. I mean the actions of the foreign government which have restricted or even closed off your access to the market or have imposed tax or other burdens in a discriminatory manner. You consider that the rules being applied against your products are unfair or are being unfairly applied. You’ve been pushing back but the government will not budge? Now what? What can you, an outsider to that country, do to overcome that foreign governmental action that is closing you off from that market or is imposing additional burdens on your product?

In other words, how can you, or any American company, overcome that governmental action?

That brings us to Section 301 of the Trade Act of 1974,3 which is unique in its focus on the unfair treatment by foreign governments of US exports.4 Section 301 is also unique in that the principal administrative functions are undertaken by the United States Trade Representative (USTR).

With the level of popular attention in the US to international trade that only comes with a quadrennial presidential election season, and with this year’s special focus on alleged violations of agreed trade norms by some of our trading partners, it is especially important to attain a good level of understanding of Section 301.


The statute in its present, amended form dates to the Trade Agreements Act of 1979, the “Tokyo Round” trade legislation.5 The principal aim of the statute is to enforce the US rights affected or to obtain the elimination of the complained of act, policy or practice. The first observation is that there are those foreign government violations for which retaliations are mandatory and those for which responses are discretionary, depending upon the determinations/findings of the USTR.

Mandatory action

There are two principal types of circumstances under which potential violations will ordinarily trigger a mandatory response under this statute. These are (1) when rights of the US arising under any trade agreement are being denied or
(2) if any act, policy or practice of a foreign country (a) violates or is inconsistent with or denies benefits to the US under any trade agreement or (b) is unjustifiable and burdens or restricts US commerce.6

Exceptional circumstances will derail mandatory actions. The USTR is not required to take action in five cases
  1. if the WTO Dispute Settlement Body has determined that there was no violation
  2. if the USTR finds that there is no need for such action (the foreign country is taking satisfactory measures, has agreed to eliminate or phase out the complained of conduct)
  3. it is impossible for the foreign country to correct the action
  4. if the taking of such action would cause an adverse and disproportionate impact on the US economy
  5. if there are national security imperatives.7
There is a subtle distinction between determinations that lead to these mandatory responses and those that allow for discretion by the President.

Discretionary action

In an affirmative finding along this track, the USTR determines both (1) that an act, policy or practice of a foreign country is unreasonable or discriminatory and burdens or restricts US commerce and (2) action by the US is appropriate.

Defined Terms

Many of the operative terms which are embedded within these two statutory tracks are defined. For example, we find that an act, policy or practice is “unreasonable” within the meaning assigned to the discretionary track of section (b) if it is unfair or inequitable even if it is not necessarily in violation of, or inconsistent with, the international legal rights of the US.8 The statute proceeds to give further definition to the term and in the course of doing so Congress has made it clear that it considers that the welfare of the foreign work force is as much a matter of concern as the rights of our fictional US company. This is made clear by defining at subsection (B) (iii) as “unreasonable” any acts, policies or practices that comprise a persistent pattern of conduct which denies workers the right of association, denies workers the right to organize and bargain collectively, permits compulsory labor, fails to provide against child labor and fails to provide for minimum standards of work hours and wages, health and safety.9

A few obvious comments are appropriate here. First, there is a built-in tension between this domestic statute and the WTO system. The USTR can take action even if no substantive US international legal rights, presumably created either under a WTO agreement or under a bilateral or regional agreement, have been violated. That suggests that there will be at some point a complaint filed with the Dispute Settlement Body of the WTO after the US has imposed a remedial duty in such a circumstance.10 The complainant will inevitably be arguing that “unfair and inequitable” do not constitute an acceptable basis for US retaliatory actions in the absence of an express failure to meet a specific international obligation. The statute sets up an even greater likelihood of an antagonism between the US statute and the WTO system when it expressly provides that an act, policy or practice could be unreasonable if it denies fair and equitable provision for adequate intellectual property rights even if the foreign country may be in compliance with the specific obligations of the Agreement in Trade-Related Aspects of Intellectual Property Rights (TRIPS).11 If we consider that the route forward to mandatory retaliation is blocked because there has been no violation but the statute nevertheless reserves the right for the USTR to take discretionary action, we might be better prepared to understand a trade partner’s frustration.

In this same regard, there is a built-in inconsistency between the statutory scheme for mandatory action, Section (a) (1), in which the USTR “is not required” to take action after a WTO Dispute Settlement decision against the US, and for discretionary action, Section (b) (1), where as we have seen an act, policy or practice may be deemed unreasonable even if the international legal rights of the US have not been violated. For those who might have concluded that the way around that is for USTR not to initiate a process at the WTO or equivalent forum, with the result that a formal finding of no violation of US legal rights would not be forthcoming, the next section discusses the need to engage in just those formal international processes.

