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Today, The Office of the United States Trade Representative <a href="https://url.us.m.mimecastprotect.com/s/wKgeCG6wODhO7Ev2uKBvjL?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">announced</a> the long-awaited results of the Section 301 tariff statutory review, following congressional and industry pressure. The White House <a href="https://url.us.m.mimecastprotect.com/s/MN99CJ6EgJhAJlNgsGlUjc?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">fact sheet</a> includes industries targeted by the review, including steel and aluminum, semiconductors, electric vehicles (EVs), batteries and critical minerals, solar cells, and medical products. Each of these sectors will see a 25-100% increase in tariff rates for products imported from China beginning in 2024 through 2026.

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The findings from the <a href="https://url.us.m.mimecastprotect.com/s/TSfrCKrAj0IMoPVZh3shvm?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">report</a> indicate that China has continued to engage in technology transfer-related practices that impede U.S. commerce, despite not eliminating them. USTR comments that China’s persistence, accompanied with aggressive actions such as cyber-attacks and theft, exacerbate trade challenges. Economic analyses presented suggested that tariffs, specifically the Section 301 tariffs on China, have had a modest negative impact on the overall United States economic welfare but have bolstered domestic production in sectors directly affected by the tariffs. However, retaliatory tariffs by China on exports from the United States have significantly harmed the United States. Overall, USTR has concluded that while tariffs may support diversification of supply chains and resilience, their efficacy depends on broader political dynamics.

As USTR’s report details, Ambassador Katherine Tai will propose the following adjustments in certain sectors:

Product

Tariff Increase

Effective Year

Battery Parts (non-lithium-ion batteries)

Lithium-ion Electric Vehicle Batteries

Other Critical Minerals

Ship-to-Shore Cranes

Solar Cells (whether or not assembled into modules)

Steel and Aluminum Products

Syringes and Needles

Lithium-ion Non-electric Vehicle Batteries

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Proposed Modifications and New Exclusion Process

USTR’s report includes modifications to the current Section 301 tariffs to be made at the direction of Ambassador Tai. The recommendations include the establishment of an exclusion process for select products limited to machinery used in domestic manufacturing efforts under Chapters 84 and 85 of the Harmonized Tariff Schedule (details provided in the <a href="https://url.us.m.mimecastprotect.com/s/TSfrCKrAj0IMoPVZh3shvm?domain=rnn4sp8ab.cc.rs6.net" target="_blank" rel="noopener">report</a>),the allocation of additional funds to Customs and Border Protection (CBP) to ensure better enforcement of Section 301 tariffs, increased collaboration between the private sector and government to deter technology theft, and a review of approaches to diversify supply chains from outside of China and other near peer adversaries.

In terms of the extended exclusions for 77 medical-care products related to COVID-19, as well as the 352 extended exclusions, set to expire on May 31, 2024, the USTR’s report indicates only that the “…exclusions are scheduled to expire on May 31, 2024”. The report does not provide a clear path for their potential continuation or elimination beyond this date.

USTR will release a Federal Register notice next week to allow for public comment on the proposed duty increases on certain sectors, including the tariff lines that will be affected by the increases. The public comment period will also include information around the exclusion process for machinery used in domestic manufacturing efforts.

If you have any questions about the implications of this announcement, please contact Michael Best’s Trade Practice Lead Sarah Helton at <a href="mailto:sarah.helton@michaelbest.com">sarah.helton@michaelbest.com</a> with questions.

To learn more about Michael Best Strategies' Trade Practice, <a href="https://michaelbeststrategies.com/industries/trade/" target="_blank" rel="noopener">click here.</a>

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USTR Releases Findings of Section 301 Statutory Review

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