Key Takeaways:
- New tariff rates on certain Chinese-origin goods will be effective starting August 1, 2024 (with later effective dates of January 1, 2025, or January 1, 2026, for some goods).
- The USTR is planning to increase tariffs on a variety of goods from China, including semiconductors, electric vehicles, lithium-ion batteries, critical minerals, and certain medical products. The tariff rate on solar cells is set to increase to 50% on August 1, 2024.
- The USTR is proposing 19 new temporary tariff exclusions for certain solar manufacturing equipment.
- Certain product exclusions under Section 301 will be extended through May 31, 2025.
- USTR is accepting public comments until June 28, 2024, on the proposed tariff increases and the new exclusions.
Background
As reported in our previous client alert, on May 14, 2024, President Biden announced that he directed his Trade Representative to increase tariffs under Section 301 of the Trade Act of 1974 (Section 301) on a wide range of Chinese goods. On May 28, 2024, the Office of the United States Trade Representative (USTR) issued a Federal Register notice, providing additional information on the new proposed tariff rates. Key information from the notice is detailed below.
Tariff Increases
The proposed tariff increases apply to a wide range of goods. Many goods related to the clean energy sector are also impacted by these hikes. Below is a table outlining the tariff increases on the different types of impacted goods and their dates of entry.
| Product | Proposed New Tariff Rate | Proposed Effective Date |
|---|---|---|
| Electric Vehicles (EVs) | 100% | August 1, 2024 |
| Battery Parts | 25% | August 1, 2024 |
| Lithium-ion Non-EV Batteries | 25% | January 1, 2026 |
| Lithium-ion EV Batteries | 25% | August 1, 2024 |
| Natural Graphite and Permanent Magnets | 25% | January 1, 2026 |
| Certain Other Critical Minerals | 25% | August 1, 2024 |
| Solar Cells (whether or not assembled into modules) | 50% | August 1, 2024 |
| Semiconductors | 50% | January 1, 2025 |
| Steel and Aluminum Products | 25% | August 1, 2024 |
| Ship-to-Shore Cranes | 25% | August 1, 2024 |
| Syringes and Needles | 50% | August 1, 2024 |
| Face Masks | 25% | August 1, 2024 |
| Permanent Magnets | 25% | January 1, 2026 |
| Rubber Medical and Surgical Gloves | 25% | January 1, 2026 |
Partial Extension of Current Exclusions
Currently, there are 429 product-specific tariff exclusions for certain Chinese goods that are set to expire on May 31, 2024. Of those items, 352 were general exclusions and 77 were COVID-related exclusions. On May 24, 2024, the office of the USTR announced in a notice that of the 429 products, 164 exclusions will be extended until May 31, 2025, and the rest will expire on June 14, 2024, instead of May 31, 2024, as the USTR is granting a transition period. The list of product exclusions extended until May 31, 2025, can be found in Annex C of the notice and the list of product exclusions expiring on June 14, 2024, can be found in Annex D of the notice.
Exclusion Process for Machinery Used in Domestic Manufacturing
The USTR is establishing an exclusion process by which interested persons may request that particular machinery used in domestic manufacturing and classified within certain subheadings under Chapter 84 (nuclear reactors, boilers, machinery, and mechanical appliances) and Chapter 85 (electrical machinery and equipment and parts thereof) of the Harmonized Tariff Schedule of the United States be temporarily excluded from the Section 301 tariff. The product categories eligible for consideration of temporary exclusion can be found in Annex B of the May 28, 2024, notice. The USTR will publish a separate notice with the procedures for requesting exclusions under this process.
Tariff Exclusions for Certain Solar Manufacturing Equipment
As detailed in our previous alert, the USTR is establishing 19 new temporary tariff exclusions for certain solar manufacturing equipment, with the aim of supporting investment in U.S. solar manufacturing. The proposed exclusion would be effective from May 28, 2024, through May 31, 2025.
Request for Public Comments
The USTR is inviting the public to comment on the proposed modifications included in its notice of May 28, 2024. The public can submit comments on the notice until June 28, 2024, through the USTR Comment Portal. The list of questions on which the USTR is seeking comments includes:
- The effectiveness of the proposed modifications 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 U.S. 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).
- For face masks, medical gloves, and syringes and needles, whether the tariff rates should be higher than the proposed rates.
- For face masks, 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.
- Whether the subheadings listed in Annex B 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 that should be included.
- For the proposed solar manufacturing machinery exclusions, USTR requests comments on the scope of each exclusion, including any suggested amendments to the product description.
The USTR is accepting comments until June 28, 2024, Foley Hoag will provide additional updates as more information becomes available and can assist in effectively submitting comments to the USTR on the proposed modifications.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.