USTR Terminates Many Remaining Section 301 Exclusions but Requests Comments on a New Exclusion Process for Certain Manufacturing Equipment

When the Office of the U.S. Trade Representative (USTR) announced on May 13, 2024 the final results of its “sunset review” of the need for continuing the Section 301 “China tariffs,” it left unanswered the fate of the remaining 429 product-specific exclusions allowing importers to avoid paying the 25% or 7.5% duty (depending on the imported product’s tariff code) (for prior coverage, see the tax alert dated 15 May 2024). That question was answered on May 24th in the Federal Register and was preceded two days earlier by another Federal Register notice requesting comments on related matters.

Following a request for comments in a December 29, 2023 Federal Register notice concerning whether the exclusions in place at that time should remain, USTR extended those exclusions through May 31, 2024. After considering those comments and in light of the four-year sunset review results, the announcement on May 24 ended the exclusions for over 200 product-specific exclusions effective June 14, 2024, thus giving importers an additional two-week transition period. The cited reason was that “public comments do not demonstrate that further extending the exclusion would aid efforts to shift sourcing out of China in the near term or do not demonstrate that products covered by the exclusion are unavailable outside of China.” Items for which the exclusions will terminate on June 14, 2024 are listed in Annex D to the Federal Register notice.

The remaining product-specific exclusions listed in Annex C were extended to May 31, 2025. USTR “found that extending these exclusions will support efforts to shift sourcing out of China, or provide additional time where, despite efforts to source products from alternative sources, availability of the product outside of China remains limited.”

In the related development, USTR’s May 22 notice announced the solicitation of comments regarding the new proposed increases in the Section 301 tariffs to the product categories discussed in the BDO tax alert dated May 15. Many of those increased tariffs will come into force before the close of 2024.

The May 22 notice also requested comments pertaining to a new exclusion process for two product categories, one specific and one generic. The broad category for which the Biden Administration envisions a new exclusion process centers on imported machinery used for domestic manufacturing. The narrower category centers on solar manufacturing equipment. All potential exclusions are based on the tariff code of each imported article. Comments are due via filing on USTR’s public docket by June 28, 2024.

How BDO Can Help

BDO’s global trade and supply chain professionals can assist clients with reviewing their exposure to the Section 301 “China tariffs,” as well as assess the impact of future tariff increases by performing tariff code reviews, country of origin assessments, implement duty mitigation strategies (i.e., drawback, first sale), and supply chain planning in the context of an ever-changing international trade regulatory environment. We also can help importers with implementing and enhancing internal controls, including preparing documentation to respond to CBP reviews, supplier surveys, etc.