Second, as praiseworthy as the goals may be,12 I am having difficulty in placing foreign worker rights into this discussion of international trade law, except in a limited free trade agreement (FTA) context. Even if we take the broad subchapter title from the Trade Act of 1974, “Enforcement of United States Rights under Trade Agreements and Response to Certain Foreign Trade Practices,” what US rights arising under the WTO are affected when foreign country labor conditions are affected? As a digression, I am reminded of an Apartheid-era complaint filed against South Africa alleging that the government-sponsored apartheid system suppressed wages and was tantamount to an unfair subsidy, against which countervailing duties should be levied on imports into the US from South Africa.

But what is the international trade agreement that created the rights or obligations violated by sub-standard worker rights? A cursory review finds nothing at the WTO, but that is not surprising in that the subject of worker rights are still exclusively within the province of the International Labor Organization (ILO) rather than the WTO. That remains the case despite the US objective of inserting internationally recognized worker rights into13 the GATT.14 As for free trade agreements, worker rights were the subject of a side agreement to NAFTA, the North American Agreement on Labor Cooperation (NAALC).15 Presumably a failure of a NAFTA partner to honor those obligations might invoke action under subsection B (iii). In later FTAs, labor rights were included within the text of the agreements themselves. As the USTR’s website describes the commitment to labor rights in the context of the US/Colombia FTA (whose formal name is the Trade Promotion Authority, TPA):

The TPA commits both Parties to adopt and maintain in their laws and practice the five fundamental labor rights as stated in the 1998 ILO Declaration on Fundamental Principles and Rights to Work.  Both Parties are also required to effectively enforce – and may not waive – labor laws related to fundamental labor rights.  All obligations in the labor chapter are subject to the same dispute settlement procedures and enforcement mechanisms as the TPA’s commercial obligations.16

As a result, we should perhaps read the worker rights protections here as referring to those arising under FTAs. At the same time, we might interpret another subsection of Section (B), one dealing with establishment of an enterprise, within the context of FTAs or Bilateral Investment Treaties and their protection of investments. Moreover, the IP rights which are the subject of subsections (B) (i) (II) and (III) as well as foreign government tolerance of anticompetitive behavior that restricts market access and export targeting might be considered as export market concerns which are analogues of the areas protected by Section 337 against unfair import competition. We also note the overlap between these IP rights provisions and the “Special 301” regime of identifying and monitoring of foreign countries that deny adequate protection or market access for IP rights.17

Finally, we must focus on the commercial contexts for USTR actions. In redressing action that unduly restricts US commerce, there is a protection afforded IP rights and also trade in services, the latter being specifically listed in the statute. Thus, the statute extends a protective canopy beyond the goods, or product imported articles focus of other trade remedy statutes.

This is the correct time to ask, how does one of these actions get started.


To being at the beginning, it is important to note that there are two potential starting points for proceedings under Section 301.18

First, in the more usual manner, an investigation will be initiated in response to a petition filed by an aggrieved “interested person.” This term is broadly defined to include, but not limited to, domestic firms and workers, representatives of consumer interests, US product exporters, and any industrial user of any goods or services that may be affected by the retaliatory actions taken under the statute. The USTR will have 45 days within which to determine whether to initiate an investigation. Notices of these determinations are published in the Federal Register.

Suffice it to say that a petition would usually follow an unsuccessful attempt by the interested party to resolve the matter. In the course of those attempts, the petitioner might be expected to have sought assistance from other US government resources, such as the local embassy or Foreign Commercial Service office.19

The second route is an investigation that is self-initiated by the USTR, with notice of that determination also being published in the Federal Register.

Note that the USTR is invested with discretion whether to initiate an investigation of an act, policy or practice enumerated in Section 2411 (d) under either track, the criterion being “whether a retaliatory action would be effective in addressing (perhaps “redressing” would have been better here) an act, policy or practice.” It is a subtle point, but the discretion is limited to act, policy or practice, which is the subject of Section 2411 (a) (1) (B) or 2411 (b) (1). That implies that the USTR has no discretion whether to start an investigation over a denial of US trade agreement rights, which are the subject of Section 2411 (a) (1) (A). But surely we have a question that has been begged here. Otherwise how can it be determined that a trade agreement right has been denied, and a mandatory action put into motion, unless, it must be presumed, there has first been an investigation into the effect of an act, policy or practice and whether the ensuing effect may be defined as a denial of US rights (subsection (a) (1) A) or as a denial of the benefits to the US under any trade agreement or is unjustifiable and burdens or restricts US commerce (subsections (a) (1) (B)) or is unreasonable or discriminatory and burdens or restricts US commerce (subsection (b) (1)). It would appear that we don’t get to a denial of US rights except through a complained of act, policy or practice.

