On May 14, the White House announced increased tariffs on $18 billion of imports from China across “strategic sectors,” including steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products. The increased tariffs resulted from findings made by the US Trade Representative (USTR) in its mandatory four-year review of tariffs imposed on Chinese goods under section 301 of the Trade Act of 1974. While USTR found that China had eliminated certain technology transfer-related acts, policies, and practices, it has not eliminated many of them. This post focuses on those practices that pressure foreign firms to transfer their technology in selling medical devices to Chinese hospitals and other entities, a practice that was also cited in an investigation recently initiated by the European Union.
The current tariff action arises from an investigation initiated by USTR in 2017 under section 301 to determine whether Chinese acts, policies, and practices related to technology transfer, intellectual property, and innovation were unreasonable or discriminatory and burden or restrict U.S. commerce. Based on that investigation, USTR determined in 2018 that China employed a series of technology transfer-related acts, policies, and practices that were unreasonable or discriminatory and burden or restrict US commerce and were thus actionable under section 301. As a result, the United States imposed additional duties on a wide variety of Chinese products. Subsequently, the US adjusted the duties (increasing some, reducing others).
In May 2022, USTR initiated a review of the effectiveness of the section 301 actions on achieving their objective, other actions that could be taken, and the effects of such actions on the US economy. In its 193-page report, released on May 14, the agency concluded that the tariff actions have been effective in encouraging China to take steps toward eliminating some of its technology transfer-related actions. However, it also found that China has not eliminated many of those policies and practices and has persisted in its attempts to acquire and absorb foreign technology. Among the practices that China has not eliminated, USTR cited its use of indirect means to pressure companies into joint ventures or partnerships with local firms that involve technology transfer, including in procurement in the medical devices sector.
The report pointed out that “high performance medical equipment” is one of 10 industries China seeks to dominate by achieving an 85% domestic market share goal for “core medical device components” by 2025. It elaborated on how government procurement provides a framework for China to achieve this dominance through technology transfer because as much as 80% of all medical devices sold in China are purchased by the government. Furthermore, it found that “many Chinese procurement regulations and tenders explicitly condition the purchase of imports on the supplier transferring their technology to China.” It cited more than a dozen subcentral medical device procurements that included provisions relating to technology transfer, particularly provisions that give a priority to imported products from suppliers that will transfer their technology.
USTR’s findings relating to the medical device sector are similar to those cited in the EU’s initiation of an investigation in April of China’s procurement market for medical devices. In commencing that investigation, under the recently implemented International Procurement Instrument, the European Commission asserted that China unfairly discriminates against European companies and products in its procurement. Like the USTR report, the European Commission cited the Chinese practice of granting priority to imported products if their suppliers transfer technology to Chinese enterprises.
The Biden administration is increasing the tariffs on Chinese imports to further encourage Beijing to eliminate its unfair trade practices regarding technology transfer, intellectual property, and innovation. They are:
• Battery parts (non-lithium-ion batteries): increase rate to 25% in 2024
• Electric vehicles: increase rate to 100% in 2024
• Lithium-ion electrical vehicle batteries: increase rate to 25% in 2024
• Lithium-ion non-electrical vehicle batteries: increase rate to 25% in 2026
• Natural graphite: increase rate to 25% in 2026
• Other critical minerals: increase rate to 25% in 2024
• Permanent magnets: increase rate to 25% in 2026
• Semiconductors: increase rate to 50% in 2025
• Ship to shore cranes: increase rate to 25% in 2024
• Solar cells: increase rate to 50% in 2024
• Steel and aluminum products: increase rate to 25% in 2024
USTR will issue a Federal Register notice with the procedures for interested persons to comment on the proposed tariff modifications and information on an exclusion process for machinery used in domestic manufacturing.
On May 14, the White House announced increased tariffs on $18 billion of imports from China across “strategic sectors,” including steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products. The increased tariffs resulted from findings made by the US Trade Representative (USTR) in its mandatory four-year review of tariffs imposed on Chinese goods under section 301 of the Trade Act of 1974. While USTR found that China had eliminated certain technology transfer-related acts, policies, and practices, it has not eliminated many of them. This post focuses on those practices that pressure foreign firms to transfer their technology in selling medical devices to Chinese hospitals and other entities, a practice that was also cited in an investigation recently initiated by the European Union.
The current tariff action arises from an investigation initiated by USTR in 2017 under section 301 to determine whether Chinese acts, policies, and practices related to technology transfer, intellectual property, and innovation were unreasonable or discriminatory and burden or restrict U.S. commerce. Based on that investigation, USTR determined in 2018 that China employed a series of technology transfer-related acts, policies, and practices that were unreasonable or discriminatory and burden or restrict US commerce and were thus actionable under section 301. As a result, the United States imposed additional duties on a wide variety of Chinese products. Subsequently, the US adjusted the duties (increasing some, reducing others).
In May 2022, USTR initiated a review of the effectiveness of the section 301 actions on achieving their objective, other actions that could be taken, and the effects of such actions on the US economy. In its 193-page report, released on May 14, the agency concluded that the tariff actions have been effective in encouraging China to take steps toward eliminating some of its technology transfer-related actions. However, it also found that China has not eliminated many of those policies and practices and has persisted in its attempts to acquire and absorb foreign technology. Among the practices that China has not eliminated, USTR cited its use of indirect means to pressure companies into joint ventures or partnerships with local firms that involve technology transfer, including in procurement in the medical devices sector.
The report pointed out that “high performance medical equipment” is one of 10 industries China seeks to dominate by achieving an 85% domestic market share goal for “core medical device components” by 2025. It elaborated on how government procurement provides a framework for China to achieve this dominance through technology transfer because as much as 80% of all medical devices sold in China are purchased by the government. Furthermore, it found that “many Chinese procurement regulations and tenders explicitly condition the purchase of imports on the supplier transferring their technology to China.” It cited more than a dozen subcentral medical device procurements that included provisions relating to technology transfer, particularly provisions that give a priority to imported products from suppliers that will transfer their technology.
USTR’s findings relating to the medical device sector are similar to those cited in the EU’s initiation of an investigation in April of China’s procurement market for medical devices. In commencing that investigation, under the recently implemented International Procurement Instrument, the European Commission asserted that China unfairly discriminates against European companies and products in its procurement. Like the USTR report, the European Commission cited the Chinese practice of granting priority to imported products if their suppliers transfer technology to Chinese enterprises.
The Biden administration is increasing the tariffs on Chinese imports to further encourage Beijing to eliminate its unfair trade practices regarding technology transfer, intellectual property, and innovation. They are:
• Battery parts (non-lithium-ion batteries): increase rate to 25% in 2024
• Electric vehicles: increase rate to 100% in 2024
• Lithium-ion electrical vehicle batteries: increase rate to 25% in 2024
• Lithium-ion non-electrical vehicle batteries: increase rate to 25% in 2026
• Natural graphite: increase rate to 25% in 2026
• Other critical minerals: increase rate to 25% in 2024
• Permanent magnets: increase rate to 25% in 2026
• Semiconductors: increase rate to 50% in 2025
• Ship to shore cranes: increase rate to 25% in 2024
• Solar cells: increase rate to 50% in 2024
• Steel and aluminum products: increase rate to 25% in 2024
USTR will issue a Federal Register notice with the procedures for interested persons to comment on the proposed tariff modifications and information on an exclusion process for machinery used in domestic manufacturing.
