USTR Opens Section 301 Exclusion Process for Manufacturing Machinery
The Office of the U.S. Trade Representative (USTR) has opened a process whereby parties can request exclusions from Section 301 tariffs for imports of certain Chinese-origin machinery used in manufacturing. The launch of this exclusion process, which was announced on October 17, 2024, is intended to temper the impact of USTR’s previous impositionof additional Section 301 duties and its increase in the rate of existing Section 301 duties on a range of Chinese products.
Interested persons who wish to request temporary exclusions may do so on USTR’s online docket no later than March 31, 2025. But exclusions are granted on a rolling basis and, if granted, only extend through May 31, 2025.
Because of the relatively short lifespan of these exclusions (less than six months), parties should submit exclusion requests as soon as possible to maximize the benefits of any exclusions that are granted. Interested persons who support or object to any exclusion requests must do so within 30 days of the request.
Background
As part of its four-year review of the Section 301 tariffs, USTR published a May 28, 2024, notice in the Federal Register proposing 312 subheadings of machinery classified under Chapters 84 and 85 of the Harmonized Tariff Schedule of the United States (HTSUS) that would be eligible for consideration for temporary exclusion from Section 301 tariffs.
USTR also proposed 19 temporary exclusions for solar wafer and cell manufacturing equipment.
After receiving substantial public comment regarding product eligibility, USTR announced in a September 18, 2024, notice in the Federal Register (the September Notice) that it had adopted 14 previously proposed exclusions for equipment related to solar manufacturing while rejecting five proposed subheadings.
The solar manufacturing exclusions can be found in of the September Notice, and apply retroactively from January 1, 2024, through May 31, 2025. of the September Notice sets out the 312 HTSUS subheadings eligible for exclusion requests.
USTR’s October 17, 2024, notice in the Federal Register (the October Notice) formally opens the exclusion process and sets out the procedures for submitting requests and responses to such requests.
Scope of Exclusions
Interested persons may submit exclusion requests with respect to products falling within 312 HTSUS subheadings listed in Annex E of the September Notice. The Annex E list includes a considerable array of manufacturing machinery, yet falls well short of the totality of Chapters 84 and 85 of the HTSUS, which cover the entirety of manufacturing machinery.
In the September Notice, USTR notes that it sought this “limited scope” to “strike[] a balance between mitigating U.S. companies’ costs in expanding domestic production capacity while maintaining the appropriate amount of leverage with China to encourage China to eliminate the acts, policies, and practices that are the subject of the investigation.”
The Biden administration is keen to ensure that expanded Section 301 tariffs do not undercut its efforts to stimulate domestic manufacturing, particularly in sectors deemed strategic, such as integrated circuits and steel production. The exclusion process may reflect the view that, for the time being, China is the dominant source of certain key manufacturing equipment, and that some degree of temporary relief is warranted.
Of the 312 subheadings eligible for exclusions, the vast majority fall within Chapter 84 of the HTSUS. These cover a wide range of machinery, from industrial robots and semiconductor manufacturing machinery to equipment with applications in the agricultural, textile and mining sectors.
Chapter 85 of the HTSUS accounts for a few dozen eligible subheadings, including subheadings for furnaces (including, but not limited to, those used for making printed circuits or printed circuit assemblies) and welding machinery.
Procedures for Requesting Exclusions
The exclusion process is open to any “interested person,” which USTR defines to include trade associations. The interested person must provide an array of information in its submission, including, among other information, the 10-digit subheading of the HTSUS applicable to the manufacturing equipment and a detailed description of the equipment.
If applicable, the submission also should include documents showing funding from federal programs such as the Inflation Reduction Act (IRA) or the CHIPS and Science Act that is “related to the domestic manufacturing at issue.” Such evidence may bolster the case of a requesting party.
Critically, the submission also must describe whether the manufacturing equipment or comparable equipment is available in the United States or third countries, and whether the requesting organization has purchased or attempted to purchase such equipment from the United States or third countries.
Requesting parties also must comment on whether the equipment is strategically important or related to “Made in China 2025” or other Chinese industrial programs.
After the request is filed, other interested persons may file a response within 30 days, either in support of or in opposition to the request. An objecting organization must set out the reasons for its objection, addressing in particular whether the manufacturing equipment is available in the United States or third countries, and the degree of substitutability of the Chinese equipment with these alternative sources.
The requesting party may then file a reply by the later of 15 days after the posting of the response or 15 days after the closing of the 30-day response period.
In the October Notice, USTR states that it “will evaluate each request on a case-by-case basis, taking into account the asserted rationale for the exclusion, whether the exclusion would undermine the objective of the Section 301 investigation, and whether the request defines the product with sufficient precision.”
Any approved exclusion will be effective starting from the date of publication of the exclusion determination in the Federal Register and will extend through May 31, 2025. USTR is accepting exclusion requests on a rolling basis and will periodically announce decisions on pending requests.
Companies and trade associations should carefully evaluate with counsel whether to submit an exclusion request, or file a response supporting or opposing requests filed by others.
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USTR, Notice of Modification: China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property and Innovation, 89 Fed. Reg. 76581, 76589 (Sept. 18, 2024).
USTR, Procedures for Requests To Exclude Certain Machinery Used in Domestic Manufacturing From Actions Pursuant to the Section 301 Investigation of China’s Acts, Policies and Practices Related to Technology Transfer, Intellectual Property and Innovation, 89 Fed. Reg. 83755, 83756 (Oct. 17, 2024).
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