The Office of the U.S. Trade Representative (USTR) recently completed its four-year review of the Section 301 duties imposed on goods imported from China. These Section 301 tariffs were put in place by the Trump administration in 2018 in response to trade practices the administration determined to be unfair.
The tariffs increased the cost of importing goods from China by imposing an additional, Section 301, duty assessment of between 7.5% and 25% onto the cost of the importation. Currently 2/3s of goods imported from China are assessed a Section 301 tariff.
In the program review, the USTR determined that additional duty increases are necessary to persuade China to change its business practices and protect recent U.S. investments in strategic sectors such as clean energy, electric vehicle and semiconductor manufacturing.
The targeted tariffs are estimated to hit $18 Billion in imported value.
Tariffs will be hiked on:
The Section 301 tariffs for Chinese steel and aluminum products have been tripled effective August 1. Imports of Chinese steel and aluminum are also subject to Section 232 (national security) tariffs of 25% and 10% respectively.
Combining the two types of tariffs yields an eye-popping duty cost of 50% for Chinese steel and 35% for aluminum and aluminum products.
No duty rates were reduced in the review, and many products currently exempt from the additional duties have exclusions which will not be renewed. But, in a spot of good news for manufacturers, some imported machinery used in manufacturing will be granted a short-term exclusion that runs through May 31, 2025.
In addition to ratcheting up tariff protections, the Biden administration intensified efforts to combat trans-shipment of Chinese steel and aluminum by imposing a new entry requirement. Importers must certify to U.S. Customs the origins of the metals shipping from Mexico or pay increased duties.
Steel articles or products from Mexico which were “melted and poured” outside of North America will incur a 25% duty rate. Aluminum articles or products from Mexico with a primary or secondary “country of smelt” or “country of most recent cast” of China, Belarus or Iran will incur a 10% duty rate. Under an earlier proclamation, imports of Mexican aluminum or aluminum products cast in Russia are already subject to a 200% duty rate.
In light of these tariff changes, companies should carefully review their product classifications to determine whether additional duties are now applicable, or whether a current tariff exclusion has expired. Planned machinery investments and the timing of purchase should be analyzed to determine whether the investments can qualify for exclusion from the Section 301 levy.
Larger-scale strategies to minimize the bottom-line impact include reviewing sourcing strategies, including the potential of reshoring.
