On May 14, 2024, the U.S. Trade Representative (USTR) published a significant four-year review regarding Section 301 tariffs on certain Chinese-origin products, indicating a substantial policy shift. President Biden's administration has since declared modifications to the existing tariff regime, affecting $18 billion worth of imports from China. This development will have far-reaching implications for various industries, including medical equipment and electric vehicles.
Unpacking the Changes
The revised tariffs on products from China will notably impact a diverse array of commodities. For instance, personal protective equipment (PPE), which previously faced a tariff range of 0% to 7.5%, will now be subjected to a steep 25% tariff, effective this year. Medical and surgical gloves will see their tariffs rise from 7.5% to 25%, although this change will take effect in 2026.
Industries reliant on steel and aluminum products, semiconductors, solar cells, and electric vehicles are particularly affected. The tariff on steel and aluminum will jump from 7.5% to 25%, while semiconductors and solar cells will see their tariffs doubled to 50%. The most dramatic change is reserved for electric vehicles, with tariffs soaring from 25% to 100%, set to commence later this year. Please see the table below for details:
What’s Next
The USTR plans to step up enforcement of the 301 tariffs, including more funding for Customs and Border Protection (CBP) to check shipments and prevent tariff evasion. Businesses should expect stricter inspections and more paperwork. Next week, the USTR will release a detailed notice in the Federal Register listing the specific tariff codes affected, the new rates, and their effective dates. This notice will also allow for public comments and introduce an exclusion process for machinery used in domestic manufacturing, offering a possible way to ease the impact.
It’s important to note that the USTR's announcement on May 14 did not include any information about the current Section 301 tariff exclusions for certain Chinese products, which are set to expire on May 31, 2024. Without any developments here, these eligible products will be subject to the Section 301 tariffs at 7.5% or 25%, starting June 1, 2024.
Proactive Measures for US Businesses
For importers struggling with these changes, proactive measures are crucial. Engaging with your Zeus customs broker or trade advisor can help you navigate the new tariff landscape and prepare for the implementation date. Zeus’ ACE Analysis tool can assist in reviewing import data to identify potentially impacted HTS codes, enabling a strategic response to these adjustments. Additionally, Zeus’ Trade Advisory team is available to support businesses in understanding and mitigating the impact of these tariffs on their supply chains. Leveraging this expertise can help companies adapt and remain competitive in these sweeping changes.
5/22/2024 Update
On May 22, 2024, the USTR issued a press release announcing a formal proposal to be published in an upcoming Federal Register to:
Increase tariffs on 382 8-digit and 5 10-digit HTS classifications on products from China. These increases will be rolled out across three different timelines, with some proposed to begin as early as August 1, 2024, and the others starting January 1 of 2025 and 2026, respectively. The products subject to these increased tariffs fall into one of 14 strategic sector commodity groups – battery parts (non-lithium-ion batteries), electric vehicles, face masks, lithium-ion electric vehicle batteries, lithium-ion non-electric vehicle batteries, medical gloves, natural graphite, other critical minerals, permanent magnets, semiconductors, ship-to-shore cranes, solar cells (whether or not assembled into modules), steel and aluminum products, syringes, and needles.
Establish a process where companies can request that specific machinery used in domestic U.S. manufacturing be temporarily excluded from the 301 tariffs. These exclusions are only available for products classified in 312 8-digit HTS classifications in Chapters 84 and 85.
Propose 19 temporary exclusions for semiconductor manufacturing apparatus classified in 8486.10, 8486.20, and 8486.40 for use in domestic solar wafer, cell, and module manufacturing.
Establish a 30-day period for public comment on these modifications.
The USTR will accept comments on the proposed tariffs and exclusions through June 28, 2024. The Zeus Trade Advisory team can provide assistance in preparing and submitting comments on products critical for your company. Your Zeus brokerage team can help you to understand which products in your supply chain may be affected by these modifications.
In addition, USTR announced that the existing Section 301 product exclusions that were scheduled to expire May 31, 2024, will now expire on June 14, 2024, and a limited number of those exclusions are further extended through May 31, 2025.
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