In the wake of its Four Year Report concerning the Section 301 tariffs imposed on products of China beginning in 2018, the United States Trade Representative has announced that it will terminate most of the existing product-specific exclusions from Section 301 tariffs, and will continue others until May 31, 2025.

The current number of product-specific Section 301 exclusions will be reduced from 352 to 164.

The 352 product specific exclusions currently, in effect, scheduled to terminate May 31, 2024, will all be extended through June 14, 2024. Thereafter, however, only 164 product exclusions will remain in force through May 31, 2025, as shown on Annex C of USTR’s announcement. These products include a broad range and pumps and pump parts, valves and parts, compressors, heat exchanger parts, air purification and filtering equipment, AC and DC motors, printed circuit board assemblies, monitors for use by medical professionals, thermostats, certain motorcycles, some seafood products, certain silk fabrics and a wide range of other good. USTR expect that The additional time will allow importers of these products to source them from locations outside of China.

However, about 190 product-specific exclusions, listed in Annex D to the announcement, will terminate June 14, 2024. According to USTR, these include some 102 exclusions for which no public comments were received recommending extension. In addition, where public comments indicated that efforts to re-source products out of China were not ongoing, or that firms could not find an equivalent product as the same cost as in China, USTR made a decision to terminate the exclusions.

The Biden Administrations, whose Four Year Report recommended continuation of all Section 301 tariffs on Chinese goods, and the imposition of enhanced tariffs on some 18 billion dollars worth of Chinese imports, has never been a fan of product-specific exclusions. The Trump Administration had set up a robust program for seeking product-specific exclusions, which lapsed at the end of 2020 when the Administration left office. Despite intense pressures from industry, and promises that a new exclusion process would be established, the Biden Administration never followed through on that promise. Instead, in early 2022, it “reinstated” some 352 product-specific exclusions which the Trump Administration had issued and extended. The reinstatement reached entries made since October 2021. While the Biden Administration had continued these exclusions, it has now decided that most should be ended. There is little likelihood that the Biden Administration will hereafter initiate a new exclusions procedure.

As it now seems apparent that the Section 301 tariffs will remain in force – and be rigorously enforced by Customs and other trade agencies – for the foreseeable future, many importers are now giving renewed serious consideration to moving production from China to other countries. Any attempts to do so will require a careful analysis of country of origin rules, to determine that work done in countries other than China will result in “substantially transformed” products of those countries, not subject to Section 301 tariffs.

For assistance with these matters, especially evaluating new production operations for country of origin purposes, feel free to reach out to a Neville Peterson professional.