Further, what is the real distinction between the two operative measures of damage in Section 2411 (a) (1), viz., (i) denial of rights under any trade agreement and (ii) an act, policy or practice that violates, or is inconsistent with or otherwise denies benefits under any trade agreement? Can it be reduced to a difference between “rights” and “benefits?” And this brings us to that question, with all of the statutory references to trade agreements, how does this domestic statutory program relate to our international trade agreements?


As we have seen, one of the aspects of the statute that is most interesting is that it marks one of the points of intersection between the international trade agreements regimes and the domestic trade laws.

Even if there has been an earlier consultation at an informal level, with the initiation of an investigation the USTR is directed to request consultations with the foreign country concerned on the very date of that initiation.20

This is an important point, because the dispute resolution process under any of the trade agreements always begin with formal consultations. In the case of disputes arising within the WTO “system,” i.e., disputes under any of the “covered” trade agreements,.21 consultation is invariably a first step in the process established by the Dispute Settlement Understanding, or “DSU.”.22 Importantly, the DSU is one of those WTO agreements, along with the various substantive agreements, which are specifically listed under the Uruguay Round Trade Agreements Act (1994).23

We can actually go further than this overlap in the matter of consultations. As a result of the strengthening of the WTO dispute resolution process through the 1994 promulgation of the DSU, activities undertaken by the USTR under Section 301 are taken under the auspices of the DSU. Beyond the consultations, Section 301 actually invokes the DSU without specifically referring to it, as the next step in the process

If ….a mutually acceptable resolution is not reached…the Trade Representative shall promptly request proceedings in the matter under the formal dispute settlement procedures provided under such agreement.24

In the case of the DSU, that next step is the request for the establishment of a panel under Art. 6. Insofar as the petitioner has initiated the process, one reasonable fear is that once the matter has been taken up by the USTR the interested party has ceded control to the government. Congress has anticipated this issue, specifically providing at two points in two different domestic trade laws that the petitioner should stay in the picture. Under the Trade Act of 1974, the USTR shall seek information and advice from the petitioner, and from Congressional committees if it is a Special 301 matter..25 With the Uruguay Round Agreements, once a panel has been established under the auspices of the DSU, the USTR is directed to consult with the appropriate congressional committee, the petitioner, as well as the relevant private sector advisory committee,26 at each stage of the proceedings.27 Notice in the Federal Register is also specified,28 so that public comment is also available. All of this taken together suggests that Section 301 actions will not proceed separate from but instead will be undertaken within the farm of the DSU, where rights under a WTO agreement are in controversy.

But, as we have earlier noted, the general reference to “trade agreements” extends beyond the WTO agreements. There are rights created by FTAs and other agreements which could be in play, and Section 301 will also be applied in a manner that is consistent with and anticipated by those other agreements. In the case of NAFTA, for example, the contours of the dispute settlement process are set forth in Chapter 20. Article 2021 of NAFTA prohibits any private right of action in a domestic law to challenge a NAFTA partner’s actions.29 That leaves the matter up to each of the national governments. The legislative history of NAFTA makes it perfectly clear that Section 301 furnishes the pre-existing statutory authority for US governmental action taken to enforce NAFTA rights

Legislative authority currently exists for the Executive Branch fully to enforce U.S. rights under Chapter Twenty. Section 301 of the Trade Act of 1974, as amended, authorizes the United States Trade Representative ("USTR") to take specific action, subject to the President's direction, and to take all "appropriate and feasible action" in the President's power that the President directs the USTR to take to enforce U.S. rights under trade agreements such as the NAFTA.

Once the NAFTA enters into force, an interested person may file a petition with the USTR requesting section 301 action in any case in which the person considers that another NAFTA government has failed to honor a provision of the Agreement or has caused the nullification or impairment of benefits that the United States could reasonably have anticipated under the Agreement. Alternatively, the USTR may, on his or her own initiative, institute a section 301 proceeding.30

We see that Section 301 has an assured, fixed place in the enforcement of rights arising under the trade agreements to which the US is a party.

And that brings us to the question, where is all of this leading? What is the end result of a Section 301 proceeding? What will the remedy be?


First and foremost, if you are an aggrieved petitioner, the best outcome is for the foreign government to stop the complained of activity. That lifting of the foreign practice is sure to deliver the most direct relief for the petitioner. So the petitioner is going to support an early resolution, one that is achieved during the consultation period.

