On May 22, the Office of the US Trade Representative (USTR) issued a Federal Register notice that provides additional information on the new or increased tariffs on select Chinese-origin products that USTR previously announced on May 14, pursuant to Section 301 of the Trade Act of 1974. As WilmerHale previously reported, USTR’s action is the culmination of its statutorily mandated “four-year review” of the Section 301 tariffs imposed under the prior Administration on a wide range of Chinese-origin products.
In today’s Federal Register notice, USTR proposes to increase tariffs on specific products in “strategic sectors.” USTR is not taking any action to lower existing Section 301 tariffs, so they will remain in place at their current levels. The notice does not address the fate of existing Section 301 exclusions, including those for certain medical-care products and products related to the US response to COVID-19, that are scheduled to expire on May 31, 2024.
In addition to the proposed tariff increases, the notice establishes a framework for an exclusion process for certain machinery covered in Chapters 84 and 85 of the Harmonized Tariff Schedule of the United States (HTSUS) and proposes temporary exclusions for 19 tariff lines for solar manufacturing equipment.
Finally, the notice invites public comments with respect to the proposed actions, which are due by June 28, 2024.
Proposed Tariff Modifications
As WilmerHale previously reported, USTR is proposing to add or increase tariffs on numerous product categories, including electric vehicles (EVs), lithium-ion EV and non-EV batteries, battery parts (non-lithium-ion batteries), natural graphite and other certain critical minerals, permanent magnets, semiconductors, solar cells (whether or not assembled into modules), steel and aluminum products, certain medical products, and ship-to-shore cranes. USTR sets out these product categories in Annex A to the notice. They include 382 HTSUS subheadings and five statistical reporting numbers of the HTSUS, with an approximate annual trade value of $18 billion (2023).
USTR is proposing that the tariff increases take effect in 2024, 2025 and 2026, depending on the product category. The notice proposes that increases in 2024 be effective August 1, 2024, and that increases in 2025 and 2026 be effective January 1 of the corresponding year. The details of the tariff increases are as follows:
Exclusion Process for Certain Machinery and Solar Manufacturing Equipment
In addition to the proposed tariff increases, USTR is establishing an exclusion process that will enable interested persons to request that particular machinery used in domestic manufacturing that is classified within certain subheadings under Chapters 84 and 85 of HTSUS be temporarily excluded from the Section 301 tariffs. The HTSUS subheadings that are eligible for potential exclusion appear in Annex B to the notice. The notice explains that USTR will publish the procedures for requesting exclusions in a separate notice. Exclusions granted through this process will be effective through May 31, 2025.
USTR sets out the 19 proposed temporary exclusions for solar manufacturing equipment in Annex C to the notice. The proposed exclusions will be effective the date of today’s notice and through May 31, 2025. According to the notice, the purpose of these temporary exclusions is “to support domestic production and decrease reliance on China in a strategic sector.”
Opportunity for Public Comment
On May 29, 2024, USTR will open a public docket at the following portal that the public can use to submit comments on the proposed modifications and exclusion process: https://comments.ustr.gov. To be assured of consideration, interested persons should submit their comments by June 28, 2024. In order to facilitate preparation of comments prior to the May 29 opening of the portal, USTR intends to post a copy of questions for the docket by May 24, 2024, at https://comments.ustr.gov.
With respect to the proposed new and increased tariffs set out in Annex A, USTR is specifically inviting comments on the following:
- The effectiveness of the proposed modification in obtaining the elimination of or in counteracting China’s acts, policies and practices related to technology transfer, intellectual property and innovation.
- The effects of the proposed modification on the US economy, including consumers.
- The scope of the product description to cover ship-to-shore cranes under subheading 8426.19.00 (Transporter cranes, gantry cranes and bridge cranes).
- With respect to facemasks, medical gloves, and syringes and needles, whether the tariff rates should be higher than the proposed rates.
- With respect to facemasks, whether additional statistical reporting codes under tariff subheading 6307.90.98 should be included.
- Whether the tariff subheadings identified for each product and sector adequately cover the products and sectors included in the President’s direction to the Trade Representative.
In addition, with respect to the exclusion process for certain machinery, the notice invites comments on whether the subheadings listed in Annex B should or should not be eligible for consideration in the process, and whether Annex B omits certain subheadings under Chapters 84 and 85 that should be included.
Finally, with respect to the proposed solar manufacturing machinery exclusions in Annex C, USTR invites comments on the scope of each exclusion, including any suggested amendments to the product description.
Background
As WilmerHale previously reported, USTR initiated the review in accordance with Section 307(c) of the Trade Act, which requires USTR to terminate a Section 301 action after four years if neither the petitioner nor any representative of the domestic industry that benefits from the action submits a written request for its continuation. Today’s announcement comes just over two years after the May 5, 2022, initiation of the process. The notice cites Sections 307(c) and 307(a)(1) of the Trade Act of 1974 and the “specific direction of the President” as the authority for today’s action.
