U.S. Proposes Increased Section 301 Tariffs on Products Originating from China

Key Takeaways:

• The increased Section 301 tariffs are likely to be applied in addition to existing Section 232 tariffs on aluminum and steel, Section 201 safeguard tariffs, antidumping and countervailing duties, and normal duties assessed on the same imports.
• The proposed Section 301 duties will be applied to Chinese-origin goods whether exported to the United States from China or from third countries.
• USTR is expected to issue a publication in the Federal Register during the week of May 20, 2024, soliciting comments on the proposed tariff modifications and the possibility of tariff exclusions for machinery involved in domestic manufacturing.

On May 14, the United States Trade Representative (USTR) proposed increased Section 301 tariffs on electric vehicles, batteries, battery parts, steel and aluminum products, semiconductors, and several other products that originate from China. The White House announced that the additional tariffs were needed to counteract artificially low-priced exports from China, to protect U.S. investments in manufacturing infrastructure, and to further address concerns about unfair intellectual property practices in China. See the White House Fact Sheet link below and a list of products categories subject to the increase below.  

FACT SHEET: President Biden Takes Action to Protect American Workers and Businesses from China’s Unfair Trade Practices | The White House

Most of the proposed increased tariffs will apply in 2024.  Some of the increased tariffs are being proposed to apply to semiconductor products 2025 and to certain lithium batteries and permanent magnets in 2026. For additional details, see the USTR report which can be accessed by link below. 

U.S. Trade Representative Katherine Tai to Take Further Action on China Tariffs After Releasing Statutory Four-Year Review | United States Trade Representative (ustr.gov)

Product Categories Subject To Proposed Tariff Increases:

The increased Section 301 tariffs are likely to be applied in addition to existing Section 232 tariffs on aluminum and steel, Section 201 safeguard tariffs (i.e., solar panels), antidumping and countervailing duties (AD/CVD), and normal duties assessed on the same imports.

Exports from Third Countries and Section 301 Duties

Section 301 duties are based on country of origin, not country of export. The proposed Section 301 duties will be applied to Chinese-origin goods whether exported to the United States from China or from third countries.

Simple assembly of Chinese parts in a third country does not confer a new country of origin upon the product.  A new country of origin is conferred when input materials are “substantially transformed” into the final goods in the third country, producing a change to the name, character or use of the materials and/or components. Exporters from third countries should evaluate carefully the country of origin of their products before exporting to the United States to avoid unexpected duty obligations.  Guidance on how U.S. Customs & Border Protection analyzes work that substantially transforms a product’s country of origin can be found by researching customs rulings at rulings.cbp.gov/home.

Next steps – Federal Register Notice expected next week

USTR is expected to issue a publication in the Federal Register during the week of May 20, 2024, soliciting comments on the proposed tariff modifications and the possibility of tariff exclusions for machinery involved in domestic manufacturing. 

How can BakerHostetler help?

Our International Trade team can help clients evaluate the tariff implications of the proposals, the impact on their supply chains and possible alternatives.  We have assisted clients with filing and receiving tariff exclusions for some products subject to Section 301 tariffs.  We can also recommend duty mitigation strategies that may accommodate your supply chain configuration. 

Please contact Mike Snarr, msnarr@bakerlaw.com or any of the members of our Customs, Tariffs and Import Regulations team if you have questions or would like to discuss further.