That sometimes occurs, but if not, then the matter will move onto the panel process.31 Once the panel process is underway, and assuming that the US has prevailed, then WTO rules allow for retaliation if the respondent country elects not to change its practices. To be sure, the respondent country may agree to make the appropriate change, to bring itself into conformity with its obligations under the relevant trade agreement.

But if the respondent country persists and decides not to change its practice, that is when it gets interesting, as retaliation is permitted. The retaliation is often in the form of a suspension of tariff concessions, actually increased duties. In the US, typical practice is a 100% duty on selected products, so that the economic impact suffered by the US commercial interests are matched with an equivalent hit against imported products. There will often be an argument about the extent of the impact caused by the violative conduct,32 but assuming that nullification or impairment has been proven, and that the level of that economic impact has been settled, the US will proceed to levy 100% duties against imports, whose aggregate import levels correspond to that level of injury. This “macro level” balancing is actually set forth in the statute, whereby, “any action to eliminate an act, policy or practice shall be devised so as to affect goods or services of the foreign country in an amount that is equivalent in value to the burden or restriction being imposed by that country on US commerce.”33 Note that it does not refer in any way to the specific industry or product sector but merely to “US commerce.”

Now you should be asking, how does that macro-level balancing help an aggrieved US company or even the industry represented by that company? It may well be that there is no import flow into the US of the same product, so there is no chance that the direct competitors of the petitioners will be affected at all. And even were we to assume that a 100% import duty would stop imports of the affected products in their tracks, and that the US company would close out import competition here, is it really the case that the petitioner will be made fully whole? After all, the issue arises in a foreign market and we are considering these questions precisely because the foreign country has elected to keep its practices in place. That would mean that the petitioner is still being harmed in that foreign market, potentially being shut out of or facing roadblocks in its export efforts to penetrate that market.

Measured against its predecessors, the statute in its present form has undergone some important revisions over the years in this area of retaliations. But the important fact is that a substantial discretion is accorded to the USTR.

We have already seen that retaliation will come in the form of an equivalent macro economic level. Within that constraint, there is an allowance in the statute for the targeting of the products that will be selected for retaliation in the form of both their origin and their identity.


In its original format, the remedies were applied on an across-the-board basis against all imports. Apparently there was a blind adherence to the GATT principle of most favored nation (MFN) treatment, so that if a duty increase were to be levied on a selected imported commodity, all imports of that selected commodity would be hit on an across-the-board, nondiscriminatory basis.

The best and still lingering example of this policy at work is the duty assigned by the US against all importations of trucks, 25% ad valorem.34 This duty rate was originally assigned in 1963 as retaliation for the EC’s restrictions on chicken exports from Arkansas pursuant to the then-new Common Agricultural Policy. That CAP only applied to the six original Members of the EC, because the origins of this dispute arose in the 1950s! While the retaliatory duties on other commodities35 were also imposed in 1963 and lifted long ago, the duty on those trucks remains to this day.36 And sure enough, it continues to apply to all trucks, not just light weight trucks, and regardless of origin, and not just from Germany, whose light weight Volkswagen vehicles were the original targets. For obvious reasons, the trade dispute is referred to as “The Chicken War,” and the duty rates the “Chicken War duties.”

Lest you think that such a shotgun 25% duty retaliation against, say, Japan’s trucks, for the sins of the EC stemming from its CAP on US chicken exports, is an aberration and an anachronism and would never recur today, think again. The current statute provides explicitly that the USTR’s action can be directed against any goods or economic sector either on a nondiscriminatory basis or solely against the errant country.37 You are probably wondering, how can this possibly be consistent with WTO commitments?

Retaliation List

The other area for USTR discretion is in its selection of what products will be retaliated against. Here the statute notes that the selection of the goods or economic sector for inclusion on the “retaliation list,”38 i.e., products subject to retaliation, can be “without regard to whether or not such goods or economic sector were involved in the act, policy or practice that is the subject of such action.”39 You will recognize here the possibility of a repetition of the same disconnect between chicken exports and brandy, potato starch, dextrin and truck imports.

To counteract that tendency to name products that have no connection at all to the product sector involved, the statute requires that the reciprocal goods of the industries involved are selected for retaliation.40

Note that if the resolution of the dispute takes the form of a binding agreement with the respondent country, the USTR is directed to ensure that the domestic industry that would benefit would be the complaining industry that raised the issue. But even here, there is a proviso--unless that is not feasible or that trade benefits that benefit another economic sector would be more satisfactory.41 Then, too, any modifications or terminations of actions taken by the USTR must be taken only after the petitioner, the representatives of the domestic industry and other interested persons have been consulted.

