USTR requests comment on Art. 301 Tariff increases in strategic sectors | Polsinelli

The long-awaited statutory overhaul of tariffs imposed on imports of Chinese goods under Section 301 of the Trade Act of 1974 resulted in the Biden administration raising tariffs on electric vehicles, semiconductors, solar products, steel and aluminum, batteries and medical products, and adding the tariff list of certain medical products, PPE and loading cranes, and leaving customs duties on other goods at the same rates. The vast majority of tariff increases will occur enters into force on August 1, 2024. Additional details on the timing of tariff increases and an outline of the limited exclusion process targeting machinery used in domestic manufacturing, with specific exclusions for certain solar energy production equipment, were provided today in a Federal Register notice and include:

• Increases in customs duties on the following categories of goods:
  • From August 1, 2024, the number of electric vehicles will increase from 25% to 100%.
  • Solar cells (assembled into modules or not) will increase from 25% to 50% on August 1, 2024.
  • From January 1, semiconductor prices will increase from 25% to 50% 2025
  • From August 1, 2024, the prices of certain steel and aluminum products will increase from 7.5% to 25%.
  • From August 1, 2024, the level of certain personal protective equipment (including respirators, face masks and gloves) will increase to 25%.
  • From August 1, 2024, the percentage of lithium-ion batteries in electric vehicles will increase from 7.5% to 25%.
  • From January 1, the share of lithium-ion batteries other than EVs will increase from 7.5% to 25%. 2026
  • From August 1, 2024, the share of battery parts will increase from 7.5% to 25%.
• Imposition of duties on two categories of products previously exempted:
  • reloading cranes on land 25% from August 1, 2024
  • syringes and needles 50% off from August 1, 2024
• Continued tariffs at the same level for the vast majority of affected imports;
• Establishing an exclusion process for products covered by HTS Chapters 84 and 85, which include, but are not limited to, machinery, mechanical equipment and electrical machinery. In addition, The USTR has provided 19 temporary exemptions for specific solar equipment that take effect immediately and expire on May 31, 2025..
• Comments are due June 28.
• This notice does not include currently applicable exclusions, which suggests that these exclusions will end on May 31, 2024 as planned.
• USTR requests comments on the following matter:
  • USTR’s proposed modification to add or increase Section 301 tariff rates on certain Chinese products listed in Annex A, including the effectiveness of the proposed modification in eliminating or countering Chinese technology transfer, intellectual property, and innovation activities, policies and practices and the impact of the proposed modification on the U.S. economy, including consumers
  • Whether or not the Harmonized Tariff Schedule (HTS) subheadings listed in Annex B should be eligible for inclusion in the machinery exclusion process
  • Does Annex B omit certain HTS subheadings in Chapters 84 and 85 which cover machinery used in domestic production and should be included
  • Scope of proposed exemptions for solar energy production in Annex C, including any suggested changes to product descriptions.

While the industry had mixed reactions to the administration’s announcement, congressional efforts to stop the new tariffs from taking effect are unlikely to succeed. Additionally, while importers are challenging the President’s authority to change Section 301 tariffs after their initial implementation, the Court of Appeals for the Federal Circuit’s decision will likely not be issued until mid-2025.

As the report found that China continues to steal U.S. intellectual property through cyber theft and related activities, the report concluded that “To reduce the exposure of American individuals, companies and technology to Chinese technology transfer acts, policies and practices and to strengthen The resilience of U.S. supply chains, USTR, other U.S. government agencies, and the U.S. Congress should continue to evaluate approaches to shifting supply chains out of China and increasing the impact of tariffs on the supply chain.”

Therefore, affected industries should make supply chain decisions with the expectation that tariffs, at least on imports from China, are unlikely to disappear. In addition, the Government of the People’s Republic of China pledged to take “decisive measures” to defend itself. Such measures are likely to include retaliatory tariffs on U.S. exports to China.