On September 13, 2024 USTR announced modifications to the tariffs originally imposed under Section 301 of the Trade Act of 1974 to pressure China to eliminate unreasonable policies and practices related to technology transfer and intellectual property protection. The changes reflect a comprehensive review of the duties required by statute.
USTR’s announcement follows its May 14, 2024 report on the four-year anniversary review of the Section 301 tariffs. The May 14, 2024, report stated that USTR would continue existing Section 301 tariffs on most products and proposed new or increased tariffs on products in certain strategic sectors, including lithium-ion batteries, lead acid battery parts, electric vehicles, critical minerals, permanent magnets, semiconductors, solar cells, ship-to-shore cranes, steel and aluminum and medical and personal protective equipment. USTR proposed granting certain limited exclusions for solar manufacturing equipment and for machinery used in domestic manufacturing.
Following the May report, USTR called for stakeholder comments on the expanded list of products subject to tariffs as well as the list of proposed exclusions. Our previous posts on the May 2024 report and the request for comments are here and here.
The expanded Section 301 tariffs were initially set to go into effect on August 1, 2024. However, on July 20, 2024, USTR announced it was delaying the starting date for the tariffs. After further delays, USTR announced the final list of tariffs on September 13, 2024. The September 13 announcement clarifies that tariff increases set for 2024 will go into effect on September 27, 2024, while tariff increases slated for 2025 and 2026 will go into effect on January 1 of the relevant years.
Following a review of over 1,000 comments, USTR has largely retained the proposed list of products subject to Section 301 tariffs announced in the May 2024 report with a few modifications, including adjusting the starting date for a number of tariff categories and expanding or limiting certain machinery and solar manufacturing equipment exclusions. USTR has now also proposed to impose Section 301 tariffs on polysilicon, wafers and certain tungsten products. In total, the expanded tariffs cover 382 tariff categories, with an approximate annual trade value of $18 billion.
USTR’s Final Decision and Modifications to the Expanded List of Section 301 Tariffs
Semiconductors and wafers for manufacture of semiconductors: USTR maintained its initial proposal to impose a tariff rate of 50% on 16 semiconductor tariff categories, which will go into effect January 1, 2025. USTR stated that “raising the tariff rate on semiconductors was an important initial step to complement the sustainability of [the] investments” in the semiconductor sector made through the CHIPS Act funding.
Wafers were not proposed for tariff increases in the May 2024 notice. However, in response to industry comments, USTR announced it is considering imposing a tariff rate of 50% on wafers (HTS 3818.00.00). USTR noted that China accounts for 95% of wafer capacity and its dominance in wafer manufacturing is undermining U.S. investment in domestic manufacturing as well as the impact of tariffs on imported semiconductors. USTR believes the tariffs will incentivize shifting of supply chains away from China. USTR issued a separate notice seeking comments on the proposed expansion of tariffs to wafers.
Lithium-ion batteries and parts of lead acid batteries: USTR confirmed its proposal to impose a tariff rate of 25% starting in 2024. For lithium-ion non-electrical vehicle batteries, the tariffs will start in 2026. USTR rejected proposals to extend the tariffs to certain inputs and precursor materials used to manufacture lithium-ion batteries.
Electric Vehicles: USTR retained the initial proposal to impose duties at the rate of 100% starting in 2024 on electric vehicles. USTR highlighted that China dominates the world electric car market and that the tariffs are intended to spur diversification from Chinese sources.
Critical minerals and permanent magnets: USTR confirmed a tariff rate of 25% on natural graphite, other critical minerals and permanent magnets. The tariffs on critical minerals (such as ores of manganese, cobalt, aluminum, zinc, chromium) will be effective September 27, 2024. Tariffs on natural graphite and permanent magnets will go into effect on January 1, 2026.
USTR declined to extend the Section 301 tariffs to certain subheadings for uranium and vanadium chlorides, but in response to comments, USTR is proposing to apply a tariff rate of 25% on unwrought tungsten, tungsten bars, rods, profiles, plates, sheets, strips, foil and tungsten articles. USTR has issued a separate notice seeking comments on the proposed expansion.
Solar cells: USTR confirmed its original proposal to impose a tariff rate of 50% starting in 2024 on two tariff categories related to solar cells. USTR is also proposing to expand the 50% tariff rate to two inputs used in the manufacture of solar cells, namely polysilicon (HTS 2804.61.00) and wafers (HTS 3818.00.00). USTR has published a separate notice seeking comments on the proposal.
Ship-to-shore cranes: A tariff rate of 25% on ship-to-shore cranes will be effective in 2024. USTR has granted a limited time-bound exclusion for cranes that are imported under contracts executed before May 14, 2024 and delivered prior to May 14, 2026. This exclusion is intended to account for the long lead times in the delivery of cranes, an issue highlighted in the public comments. Availability of the exclusion is conditional on importers submitting a certification at the time of entry.
Steel and Aluminum: Certain steel and aluminum products will be subject to a tariff rate of 25% effective in 2024, covering 321 tariff categories. These tariff categories are already subject to higher duties under a separate trade measure imposed under a different law, Section 232 of the Trade Expansion Act. USTR believes the dual duties “will reduce opportunities for circumvention, making the actions more effective.”
Medical and personal protective and medical equipment: USTR has modified the initial proposal to increase tariffs on facemasks, medical gloves and syringes and needles. Specifically, facemasks will be subject to a tariff rate of 25% starting in 2024, which will be increased to 50% in 2026. Medical gloves will be subject to a tariff rate of 50% starting in 2025, which will increase to 100% in 2026. Tariffs on needles and syringes were initially proposed to have a rate of 25% but USTR has increased the rate to 100% for both products and provided an exclusion for enteral syringes through January 1, 2026 to account for possible shortages.
Exclusion for machinery used in domestic manufacturing: USTR retained the 312 tariff categories initially proposed for the exclusion for specific types of machinery and added five more categories to the list. These include, for example, certain filtering equipment, certain industrial robots and certain printing machinery.
USTR is expected to issue additional guidance on a process for seeking the available exclusions. Note that USTR has not renewed its prior broader process for seeking exclusions, which was not limited to specific categories.
Solar equipment manufacturing equipment: USTR initially proposed 19 exclusions for solar manufacturing equipment. Following comments, USTR removed five exclusions in light of information that the machinery was available in sufficient quantity outside of China. The remaining exclusions are being applied retroactively and are effective starting January 1, 2024 through May 31, 2025.
On September 20, 2024, USTR issued a separate notice requesting comments on its proposals to increase Section 301 tariffs on certain tungsten products, wafers and polysilicon. Written comments may be submitted on a public portal which opens on September 23, 2024. To be assured of consideration, comments should be submitted by October 22, 2024.
Importers are advised to review their supply chains to identify products subject to increases in tariff rates as a result of the new action. Further, interested parties can submit comments in response to USTR’s latest notice to help guide further agency action.
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