But those assurances provide cold comfort to the petitioner, who can only hope that there is a possibility that his direct competitors will be frozen out of the US market. If that happens, and if other products are also selected for retaliation, then the hope is that the foreign companies or industries whose products are affected will bring political pressure to bear on the foreign government to rescind the offending act, policy or practice and to re-align with their trade agreement obligations.

For that reason, the compilation of the list of products selected for retaliation will often be the product of astute political analysis. The products selected will be those which will matter to foreign decision makers to stop the complained of activity, or those who can influence those foreign decisions.

There are a number of other examples of this phenomenon in trade disputes, whereby the product list is complied so as to pressure the foreign government, but let’s confine ourselves to two.

The first deals with NAFTA, and the politically astute product selection was performed by Mexico, with the US at the receiving end. The background was covered in detail in an earlier discussion,42 but for our purposes it is sufficient to know that the US had not followed through on commitments in the NAFTA to permit Mexican truckers to deliver product in the US. Mexico had the right to impose retaliatory duties, here normally between 5% and 20%, against 99 various US products, again up to the level of economic injury being suffered by Mexican interests. This was a double injury because these same US-origin products would have been duty free under NAFTA when exported to Mexico. Now they faced being priced out of that market, with Canadian companies benefiting because they retained duty-free access. The list of products included apples and other fruits, washing machines, potatoes and others. As expected, the various US interests complained to their congressional representatives. As an example, in the case of apples, the Washington and Michigan congressional delegations received many constituent calls. Eventually, the retaliation had the desired effect because the Mexican trucks were permitted access and the retaliations were dropped.

In the second example, discussed below in greater length, the dispute between the US and the EC over hormone-treated meat products, there was again a careful targeting of products, intended to cut off the US market so that aggrieved, erstwhile exporters to the US would bring pressure to bear on their home governments in the discrete Member States to change the EC regime.43

Or sometimes the product selection serves purely domestic, US political interests. The inclusion of trucks in the Chicken War list (1963-64), whereby President Johnson wanted to curry favor with the Big Three auto companies and the United Auto Workers, is one such example.

This brings us to the process whereby the retaliation lists are compiled. The ordinary process is for the USTR to announce that a preliminary list is being compiled, with the invitation for interested parties to submit candidates for inclusion. Later, a final list is prepared, often pared back from the broader, preliminary list. We could stick with the EC-Hormone Ban case as the example. A summary chronology of relevant decisions is helpful:44

WTO Panel Report issued (1997). The EC ban on the use of hormones to promote the growth of cattle is inconsistent with its obligations under the Sanitary and Phytosanitary Agreement (specifically, Articles 3.1, 5.1, and 5.5), in that the ban is not based on science, that is, on an adequate risk assessment or according to relevant international standards.

WTO Appellate Body Report (1998). AB upholds the dispute panel’s decision but overrules some panel findings. The AB decides the EU had not scientifically proven that the hormones in question posed a cancer risk to consumers; the AB also acknowledges that countries may adopt stricter standards, if supported by an adequate risk assessment. The AB rules the EU ban does not constitute a hidden barrier to international trade. The WTO Dispute Settlement Body (DSB) adopts the panel decision and the AB rulings on the ban. The EC says it will implement the WTO ruling in “as short a time as possible.” Neither party is able to agree on a “reasonable period of time” for implementation; the arbitrator decides the EU needs 15 months (until May 13, 1999).

EC suggests three options to resolve the dispute (February 1999): (1) compensation, (2) removal of the ban coupled with a suitable labeling system, and (3) the conversion of the ban to a temporary measure. The US decides against various compensation measures, preferring instead removal of the ban. The EU decides it wants to conduct additional risk reviews before considering removing the ban.

Preliminary retaliation list published by the USTR if the dispute is not resolved and allows for filing of comments and a public hearing, 64 Federal Register 14,486 (Mar. 25, 1999).

EU issues its first scientific review and opinion (April 1999) based on studies by the EU’s Scientific Committee on Veterinary Measures relating to Public Health (SCVPH) on the potential human health risks associated with consumption of hormone-treated beef. The SCVPH opinion states that it has evidence to show that a growth hormone used in US cattle production is carcinogenic. The report draws criticism from the UK’s Veterinary Products Committee, as outlined in a report.

WTO DSB arbitration panel sets the nullification and impairment level at $116.8 mio annually (Jul. 12, 1999) with preliminary retaliation list assembled by US contained at Annex II. The list is organized on a tariff classification basis and lists the average value of imports for the years 1996-98. The panel rejects an EC argument that would lock in the specific products to be retaliated against and, instead, allows the US to retaliate against any products contained on the list so long as the trade volumes of the retaliation were within the $116.8 in their cumulative annual effect.

