Notice on Details Behind Section 301 Modifications Issued by USTR

In furtherance to the report issued by the Office of the U.S. Trade Representative ("USTR") last week publishing its findings/recommendations from its four-year review of Section 301 tariffs imposed on importations of goods of Chinese origin, USTR has now released details regarding both the tariff classifications impacted by those recommendations as well as guidance on the procedures associated with any exclusion requests and the proposed timing for implementation of Section 301 tariff changes.

Those details, set forth in a Request for Comments released as part of a Statement posted by USTR Katherine Tai on USTR's website, build on the Memorandum issued by President Biden directing USTR to take these actions in light of the People's Republic of China's perceived intransigence in implementing required changes to its unfair trade practices related to technology transfer, intellectual property and innovation. Key takeaways from the Request for Comments include the following:?

• Existing exclusions currently scheduled to expire as of May 31, 2024 will in fact expire as of that time. There was lingering hope that those exclusions would again be extended (or perhaps even made permanent) when this notice was published but the Administration has apparently decided that no exclusions other than might benefit domestic industry/manufacturing will be considered;
• Consistent with that reorientation, USTR has identified in Annex B the full range of machinery classifications that it is proposing for a one-year exclusion of Section 301 tariffs from the date of USTR's Request through May 31, 2025. In considering these items, USTR is requesting comments "on 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 84 that cover machinery used in domestic manufacturing and should be included." Please note that these classifications are more specific in their identification than the classifications and commodities identified in Appendix K to last week's USTR report. As a result, please work from this list for purposes of identifying any machinery that should/should not be considered for exclusion purposes; and
• In addition to that grouping, USTR has also included as Annex C the list of 19 solar manufacturing-related products that are similarly proposed for an exclusion through May 31, 2025. This list and associated descriptions is consistent with the details set out by USTR in Appendix L to its report last week.

Finally, separate and apart from any exclusion expirations or opportunities that might exist, USTR has also now published the specific product descriptions and applicable tariff classifications associated with the range of commodities for the $18 Billion in annual trade value for which an increase in the Section 301 tariff has been proposed. For ease of reference, those broad designations and their specifically proposed implementation dates are as follows:

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Battery parts (non-lithium-ion batteries)?- Increase rate to 25% as of August 1, 2024

Electric vehicles?- Increase rate to 100% as of August 1, 2024

Facemasks - Increase rate to 25% as of August 1, 2024

Lithium-ion electrical vehicle batteries - Increase rate to 25% as of August 1, 2024

Lithium-ion non-electrical vehicle batteries Increase rate to 25% as of January 1, 2026

Medical gloves - Increase rate to 25% as of January 1, 2026

Natural graphite - Increase rate to 25% as of January 1, 2026

Other critical minerals - Increase rate to 25% as of August 1, 2024

Permanent magnets - Increase rate to 25% as of January 1, 2026

Semiconductors - Increase rate to 50% as of January 1, 2025

Ship to shore cranes - Increase rate to 25% as of August 1, 2024

Solar cells (whether or not assembled into modules) - Increase rate to 50% as of August 1, 2024

Steel and aluminum products - Increase rate to 25% as of August 1, 2024

Syringes and needles - Increase rate to 50% as of August 1, 2024

As is always the case, please review with care the classifications identified by USTR as they are detailed in nature and – particularly where steel and aluminum are concerned – address a wide range of commodities. Needed clarification on those classifications falling within the semiconductor and critical minerals designations has also been included as part of the Notice. The docket for public comments will open as of May 29th and run through June 28th, with all comments required to be submitted through USTR's on line portal at https://comments.ustr.gov.

Please let us know if you have any further questions and/or if there is any additional guidance that we may provide where implementation of these tariffs and participation in the exclusion process is concerned.