US Trade Representative Finalizes 4-Year Review of Section 301 Tariffs on Imports from China, Increasing Tariffs on Clean Energy Supply Chains

On May 14, 2024, the United States Trade Representative (“USTR”) released the results of its statutorily required review of the tariff actions in USTR’s Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation.¹ Notably, USTR has recommended that products from the People’s Republic of China (“PRC”) that are currently subject to Section 301 tariffs will continue at their current rates, or have their rates raised as described below.²

Increased Tariff Rates

Concurrently with USTR’s release of its findings, the White House issued a memorandum and fact sheet directing USTR to increase tariffs on products from China across strategic sectors “[t]o encourage China to eliminate its unfair trade practices regarding technology transfer, intellectual property, and innovation.”

2024 Increases:

• Certain steel and aluminum products from 0 – 7.5% to 25% in 2024
• Electric vehicles from 25% to 100% in 2024
• Lithium-ion EV batteries from 7.5% to 25% in 2024
• Battery parts from 7.5% to 25% in 2024
• Solar cells from 25% to 50% in 2024
• Ship-to-shore cranes from 0% to 25% in 2024
• Syringes and needles from 0% to 50% in 2024
• Personal protective equipment, including certain respirators and face masks, from 0-7.5% to 24% in 2024

2025 Increases:

• Semiconductors from 25% to 50% by 2025

2026 Increases:

• Lithium-ion non-EV batteries from 7.5% to 25% in 2026
• Rubber medical and surgical gloves from 7.5% to 25% in 2026

Recommendations from USTR

USTR also released an accompanying report that outlines several key conclusions relating to its four-year review, as well as recommendations for:

1. Establishing an exclusion process for machinery used in domestic manufacturing, including proposals for 19 temporary exclusions for certain solar manufacturing equipment;
2. Allocating additional funds to United States Customs and Border Protection for greater enforcement of Section 301 actions;
3. Greater collaboration and cooperation between private companies and government authorities to combat state-sponsored technology theft; and
4. Continuing to assess approaches to support diversification of supply chains to enhance US supply chain resilience.

Exclusion Process

As to the first recommendation (establishing an exclusion process for machinery used in domestic manufacturing), USTR’s rationale is that these products are machinery or tools that could be imported from China to support increased US production in strategic sectors, including the US solar industry. These products are listed in Appendices K and L of the report. Specifically, Appendix K identifies the products that USTR proposes to be included in its machinery exclusion process, which includes only certain products from Chapters 84 and 85 of the Harmonized Tariff Schedule. Appendix L identifies solar manufacturing equipment proposed for temporary exclusions, including certain silicon growth furnaces, coolant fluid recycling machines, degumming machines, and physical vapor deposition machines.

USTR is expected to quickly issue a Federal Register notice announcing procedures for interested persons to comment on the proposed modifications and information concerning an exclusion process for machinery used in domestic manufacturing. Interested parties should continue to monitor developments regarding and consider participation in USTR’s comment process.

Importantly, the USTR report and White House fact sheet were silent on any proposed action related to the pending expiration of several hundred existing exclusions. These exclusions are currently scheduled to expire on May 31, 2024.

¹ On August 18, 2017, USTR initiated an investigation under Section 301 of the Trade Act of 1974 to determine whether the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict US commerce. On March 22, 2018, USTR released its findings, determining that China employed a series of technology transfer related acts, policies, and practices that are unreasonable or discriminatory and burden or restrict US commerce. USTR subsequently published List 1 ($34 Billion Trade Action), List 2 ($16 Billion Trade Action), List 3 ($200 Billion Trade Action), and Lists 4A and 4B ($300 Billion Trade Action), which issued tariffs on certain products that totaled corresponding annual trade value amounts. On May 5, 2022, USTR initiated a four-year review of these Section 301 tariffs.

² On March 28, 2022, USTR reinstated 352 expired exclusions from the 301 tariffs, and these exclusions are scheduled to expire on May 31, 2024. There are also 77 COVID-19-related exclusions in effect, which are also scheduled to expire on May 31, 2024. The report issued by USTR on May 14, 2024, does not address whether these exclusions will be extended.