Final retaliation list published by the USTR. 64 Federal register 40638 (Jul. 27, 1999). This list enumerates a narrower range of EC-origin products to be retaliated against. The U.S. list targets France, Germany, Italy, and Denmark, but excludes the United Kingdom. For example, inter alia, fresh or chilled tomatoes under heading 0702 were deleted from the list, as were small displacement motorcycles and mopeds under subheadings 8711.20 and 8711.30. Moreover, for some products, the list targets those products from only certain of the EC Members, presumably to narrowly hit the producers in those countries which were staunch supporters of the EU ban on hormone-treated meat. As an example, for certain hams, chocolate, and certain jams only French-origin products are hit with a 100% duty. Importantly, products of the UK were not included on the list.

While we may accept that the products on the retaliation list may or may not include products in the same sector that have been unfairly harmed by the foreign government action, we should also know that the list may change.

Retaliation list subject to review and change

The statute provides for periodic review and revision of the retaliation list by the USTR.45 The schedule calls for a review within 120 days of the start of retaliation and then every 180 days thereafter. The reason for this is that, if retaliation against a given product list does not compel the foreign government to take corrective action, perhaps retaliation against another product might be more politically sensitive and induce the desired action. This changeable nature of the retaliation list is known as “carousel retaliation.” The US promised in 1999, before the 2000 legislation that introduced the feature,47 that it had no present plans to make use of a “carousel” review for the Hormone case.48

The introduction of the carousel concept does not bring with it a new political tinge to the process whereby products are selected for retaliation. That political aspect of the process is inherent from the very first moment that the USTR is considering a retaliation.

The Federal Register announcement and publication of a preliminary list sets off an intense jockeying by competing interests who represent the varying sectors represented by the list to ensure that their products benefit, i.e., receive the protection afforded by a 100% ad valorem duty. The lobbying actually begins before the publication, and an ongoing Section 301 proceeding will prompt US interests to approach the USTR so that their products are placed on the preliminary list to begin with.

Naturally, for every product selected for retaliation, there is another sector affected. These are the consumers of the imported products or the domestic industry customers whose foreign sources for parts or raw materials are about to be cut off.

For every economic interest affected, positively or negatively, by the retaliation there is the chance that a later “carousel” review will change the picture and their fortunes will be reversed.49 Take the example of a US importer whose product has been hit with a 100% duty. The carousel process instills the hope that the product will be removed from the list later, and all he must do is find an alternative supply if possible, hang on, and hope that a review later will remove the 100% duty.

That is the theory. What happens if the USTR does not engage in a carousel review? Can the erstwhile importer force a review, so that the product might at least be considered for removal from the list? Can the importer get the USTR to conduct the carousel review? And of course the reverse is also a valid question, can a product that is eligible for retaliation be moved onto the active list upon the list’s revision?

To answer that question, we must first notice that the statute allows for two narrow exceptions to the carousel review: if the USTR determines that foreign government action in bringing the challenged programs into conformity is imminent or if the USTR and the petitioner or affected US Industry if the proceeding was self-initiated by the USTR jointly agree that no revision is necessary.50

Beyond that carousel review/revision, Congress effected a significant change to the Section 301 program in 1988 by providing that the retaliation would expire after four years unless the petitioner or any representative of the benefited domestic industry requests continuation.51

That appears straightforward, and a party who would be interested in either the retaliation list being revised or the retaliation being terminated should look forward to some resolution, either on the effect of retaliation on a particular product or on the ending of all retaliatory action. But, as is often the case, actual experience can be another matter. To stay with our Beef Hormones case, we can see that the statute’s directions may not be observed.

Enter Gilda Industries who was an importer of toasted bread from Spain, which was one of the products selected for the 100% retaliation duty in July 1999. In 2002 and 2003, three of Gilda’s entries that were classified under subheading 9903.02.35 and were subjected to the 100 percent retaliatory duty.

Gilda filed protests with the Customs and Border Protection contesting the classification of the entries and the imposition of the retaliatory duty, but Customs denied the protests. In April 2003 Gilda filed a complaint with the Court of International Trade requesting reliquidation of its entries, refund of the duties it had paid as a result of the inclusion of its imports on the retaliation list, and removal of those products from the list. Gilda argued that the carousel provision had not been honored by the USTR. The court granted the government’s motion to dismiss the complaint for failure to state a claim upon which relief could be granted.52

Gilda appealed to the Court of Appeals for the Federal Circuit and the appellate court decision held out some hope if it could be shown on remand that the USTR had not received a proper request for an extension from the domestic industry. The company lost on the substantive issue when the CIT on remand determined as a factual matter that the USTR had fulfilled one of the statutory exceptions in § 2416(b)(2)(B)(ii) for a review of the retaliation list.54

