On May 14, the Office of the US Trade Representative (USTR) announced that it is proposing to add or increase tariffs on select Chinese-origin products in "strategic sectors," pursuant to Section 301 of the Trade Act of 1974. This announcement is the culmination of USTR's statutorily mandated "four-year review" of the Section 301 tariffs that USTR imposed under the prior Administration on a wide range of Chinese-origin products.
USTR is proposing to add or increase tariffs on numerous product categories, including electric vehicles (EVs), lithium-ion EV and non-EV batteries, battery parts (non-lithium-ion batteries), natural graphite and other certain critical minerals, permanent magnets, semiconductors, solar cells (whether or not assembled into modules), steel and aluminum products, certain medical products, and ship-to-shore cranes.All other existing Section 301 tariffs will remain in place at their current levels.
In addition, although it is not stated explicitly, it appears that USTR does not plan to prolong the current Section 301 exceptions, which include those for specific medical-care products and products connected to the US response to COVID-19 and are set to expire on May 31, 2024. The Biden Administration's stated purpose for the action is "to protect American workers and American companies from China's unfair trade practices" and "to encourage China to eliminate its unfair trade practices regarding technology transfer, intellectual property, and innovation."
Based on the review,President Joe Biden announced he will direct USTR to maintain all existing tariffs on Chinese imports and impose new tariffs on a range of products, including the following:
· semiconductors: from 25 percent to 50 percent by 2025
· certain steel and aluminum products: from 7.5 percent to 25 percent in 2024
· electric vehicles (EVs): from 25 percent to 100 percent in 2024
· lithium batteries for EVs and critical minerals: from 7.5 percent to 25 percent in 2024
· solar cells: from 25 percent to 50 percent in 2024
· ship-to-shore cranes: from 0 percent to 25 percent in 2024
· rubber medical and surgical gloves: from 7.5 percent to 25 percent in 2026
In addition to the increases in tariffs, the USTR report also recommends:
(1) establishing an exclusion process targeting machinery used in domestic manufacturing, including proposals for 19 temporary exclusions for certain solar manufacturing equipment;
(2) allocating additional funds to United States Customs and Border Protection (USCBP) to allow for greater enforcement of the Section 301 actions;
(3) increasing collaboration and cooperation between private companies and government authorities to combat state-sponsored technology theft;
(4) continuing to assess approaches to shift supply chains away from China and enhance the "supply chain impacts" of the Section 301 tariffs.
The announcement did not include a list of HTS lines for the products subject to the proposed tariff increases. However, Appendix K of the USTR report does include a list of 8-digit tariff lines for the products that USTR is proposing to include in the exclusion process for machinery used in domestic manufacturing, which will be limited to certain machinery covered in Chapters 84 and 85 of the HTSUS. Appendix L contains the 19 suggested temporary exclusions for specific solar manufacturing equipment. How to navigate the Section 301 tariff process, go to enter your 8-digit hts subheading.
According to the USTR announcement, USTR will issue a Federal Register notice next week that will announce procedures for interested persons to comment on the proposed tariff modifications, as well as information on the proposed exclusion process for machinery used in domestic manufacturing.
With this announcement, the Biden Administration has suggested raising or adding duties under Section 301 for the first time.
In reaching this decision, the Biden Administration appears to have in practice rejected requests that it reduce or eliminate tariffs on certain categories of products, including consumer goods and China-origin products that US companies use as inputs in their United States manufacturing operations. USTR's reference to increased enforcement of compliance with the Section 301 duties by USCBP also signals the possibility of further tariff increases and other actions to expedite the shift of US supply chains away from China. For companies that have relied on tariff exclusions to be able to continue to source key inputs from China or hoped that the four-year review process would provide tariff relief, this announcement makes clear that the Section 301 tariffs are here to stay for the foreseeable future and that other trade restricting actions may be on the horizon.In making this ruling, the Biden Administration seems to have effectively turned down petitions to lower or remove tariffs on a number of products, including consumer goods and commodities with a Chinese provenance that are used as inputs by US enterprises in their domestic manufacturing processes. The likelihood of more tariff rises and other steps to hasten the transition of US supply chains away from China is also hinted at by USTR's reference to greater enforcement of compliance with the Section 301 duties by USCBP.
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