On May 22, 2024, the Office of the United States Trade Representative (USTR) issued the planned Federal Register notice, implementing the Biden Administration’s plan to increase Section 301 tariffs on products from the People’s Republic of China across “strategic sectors.” The relevant sectors include steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products. The announcement came on the heels of USTR completing its four-year review of the Section 301 tariffs imposed during the Trump Administration on a broad range of Chinese imports.
Background
Section 301 of the Trade Act of 1974 grants USTR authorities to investigate and enforce U.S. rights under trade agreements and to respond to certain foreign trade practices. In 2017, USTR initiated a Section 301 investigation to determine whether China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce. Based on the findings, the Trump Administration imposed tariffs, effective since 2018 and 2019, on an array of Chinese imports with an approximate annual trade value of $550 billion.
Section 307(c) of the Trade Act of 1974 requires USTR to review the effectiveness and economic impacts of Section 301 actions every four years to keep or otherwise modify the tariffs. The agency announced its four-year review of the Section 301 tariffs in May 2022. On May 14, 2024, the agency completed this review and issued a report detailing its findings and related recommendations.
USTR Findings and Recommendations
USTR found that while the Section 301 tariffs have been effective in changing some of China’s technology transfer-related acts, policies, and practices, further actions are necessary to combat China’s trade practices. There were “small negative effects” on U.S. economic welfare, real incomes, and employment, which the agency associated with retaliatory tariffs applied by China on U.S. exports. USTR concluded that the Section 301 tariffs have potentially supported “U.S. supply chain diversification and resilience” by reducing U.S. imports from China and increasing imports from alternative sources.
The Biden Administration therefore plans to maintain all existing Section 301 tariffs and increase tariffs across the following sectors:
- Steel and aluminum products: from 0–7.5% to 25% in 2024.
- Semiconductors: from 25% to 50% in 2025.
- Electric vehicles: from 25% to 100% in 2024.
- Batteries and battery components and parts:
- Battery parts (non-lithium-ion batteries): from 7.5% to 25% in 2024.
- Lithium-ion electrical vehicle batteries: from 7.5% to 25% in 2024.
- Lithium-ion non-electrical vehicle batteries: from 7.5% to 25% in 2026.
- Critical minerals:
- Natural graphite: from 0% to 25% in 2026.
- Permanent magnets: from 0% to 25% in 2026.
- Other critical minerals: from 0% to 25% in 2024.
- Solar cells (whether or not assembled into modules): from 25% to 50% in 2024.
- Ship-to-shore cranes: from 0% to 25% in 2024.
- Medical products:
- Medical gloves: from 7.5% to 25% in 2026.
- Personal protective equipment: from 0–7.5% to 25% in 2024.
- Syringes and needles: from 0% to 50% in 2024
Biden’s Plan
USTR’s planned notice implements the Biden Administration’s proposed tariff increases and identifies 382 subheadings of the Harmonized Tariff Schedule of the United States (HTSUS) and five HTSUS statistical reporting numbers, which are included in the notice’s Annex A. USTR proposes an effective date of August 1, 2024 for the 2024 increases, and the 2025 and 2026 increases would be effective on January 1 of the corresponding years.
USTR will establish an exclusion process for interested parties to request that machinery used in domestic manufacturing classified within certain subheadings under Chapters 84 and 85 of the HTSUS be temporarily excluded. The HTSUS subheadings eligible to be considered for temporary exclusion are included in Annex B. Exclusions granted through this process will be effective through May 31, 2025. However, USTR indicated that it would publish the procedures for requesting exclusions in a separate notice.
In Annex C, USTR proposes 19 temporary exclusions for certain solar manufacturing equipment. The proposed exclusions will be effective on the notice’s publication date and through May 31, 2025.
Finally, USTR invites public written comments on the proposed tariff modifications, including on topics such as:
- The effect of the proposed modifications on China’s trade practices and the U.S. economy, including consumers.
- Whether certain Chapter 84 and 85 subheadings should or should not be eligible for consideration in the exclusion process.
- Specific concerns for certain medical products and ship-to-shore cranes.
The docket will be open for comment submissions on May 29, 2024. To ensure consideration, all written comments must be submitted by June 29, 2024. USTR will likely receive many comment letters, but it is unclear how the agency will review and consider them all before the proposed August 1, 2024 effective date.
Looking Ahead
Companies should determine whether their imports or exports of manufacturing equipment are eligible for the upcoming exclusion process or are subject to the 19 temporary exclusions for certain solar manufacturing equipment. Companies that import goods slated for tariff increases should consider participating in the public comment period and submit written comments by the stated deadline.
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