The renewal of the retaliation list for another four year term went unchallenged until Gilda returned to court later, arguing another statutory basis for relief. Gilda no longer argued about the carousel provision, but asserted that the retaliation list had simply expired as a matter of law. This was pursuant to Section 2417 (c) (1), with effect from the end of that second four year term, when the domestic industry had not requested its extension. Gilda won at the CIT on this second challenge55 but the government appealed, arguing that the domestic industry had not requested a necessary further extension because it had not been notified, as required by the statute, subsection (c) (2) of Section 2417. The government argued that the termination by operation of law, per the force of subsection (c) (1), should not apply in the face of this excusable neglect of the government to give notice, arising from an erroneous statutory interpretation. That argument was rejected by the appellate court.56


These Section 301 cases typically generate long and winding roads, with many overlapping and competing interests alike, and some of the cases lasting decades. After you have read this article I hope you keep in mind these two overriding themes. The first is that Section 301 may provide a measure of relief to a private company or industry in their contests with a foreign government. Rather than challenging foreign governmental action in a foreign court of law or other forum, or trying to compete against local interests in a foreign political contest, the statute allows the company to seek some help from the US government, along with all of the attached strings noted above. The second theme is that the actions taken may or may not provide direct relief to the aggrieved company or industry but that companies or industries that are strangers to the dispute (think trucks for chicken, apples for Mexican trucks, toasted bread for beef) may end up in the line of fire.


1. See Neville, “Safeguards, A Lifeline and/or an Anchor”, 27 JOIT No. 7 at 23 (July 2016).

2. 19 USC § 1337. See generally Chapter 13 of International Trade Laws of the United States: Statutes and Strategies.

3. 19 USC § 2411.

4. Many other countries will have their own versions of Section 301 or have other programs whereby their nationals can invoke the assistance of their home governments in these disputes.

5. The original form of the statute related to the responses to foreign import restrictions (which we now generally refer to as “market access”) and export subsidies.

6. 19 USC § 2411 (a) (1).

7. 19 USC § 2411 (a) (2).

8. 19 USC § 2411 (d) (3) (A).

9. 19 USC § 2411 (d) (3) (B) (iii). There is a savings clause, subsection (d) (3) (C), whereby the USTR shall not treat as unreasonable any of these acts, policies or practices when the country is determined to have made “significant and tangible overall advancement.”

10. We should be mindful that the EC, with many third party reservations of rights, unsuccessfully challenged the time limits of the Section 301 regime in 1998, see United Sates—Sections 301-310 of the Trade Act of 1974, WT/DS152/R (Panel Report, 22 Dec. 1999); a summary discussion is available at

11. 19 USC § 2411 (d) (3) (B) (i) (II).

12. For the role of “core labor standards,” defined at 19 USC § 4210 (17), as a principal US trade negotiation objective, see 19 USC § 4201 (b) (10).

13. As defined originally for the purposes of the Generalized System of Preferences at 19 USC § 2467 (4).

14. 19 USC § 3551 (a). See also worker rights as a principal US trade negotiation objective generally at 19 USC § 2901 (b) (14).

15. A valuable 2001 Congressional Research Service study is available at

16. Available at

17. 19 USC § 2242.

18. These are set forth in 19 USC §§ 2412 (a) and (b). There is a separate process that applies to the commencement of investigations arising under the Special 301. Subsection (b) (2).

19. In the case of disputes arising out of customs valuation, the US Government announced that it was going to support US exporters who were having problems with foreign customs administrations on tariff classification and customs valuation issues. The plan is that the subject matter experts from Customs and Border Protection (CBP) can be brought into the discussions and hopefully get the foreign customs officials to align their interpretations with the WTO and WCO instruments that set forth the customs rules in those disciplines. General Notice of Opportunity and Procedures To Request Assistance on Tariff Classification and Customs Valuation Treatment by Other Customs Administrations Affecting United States Exports, 80 Fed. Reg. 34924 (June 18, 2015).

20. 19 USC § 2413 (a) (1).

21. The Understanding on Rules and Procedures Governing the Settlement of Disputes (usually referred to as the Dispute Settlement Understanding, or “DSU”) lists, at Appendix 1, the various trade agreements whose disagreements are to be settled under the DSU. Those trade agreements that also fall under the DSU but that provide for some specific dispute resolution rules are listed in Appendix 2.

22. DSU at Art. 4.

23. 19 USC § 3511 (d). This enumeration mirrors the Appendices 1 and 2 of the DSU.

24. 19 USC § 2413 (a) (2).

25. 19 USC § 2413 (a) (3).

