The Office of the United States Trade Representative ("USTR") announced on September 6, 2023 the further extension of 352 reinstated exclusions and 77 COVID-related exclusions from the Section 301 tariffs on imports from China. These exclusions, which cover a variety of products ranging from machinery components to medical equipment, constitute the only remaining active exclusions following the lapse of all other exclusions back in December 2020. The remaining active exclusions were originally set to expire on September 30, 2023; however, the new deadline of December 31, 2023 will allow additional time for USTR to complete its statutorily mandated four-year review process.
As part of the four-year review process, USTR solicited public comments on the effectiveness of the Section 301 tariffs to combat unfair trade practices by China as well as how the actions have affected the United States economy, including U.S. workers and consumers. Interested parties submitted comments in an online portal, which included an option for commenting on 8-digit tariff codes. The portal window closed in January 2023 with around 1,500 comments submitted on more than 115 HTS codes.
After over 4 years of Section 301 duties on imports from China, USTR may determine keeping tariffs in place on certain products may have adverse effects on the U.S. economy without placing pressure on China to change their trade practices. One major reason for eliminating tariffs on certain HTS codes is if it contains products that cannot be sourced from outside China and the burden of the tariff is entirely being passed on to U.S. businesses and consumers. Removing certain HTS codes from the Section 301 Tariffs could also help alleviate the administrative burden from maintaining the current exclusion process.
The timing of the extension suggests that USTR may terminate the current Section 301 exclusion regime and instead seek to remove particular tariff subheadings from the action as a replacement. Since USTR only extended the exclusions for 3-months, this appears to be the perfect amount of time to finish the four-year review which is expected to be completed in October or November of this year. If USTR had intention to keep the exclusions in place long-term then the extension most likely would have been for a longer duration.
Importers will need to closely monitor the news this autumn for the publication of USTR's four-year review determination. HTS codes removed from the Section 301 tariffs could save importers millions of dollars, while an expiring exclusion without removing the tariff code from the action could significantly increase duties.
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