USTR Releases Four-Year Review of Section 301 China Tariffs
Earlier today, the Office of the United States Trade Representative released the four-year review of the Section 301 tariffs on imports from China.
According to the report, the USTR has recommended that the products from China currently subject to Section 301 tariffs should remain tariffed.
Modifications have been proposed to add or increase tariffs for certain products in strategic sectors, including:
| Battery parts (non-lithium-ion batteries) | Increase rate to 25% in 2024 |
| Electric vehicles | Increase rate to 100% in 2024 |
| Facemasks | Increase rate to 25% in 2024 |
| Lithium-ion electrical vehicle batteries | Increase rate to 25% in 2024 |
| Lithium-ion non-electrical vehicle batteries | Increase rate to 25% in 2026 |
| Medical gloves | Increase rate to 25% in 2026 |
| Natural graphite | Increase rate to 25% in 2026 |
| Other critical minerals | Increase rate to 25% in 2024 |
| Permanent magnets | Increase rate to 25% in 2026 |
| Semiconductors | Increase rate to 50% in 2025 |
| Ship to shore cranes | Increase rate to 25% in 2024 |
| Solar cells (whether or not assembled into modules) | Increase rate to 50% in 2024 |
| Steel and aluminum products | Increase rate to 25% in 2024 |
| Syringes and needles | Increase rate to 50% in 2024 |
“We commend the Biden administration and the USTR for their thorough review of the Section 301 China tariffs that were implemented in 2018 as a way to address China’s unfair trade practices,” said Bill Hanvey, president and CEO, Auto Care Association. “We applaud our members’ efforts in reducing their reliance on sourcing from China and investing in resilient U.S. supply chains. However, we want to reiterate that tariffs continue to negatively impact our members and the automotive aftermarket industry. Many products lack manufacturing alternatives outside of China due to infrastructure issues, significant investments in tooling and the knowledge to produce a high-quality safety product.
“We do not believe the Section 301 tariffs have forced China to address their technology transfer-related practices. Additionally, tariffs are not paid for by China; they are passed on to the final consumer, drive up consumer prices and disrupt vehicle maintenance and repair schedules.
“As part of the USTR’s recommendations, we urge the USTR to establish a comprehensive and transparent exclusion process that encompasses all products while renewing the existing exclusions that are set to expire at the end of May. We eagerly anticipate ongoing collaboration to uphold fair trade practices and to safeguard the interests of American workers and businesses.”
Bill Hanvey, President and CEO, Auto Care Association
The tariff increases will affect some $18 billion in imports from China. Many of the tariff increases are slated to increase for 2024 while some are not scheduled to take effect until 2025 or 2026. According to a senior Biden administration official press call, the delay will provide a “transition phase” to allow for the scaling-up of domestic production.
Chinese-made EVs had been subject to the Section 301 25% tariff plus a 2.5% tariff applied to all Chinese vehicles. In recent months, there has been substantial interest from lawmakers on the perceived threat of Chinese-made EVs to U.S. automakers. Foreign markets have seen the surge of unfairly underpriced Chinese vehicles entering their markets.
Report Findings and Recommendations
The report found that China has taken positive steps, but it has not eliminated many of its unfair technology transfer-related acts and policies. Since the imposition of the 301 tariffs, U.S. companies have shifted sourcing and production out of China at an increasing pace. U.S. import data show China’s market share of U.S. imports has decreased significantly.
In addition to keeping the Section 301 tariffs and increasing tariffs to the critical sectors listed above, the USTR's report also makes recommendations for:
- establishing an exclusion process targeting machinery used in domestic manufacturing, including proposals for 19 exclusions for certain solar manufacturing equipment. The proposed exclusion process will be limited to:
- machinery under certain 8-digit tariff lines in HTSUS Chapter 84 and Chapter 85 (Appendix K, pg. 174 of the report); and
- 19 temporary exclusions for certain solar manufacturing equipment to support investment in U.S. solar manufacturing (Appendix L, pg. 192 of the report);
- allocating additional funds to United States Customs and Border Protection for greater enforcement of Section 301 actions, including increased enforcement to combat evasion of section 301 duties;
- greater collaboration and cooperation between private companies and government authorities to combat state-sponsored technology theft; and
- continuing to assess approaches to support diversification of supply chains to enhance our own supply chain resilience.
**May 28, 2024 Update: Limited Exclusion Process for Machinery**
USTR has proposed an exclusion process for stakeholders to request exclusions for particular machinery used in domestic manufacturing (classified under Chapter 84 and 85) to be excluded from the Section 301 tariffs. These products can be found in Annex B in the Federal Register Notice linked below.USTR is seeking feedback on the proposed modifications and exclusion process. Comments can be filed on the USTR Comments Portal by June 28, 2024.
Annex B, 89 F.R. Notice 46279
Next Steps: Your Feedback is Needed
The USTR will issue a Federal Register notice next week announcing procedures for stakeholders to comment on the proposed modifications and information concerning an exclusion process for machinery used in domestic manufacturing.
The Auto Care Association is actively soliciting member feedback on the USTR’s report, its proposed recommendations and the ongoing effects on your businesses. Your input is invaluable and will contribute to the association’s comments. Please reach out to Angela Chiang at angela.chiang@autocare.org with any information or insights you wish to share.
Background
On March 22, 2018, the USTR determined through a Section 301 investigation that China’s trade practices related to technology transfer, intellectual property and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce. The USTR imposed tariffs ranging from 7.5% - 25% on the following lists of products:
| Section 301 List | Duty Rate | Effective Date | Import Good Value |
|---|---|---|---|
| List 1 | 25% | July 6, 2018 | $34 billion |
| List 2 | 25% | August 23, 2018 | $16 billion |
| List 3 | 25% | May 10, 2019* | $200 billion |
| List 4a | 7.5% | February 14, 2020** | $300 billion |
| List 4b | Suspended | Suspended** |
For each tranche of section 301 duties, the USTR established a process for stakeholders to request an exclusion of the tariff. Most of these exclusions expired in 2019 and 2020. The last remaining group of 352 exclusions plus 77 COVID-related medical product exclusions expire on May 31, 2024. The report does not specifically address the status of the remaining 352+77 exclusions.
On May 5, 2022, the USTR initiated the four-year review of the Section 301 China tariffs. The review process opened a docket for stakeholders to submit comments.
The report includes detailed information on:
- Effectiveness of the Section 301 actions in eliminating China’s unfair trade practices
- Effects of the Section 301 tariffs on the US economy
- Proposed modifications and other recommendations
For more information on trade and tariffs, please contact Angela Chiang at angela.chiang@autocare.org.
Welcome to the new YANG Effect! Your one-stop quarterly newsletter for all things Automotive Aftermarket contributed to and written by under-40 industry professionals.
More posts
Market Insights with Mike is a series presented by the Auto Care Association's Director of Market Intelligence, Mike Chung, that is dedicated to analyzing market-influencing trends as they happen and their potential effects on your business and the auto care industry.
More posts