On May 14, 2024, the Biden administration announced expansions to the United States’ Section 301 tariffs on imports from China, proposing to raise tariffs on solar panels, electric vehicles, batteries, green energy supply chain inputs, ship-to-shore port cranes, steel products, aluminum products, medical syringes, and personal protective equipment (PPE).1 If adopted, some of the new tariffs would enter effect this year, while others would phase in gradually in 2025 and 2026. All current tariffs under the Section 301 action would also remain in place. The United States Trade Representative (USTR) plans to issue more information on the specific products that would be covered by the tariffs, the new exclusion process, and the implementation timeline in a Federal Register Notice (FRN) next week. The announcement is the culmination of the statutory four-year review of the Section 301 Investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, which USTR commenced two years ago in May 2022.2
Covered products
Listed below are the key changes to the Section 301 tariffs. According to USTR, all other products that are currently covered by Section 301 tariffs will remain covered at their current tariff rates.
Some of these sectors are already subject to Section 301 duties and will see those tariff rates increase, while others would be new additions. USTR did not include a full detailed list of the specific products that would be subject to the tariffs in its announcement. It is unclear whether USTR intends to raise tariffs on all products covered by these broad descriptions, or if the actions would be targeted more narrowly within those categories.
The tariffs on electric vehicles, solar cells, and steel and aluminum products would enter effect sometime in 2024. The other tariffs would not be implemented until 2025 or 2026, a timeline USTR has said is meant to give affected US manufacturers time to find alternative suppliers. The announcement does not contain a detailed timeline of when the tariffs would enter effect, only referencing the calendar years.
Like the other Section 301 tariffs, the new tariffs would only apply to direct imports of the listed products from China. The tariffs would generally not apply to downstream products, whether imported from China or a third country, that are under different Harmonized Tariff Schedule (HTS) codes.
USTR stated that it is targeting these sectors because either China is seeking to expand its market share with respect to those products, or because the United States is making investments in expanding its own market share. USTR alleges that the Chinese government has provided extensive support to the solar, battery (and mineral inputs), electric vehicle, and semiconductor industries with the intent of expanding exports. On the US side, the Biden administration has led efforts to introduce new subsidies for green energy products, electric vehicles, and semiconductors under the CHIPS and Science Act, Inflation Reduction Act, and the Infrastructure Investment and Jobs Act. USTR’s report characterizes the tariffs as complementary to the US subsidy policies, stating that the tariffs will further encourage US companies to diversify green energy and semiconductor sourcing away from China.
The forthcoming Federal Register Notice
According to the May 14 announcement, USTR will issue the full proposed changes in the Federal Register the week of May 19-25. The FRN would likely include a full list of the specific HTS codes and tariff rates included in the change, as well as the implementation schedule. The FRN will also invite interested stakeholders to submit comments on the proposed tariff increases, as has occurred for previous changes to the Section 301 tariffs. Participating in the public comment process can help shape the outcome of the action and prompt USTR to provide further clarification about its actions. USTR’s responses may also inform any potential legal challenge should a final action be adopted.
New exclusions process for industrial machinery and solar manufacturing
The FRN will also explain the process companies would use to apply for exclusions from the tariffs. Rather than being open to all products like the previous exclusion processes, this exclusion process will only be open to industrial machinery used in domestic manufacturing. Appendix K of USTR’s four-year review report contains the list of the HTS Chapter 84 and Chapter 85 codes that can qualify. The exclusions, if granted, would apply retroactively to the date of the imposition of the Section 301 tariff.
USTR has also proposed 19 temporary exclusions from the solar cells-related tariffs for certain solar manufacturing equipment, which are listed in Appendix L of the four-year review report. The solar exclusions are based on product description, instead of HTS codes. The products are all within HTS 8486.10.0000, 8486.20.0000, and 8486.40.0030.
Status of the current exclusions
USTR’s announcement does not explain what will become of the current tariff exclusion list. As the four-year review has proceeded over the past two years, USTR has maintained 352 general exclusions and 77 COVID-related exclusions from the tariffs. Those exclusions will all expire on May 31, 2024, unless extended. USTR’s report notes the approaching expiration date but does not say what USTR intends to do at that time. In the past, USTR has often announced exclusion extensions with only a few days’ notice, so an announcement at the end of the month remains possible. It is also possible that USTR will allow all the current exclusions to expire, maintaining only the new machinery exclusion process. If the exclusions expire, the covered products would be subject to tariffs ranging from 7.5% to 25% beginning on June 1, 2024.
USTR’s other recommendations
In the four-year review report, USTR also recommends that:
- Congress increase US Customs and Border Protection’s (CBP) funding so it can enforce the tariffs more aggressively;
- US law enforcement and intelligence agencies should increase collaboration with the private sector to improve cybersecurity to better combat state-sponsored technology theft; and
- The government should continue assessing policies to shift US industrial supply chains away from China.
Reviewing the original tariffs
Aside from proposing changes to the Section 301 tariffs, the four-year review report also examined the effectiveness of the original tariffs in changing China’s policies, and assessed the effects of the tariffs on the US economy. The report found the Section 301 actions “have been effective in encouraging the PRC to take steps toward eliminating some of its technology transfer-related acts, policies, and practices” including technology transfer policies and foreign ownership restrictions, but that China “has not eliminated many of its technology transfer-related acts, policies, and practices, which continue to impose a burden or restriction on U.S. commerce.” The report goes on to argue that China’s approach to industrial planning is continuing to motivate technology transfer and highlights allegations of state-sponsored intellectual property theft, as well as other continuing concerns with policies that encourage technology transfer.
On the economic effects, the review found that the Section 301 tariffs and China’s retaliatory tariffs have had a negative effect on the US economy, but have also helped expand domestic production in the sectors protected by the US tariffs. The review also argues the tariffs have encouraged US importers to source merchandise from countries other than China, noting that the share of US imports coming directly from China has fallen. USTR argues this trade diversion supports the Biden administration’s supply chain diversification objectives and reduces the risk of technology transfer occurring in the future.
1 “U.S. Trade Representative Katherine Tai to Take Further Action on China Tariffs After Releasing Statutory Four-Year Review,” USTR, May 14, 2024; and “Fact Sheet: President Biden Takes Action to Protect American Workers and Businesses from China’s Unfair Trade Practices,” White House, May 14, 2024.
2 "Four-Year Review of Actions Taken in The Section 301 Investigation: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation,” USTR, May 14, 2024.
