In 2018, the United States Trade Representative (USTR) imposed increased tariffs on about two-thirds of Chinese imports under Section 301 of the Trade Act of 1974. The tariffs were intended to address China’s technology transfer policies and practices and other intellectual property-related trade issues. Despite changes in presidential administrations, the Section 301 tariffs have endured. 

Last month, in a nearly 200-page report, the USTR concluded a four-year anniversary review of the Section 301 tariffs noting “some positive developments,” but that China still engages in unfair trade practices. Accordingly, the USTR announced it would be expanding—rather than eliminating, reducing, or limiting—Section 301 tariffs. The expansion would increase tariffs on certain products currently subject to Section 301 tariffs and impose new tariffs on additional products.  

On May 22, 2024, the USTR published a Federal Register notice outlining the specifics of the proposed merchandise to be covered, tariff amounts, effective dates for the tariffs, and a new product exclusion process for manufacturing equipment. Note that the expanded tariffs are not yet in effect. The USTR is currently seeking comments from stakeholders until June 28, 2024, which will help shape the final rule. 

New and Increased Tariffs on Strategic Goods

The USTR is targeting a variety of strategic items crucial for U.S. supply chain resilience in energy, tech, public health, and defense. (See here at Annex A for a full list of covered merchandise identified by HTSUS codes). Tariffs on solar products, lithium-ion batteries, and electric vehicles are intended to fortify U.S. supply chains in the face of substantial Chinese investment in those industries. Similarly, tariffs on steel and aluminum products take aim at Chinese over-production and endeavor to rectify distorted global markets. The tariffs will come into effect progressively, with a first tranche effective as of August 1, 2024, then a second and third tranche effective as of January 1, 2025, and January 1, 2026, respectively. 

For all other merchandise currently covered by Section 301 tariffs, that merchandise will continue to be subject to Section 301 tariffs at their current levels (i.e., 25% rate for merchandise on Lists 1, 2, and 3, and 7.5% for merchandise on List 4A).

New and Existing Exclusions

As with prior Section 301 actions, the USTR announced that it will establish a new process to temporarily exclude certain merchandise from the Section 301 tariffs. This time around, however, exclusions will be limited to machinery used in domestic manufacturing, with particular focus on solar manufacturing equipment. The equipment eligible for temporary exclusion are listed here at Annexes B and C. Exclusions will be effective through May 31, 2025. The USTR is expected to issue a dedicated Federal Register notice to detail the exclusion request procedure. 

Separately, the USTR announced it would extend a set of current product exclusions through June 14, 2024 to allow for transition with those lapsing exclusions, and a more limited set of exclusions to be continued through May 31, 2025. Following expiration, merchandise previously covered by the exclusions will again be subject to Section 301 tariffs.

Opportunity for Public Comment

The USTR is currently seeking comments on certain aspects of the proposed Section 301 expansion, including:

• Proposed modifications to Section 301 tariffs for merchandise listed in Annex A (i.e., the list of merchandise for new/additional tariffs);
• The list of Manufacturing Equipment tariff headings that would be covered by the new exclusion process; and
• The temporary exclusions for certain solar manufacturing equipment.

Comments must be received by June 28, 2024, to be taken into consideration.

Conclusion

While the final form of the tariffs—including exact coverage and the mechanics of requesting exclusions from the tariffs—may change, Section 301 tariffs are here to stay and may be further expanded in the future. In the near term, companies that import or rely on imports of Chinese-origin goods should carefully evaluate the potential impact of Section 301 tariffs on their businesses and consider commenting on the proposed expansion. In the long term, companies should also consider their potential exposure if Section 301 tariffs are extended, or if, as several members of Congress have suggested, the United States revokes China’s permanent normal trade relations status.