26. See 19 USC § 2155.

27. 19 USC § 3537 (a).

28. 19 USC § 3537 (b).

6. Art. 38 (2) speaks of these two types of AEO only but the DA and IA speak of a combined AEO status, AEO(F). Consistent with this last point, Art. 38 (3) specifically notes that both types of authorizations may be held at the same time.

29. There are two notable exceptions to this preclusion of private rights of action. Investor disputes are the subject of Chapter 11, and an investor can invoke the investor/state arbitration processes, which is a well-known exception to the rule that a private party cannot generally bring suit against a foreign sovereign. Alternatively, the investor may choose the remedies available in the host country's domestic courts. Chapter 19 also sets up a limited exception in the context of antidumping and countervailing duty actions insofar as Article 1904 establishes a mechanism to provide an alternative to judicial review by domestic courts of final determinations in antidumping and countervailing duty cases, with review by independent binational panels.

30. Statement of Administrative Action at 215-216, available at

31. To be clear, we note here that the DSU also provides for a settlement opportunity in the form of good offices, conciliation and mediation at Art. 5. These are available at any time, either before or simultaneous with panel proceedings.

32. DSU rules allow for arbitration to determine the level of damage where there is disagreement on the level of compensation. Arbitrators in 1999 were called upon and ultimately decided on a level of $116.8 million in annual impact, when the US had sought $202 million and the EC claimed that a mere $53.3 million was appropriate. This was in the case of the US challenge to the ban on hormone-treated beef, European Communities-Measures Concerning Meat and Meat Products (Hormones), WT/DS26/Arb. is available at*)&Language=ENGLISH&Context=FomerScriptedSearch&languageUIChanged=true#

33. 19 USC § 2411 (a) (3).

34. The tariff term is motor vehicles for the transport of goods, light weight diesel trucks defined as those with a gross vehicle weight not exceeding 5 metric tons, classifiable within item no. 8704.21.0000, Harmonized Tariff Schedule of the US (HTSUS). Light weight gasoline-powered trucks fall under subheading 8704.31, HTSUS. You will see that all other trucks will similarly attract a 25% duty under item nos. 8704.22.50 and 8704.23.0000 (heavier diesel trucks), 8404.3200 (gasoline-powered trucks over 5 mts) and other trucks (read electric-powered) at 8704.9000, HTSUS.

35. The commodities originally selected were brandy, potato starch, dextrin and trucks.

36. See generally, For a contemporary and scholarly review of the process, see Walker, “Dispute Settlement: The Chicken War,” 58 J. Am. Int. L. No. 3, 671 (1964).

37. 19 USC § 2411 (c) (3) (A).

38. This is a defined term. 19 USC § 2416 (b) (2) (E).

39. 19 USC § 2411 (c) (3) (B).

40. 19 USC § 2416 (b) (2) (F).

41. 19 USC §§ 2411 (c) (1) (D) and (4).

42. Neville, “Trade policy’s two-way street: a political wake up call,” 22 JOIT No. 1 at 21 (Jan 2011).

43. See the list at Annex II of the Arbitrators’ Report, cited in n. 32.

44. A full chronology up to 2015 is available at the Congressional Research Service paper, at Appendix D, available at

45. 19 USC § 2416 (b) (2) (B) (i).

46. 19 USC § 2416 (b) (2) (C).

47. Congress enacted this as part of the Trade and Development Act of 2000, Pub. L. No. 106-200, 114 Stat. 251, § 407.

48. See the arbitration panel report cited at n. 32 at paras. 22-23.

49. One Federal Circuit decision noted that the purpose of the carousel provision was to prevent a targeted foreign industry from being subsidized so as to obviate the impact of the retaliation. Gilda Industries, Inc. v. United States, 446 F.3d 1271 (Fed. Cir. 2006).

50. 19 USC § 2416 (b) (2) (B) (ii).

51. 19 USC § 2417 (c).

52. Gilda Industries, Inc. v. United States, 353 F. Supp. 2d 1364 (CIT 2004). Note that the CIT decision and the appellate decision that followed are important for their discussion of jurisdictional question, viz. section 1581 (a) (review do denial or protest) v. section 1581 (i) (residual jurisdiction).

53. Gilda Industries, Inc. v. United States, 446 F.3d 127, reh. den., 453 F.3d 1362 (Fed. Cir. 2006).

54. Gilda Industries, Inc. v. United States, 30 CIT 1609 (CIT 2006).

55. Gilda Industries, Inc. v. United States, 625 F. Supp. 2d 1377 (CIT 2009).

56. Gilda Industries, Inc. v. United States, 622 F.3d 1358 (Fed. Cir. 2010).

alt text here