Are Tariffs the New Ammunition to Combat the Fentanyl Crisis?

At a Glance

• Section 301 petitions are typically made to the USTR to investigate a foreign government’s actions, policies or practices that may be burdening U.S. commerce, but they have not been previously made on the basis of the illicit drug trade.
• Facing Fentanyl, the nonprofit bringing the petition, believes that imposing significant trade remedies may be the best answer to combatting the fentanyl epidemic.

On October 18, 2024, Facing Fentanyl, a nonprofit assembly of grassroots illicit fentanyl awareness groups, petitioned the Office of the U.S. Trade Representative (USTR) to double the 25% section 301 China tariffs on Chinese imports (products on the USTR lists 1 and 2), as well as eliminate the de minimis eligibility for all Chinese goods. Facing Fentanyl’s petition is novel because section 301 petitions have typically been used for commercial trade issues and previously never been brought on the basis of alleged illicit drug/substance trade.

Traditionally, section 301 tariffs provide a statutory means for the U.S. government to impose remedies to combat otherwise legal trade practices by foreign countries that are “unjustifiable” or “unreasonable.” The petitioners state that Section 301 is the appropriate mechanism to stop the unjustifiable, unreasonable and illegal trade practices by the People’s Republic of China (PRC) for some of the following reasons:

• The Chinese government’s Value Added Tax rebates have been significantly higher for synthetic narcotics than rebates in other sectors, which actively encourages fentanyl exports.
• The de minimis exception allows shipments with an aggregate value up to $800 per day per person to be imported duty free, which encourages illicit fentanyl exports by Chinese companies that systematically mislabel fentanyl as ordinary commercial goods.
• Illicit drug trade is the center of the issue because fentanyl and fentanyl precursors are created and exported from the PRC and either go directly to the U.S. or to Mexico, which are then brought into the U.S.
• In 2023, PRC authorities granted five domestic pharmaceutical ingredient manufacturers 40 separate licenses to product fentanyl-related ingredients and products.
• The PRC has failed to follow up on U.S. investigations that demonstrated PRC entities are engaged in the illicit international trafficking of fentanyl and its precursors or take personal action to prosecute PRC entities engaged in the illicit international trafficking of fentanyl and its precursors.

Consequently, Facing Fentanyl believes that imposing significant trade remedies may be the best answer to combatting the fentanyl epidemic.

In an effort to compel the PRC government to substantially restrict the exportation of fentanyl and fentanyl precursors to the U.S., the petition proposes to increase the pre-existing 25% tariff for Chinese products on USTR’s list 1 and 2 to 50%. Moreover, the petition proposes the elimination of the de minimis threshold. Finally, the petition proposes the following additional remedies:

• Expanding outbound investment restrictions
• Limiting or banning Chinese apps
• Blocking the importation of certain goods or services from Chinese entities within the chemical biotechnology, pharmaceutical, and/or agricultural sectors
• Mandating the Chinese government buy $50 billion worth of American agricultural and automobile exports

The USTR will decide whether to initiate an investigation by Monday, December 2, 2024. We will continue to keep you informed of any updates relating to this matter.