Petition Asks USTR to Impose $50B in Section 301 Tariffs and Import Bans

A group of parents and other family members of those who overdosed on fentanyl are asking the Office of the U.S. Trade Representative to double the 25% Section 301 tariffs on lists 1 and 2 under the existing Section 301 action, combined with no de minimis eligibility for all Chinese goods.

The petition, announced by Wiley, which filed the petition on behalf of the group, Facing Fentanyl, says some tariff revenue should be allocated to U.S. states to help them with the cost of responding to fentanyl abuse.

The petition argues that the loss to the U.S. economy of fentanyl addiction and overdose deaths is $1 trillion annually, but says that the $50 billion remedy it proposes "may be sufficient, when combined with existing countermeasures on the [Chinese government] pursuant to the Act, to compel the PRC government to take actions necessary to substantially restrict exports of fentanyl and fentanyl precursors to the United States."

Wiley's National Security Practice Chair Nazak Nikakhtar, a former top Bureau of Industry and Security official, wrote that USTR should open consultations with Chinese government officials, and "demand that the PRC government expand its laws such that, at a minimum, they impose actual export bans, (rather than export license requirements that the government regularly approves) on all fentanyl manufacturing chemicals, materials, and equipment...." She said if the Chinese government does not commit to such actions, beyond the commitments it made in July, the administration should impose financial countermeasures.

If the $50 billion in additional tariffs doesn't get results, the petition offers a menu of additional financial punishments -- expanded outbound investment restrictions, a limited or full ban on Chinese apps such as TikTok, SHEIN, WeChat, Temu and others, and "blocking the import of certain goods or services from PRC entities in the chemical, biotechnology, pharmaceutical, and/or agricultural sectors or those that otherwise negatively impact U.S. supply chains and growth of U.S. industry."

The petition also suggests that the Chinese government be mandated to buy $50 billion worth of American ag exports and automobiles. China purchased about $38 billion worth of agricultural products from the U.S. in 2021 and not quite $6 billion worth of U.S.-made automobiles in 2022. The U.S. exported $57 billion worth of cars to all countries that year.

A one-pager summarizing the petition said it lays out evidence that the government provides tax incentives and other financial support to Chinese companies that export fentanyl, has state-owned enterprises that export fentanyl and its precursor chemicals, and impedes U.S. efforts to investigate and prosecute fentanyl manufacturers and exporters in China.

The petition says that Value Added Tax rebates for synthetic narcotics are far higher than rebates in other sectors, and that some producers received monetary grants from the government. It argues that this is active encouragement of illicit fentanyl exports.

Andrea Thomas, the founder of Facing Fentanyl, said at an April House Select Committee on China hearing on Chinese government complicity in fentanyl trafficking: "This is not news to us. We have been screaming this from the rooftops to the last three administrations, and still, no substantial action has taken place to address the source of the problem, which is China."

She didn't respond to a request for comment Oct. 18.

"The U.S. government has a responsibility to do everything in its power to protect the public from this scourge, and the Office of the U.S. Trade Representative, through Section 301 countermeasures, should take effective action to ensure that the Chinese government ends this crisis," the one-pager said.

The petition said criminal enforcement is limited because of lack of jurisdiction in China. "Sanctions are an ineffective tool against PRC entities, as entities can re-incorporate with ease to avoid them. And U.S. Customs and Border Protection (“CBP”) and U.S. Department of Homeland Security import inspections, no matter how expanded, will remain far too constrained to detect the vast majority of illicit fentanyl smuggled into the United States. Finally, de minimis exceptions, even if reduced to lower value thresholds or eliminated for PRC shipments, are insufficient to catch most imports of illicit fentanyl given how cheap fentanyl sales are and given that packages containing illicit fentanyl are systematically mislabeled and identified as ordinary commercial goods."

Wiley attorneys argued that USTR is more likely to convince China to crack down on the trafficking than previous efforts by President Joe Biden and Senate Majority Leader Chuck Schumer, D-N.Y.

"Diplomatic efforts and sanctions to address the fentanyl crisis are laudable, but nothing short of significant countermeasures will incentivize the Chinese government to take meaningful action to halt the manufacture and export of illicit fentanyl, honor its commitments under international law to prohibit the trafficking of illicit fentanyl, and end the targeting of American children and families using this lethal poison," the one-pager said.

They said that the law that governs Section 301 applies to this crisis, because the cost of addiction and death has exacted "a staggering toll in the form of lost productivity and reduced commercial output in the goods and services industry, resulting in less domestic and international trade." The petition said, "USTR’s past practice confirms that the term 'unreasonable' is intentionally broad enough to reach all manner of conduct that burdens U.S. commerce."

USTR must decide whether to open an investigation within 45 days. The Office of the U.S. Trade Representative didn't respond to a request for comment; a spokesperson told Reuters that it's reviewing the petition.