In brief

What happened?

The United States Trade Representative (USTR) on May 22 initiated a first step in a process for seeking exclusions from recent tariff increases. Specifically, the USTR issued a Federal Register Notice requesting comments on “Proposed Modifications and machinery Exclusion Process in 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” (the Notice).

The Notice follows the May 14 announcement of a series of tariff increases on $18 billion of imports from China under Section 301 of the Trade Act of 1974 (Section 301). This announcement directed the USTR to maintain certain increased duty rates on imports from China already established by prior orders and to increase Section 301 tariffs on certain specified Chinese products. For prior coverage of President Biden’s announcement, see PwC Tax Insight, Biden Administration announces tariff hikes on Chinese imports, May 15, 2024.

In addition, the USTR on May 24 issued a Federal Register Notice addressing the 352 formerly expired product exclusions that were reinstated by the USTR on March 28, 2022, and scheduled to expire again on May 31, 2024. The Notice states that the exclusions listed in Annex D to the Notice will expire after a 14-day transition period ending on June 14, 2024, while the remaining exclusions, listed in Annex C to the Notice, will be extended through May 31, 2025, based on the USTR’s finding that “extending these exclusions will support efforts to shift sourcing out of China, or provide additional time where, despite efforts to source products from alternative sources, availability of the product outside of China remains limited.”

Why is it relevant? 

The proposed tariff increases will affect a range of strategic sectors, such as steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, ship-to-shore cranes, and medical products. The tariff rates will vary from 25% to 100%, depending on the product. The tariff increases will raise significantly the costs of importing these products from China and may disrupt US supply chains and markets that rely on them. 

Action to consider:

US companies that import, manufacture, or use the affected products should assess the impact of the proposed tariff increases on their operations, cash flows, and competitiveness, and explore potential mitigation strategies, such as diversifying their sources of supply or production, or passing on the costs to their customers or suppliers. These companies also should consider submitting comments through the USTR’s web portal.

Requests for comments

With respect to the USTR’s proposed modification for adding or increasing Section 301 tariff rates on certain products from China listed in Annex A to the Notice, interested persons are invited to comment on:

• 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 USTR.  

With respect to the exclusion process, the USTR seeks comments on whether the subheadings listed in Annex B to the Notice should or should not be eligible for consideration in the machinery exclusion process and whether Annex B omits certain subheadings under Chapters 84 and 85 that cover machinery used in domestic manufacturing and should be included. 

With respect to the proposed solar manufacturing machinery exclusions in Annex C to the Notice, the USTR requests comments on the scope of each exclusion, including any suggested amendments to the product description. 

To facilitate preparation of comments prior to the May 29 opening of the web portal, the USTR posted a copy of questions for the docket at https://comments.ustr.gov.