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Since 2018, the U.S.-China trade relationship has been on rocky ground due to the increased tariffs imposed under Section 301 policies. New changes are now being made based on the conclusion of the four-year review begun by the U.S. Trade Commission (USTR) in May 2022.
Key Takeaways:
USA Customs Clearance has worked with hundreds of importers sourcing their products from China successfully. We’ll review the latest updates and let you know what goods it does and does not apply to.
President-elect Trump has announced plans to expand and intensify tariffs on Chinese goods, which could significantly alter the scope and impact of the existing Section 301 tariffs. These changes are aimed at addressing long-standing trade imbalances and other economic concerns with China.
The Section 301 tariffs that were implemented during Trump’s previous administration imposed duties ranging from 7.5% to 25% on a wide array of Chinese imports, including electronics, machinery, furniture, toys, and plastics, and much more. Under the new proposal, Trump plans to add an additional 10% tariff to all Chinese goods already subject to Section 301 duties, further increasing costs for importers.
Beyond these increases, Trump has suggested removing China’s Most Favored Nation status, which could pave the way for even more extreme tariff measures, potentially exceeding 60%. Such moves would dramatically escalate the U.S.-China trade relationship and could lead to higher costs across supply chains, particularly for industries heavily reliant on Chinese manufacturing.
While specific details and implementation timelines remain uncertain, Trump has indicated that the expanded tariffs could be enacted as early as January 20, 2025. Importers should closely monitor developments and assess the potential financial and operational impacts of these proposed changes to Section 301 tariffs.
Proactive planning, such as diversifying supply chains or exploring alternative sourcing options, may help businesses mitigate the effects of these potential increases. As U.S.-China trade relations continue to evolve, staying informed and agile will be key to navigating this uncertain landscape.
Related: How Trump’s Tariff Policies May Impact International Trade
Based on the review findings of the USTR, President Biden is moving forward with increasing tariff rates on limited but crucial categories of commodities.
For those importing commodities used in manufacturing, more specifically the electric vehicle manufacturing industry, these increased rates will hit harder. These upcoming tariffs were confirmed September 2024.
The medical and healthcare industry, still coming to a new normal in a post-pandemic world, will also be affected by tariff increases. Thankfully, the list of such commodities experiencing a tariff hike in this sector is much shorter.
Most of the rate increases are taking effect immediately. Others, like those for rubber gloves or semiconductors, are being given a grace period of one to two years before tariff hikes are officially applied. A similar delay in rate hike was granted to commodities impacting certain EVs and related production materials.
When the USTR first began their review in 2022, they granted a number of tariff exclusions for critical need products. Many of these were related to commodities in high demand due to COVID-19, which was still a major factor.
Items covered in the 99 original exclusions based on critical demand items included respirators, plastic aprons, medical diagnostic machinery, and more.
Exclusions for these products, which have been extended on multiple occasions, expired May 2024. Apart from the COVID-19 specific exclusions, 352 others that had been extended are also set to expire at the same time.
After review, 164 of these were extended to May 31, 2025. New exclusions specifically covering solar manufacturing equipment are now being considered, as well as exclusions for various machinery imports found under HS chapters 84 and 85.
For the purposes of international trade, Section 301 Tariffs refer to any additional tax and duty being applied to imports coming from nations that the U.S. feels are violating fair trade practices.
The Office of the United States Trade Representative (USTR) is the agency that conducts the investigations on countries that are suspected of trade agreement violations and take the necessary actions to correct them. Such investigations are possible due to the Trade Act of 1974, sections 301 to 310.
Any country trading with the U.S. can be subject to a 301 investigation. In fact, the USTR actually releases an annual report of various countries and whether they are on a trade watch list.
For the purpose of this article, I’m going to review the specific actions and tariffs that resulted from the 2017 USTR investigation on the suspicious trade behaviors of the People’s Republic of China (PRC).
After the investigation, China was found to be guilty of four different practices negatively affecting the domestic economy.
As a result of these findings, the U.S. government imposed a series of tariffs on Chinese goods to make up for the money they were losing as a result of those policies and illegal technology transfers. These were initially implemented in 2018 and specified by a commodity’s Harmonized Tariff Schedule (HTS) classification code.
Further reviews have resulted in a total of four different HTS code lists with varying tariff rates. By the end of it, thousands of imports from China had tariffs applied, from nuclear reactors to baby onesies.
Even so, I’m going to break down the process of how it happened list by list, since that does affect certain rates and exclusions.
The first list of products affected by new tariffs was directly related to the initial accusations against China in regard to the acquisition of U.S. technologies. The majority of items on this list are industrially significant technologies.
Overall, the products covered represent about $34 billion worth of imports. There were a total of 1,333 commodities defined by their eight-digit HTS subheading code included and were being charged an additional 25% tariff on top of the normal trade relation (NTR) rates. Products on this list came from the following HTS chapters:
At the time, this didn’t include every HTS subheading under the chapter. That meant it was still possible to import certain types of items in these categories. As the trade war went on, those exceptions went away.
In August 2018, only a month after the first list went into effect, a second list made up of another $16 billion worth of imports was introduced. It included 563 additional HTS subheadings. Like List 1, this one was also originally subject to a 25% tax.
List 2 continued the theme of taxing industrial materials, but applied to some of the raw materials that got left out of the first list. Additional items under the following chapters were affected:
The tariff rate add-ons may have ended here, limited to the most critical industries focused on by the USTR investigation. Of course, that’s not what happened, and we got List 3 and 4 instead.
List 3 is where things began to get messy. As a result of the first two lists, China issued a retaliatory 25% tariff on U.S. goods, valued at $50 billion—equivalent to the U.S. tariffs on China.
The third list was then drafted and put into effect just a month after List 2 in response to China’s retaliation. When the tariff was first put into place in September 2018, it added a 10% duty on top of NTR rates. By May 2019, it had been increased to a 25% tariff.
These drastic increases were meant to deter China from issuing another retaliatory tariff in response. List 3 expanded on the 15 chapters worth of commodity codes already covered by the first two lists, and then added subheadings from 66 other HTS chapters.
By this point, 81 chapters worth of HTS classification had some kind of additional tariff requirement; that’s just under 8,000 commodities. Their total value? Over $200 billion.
Unlike the first two lists, the items in List 3 have little relevance to each other. It’s vast and encompassing, and really just aimed at gathering enough items together to reach the needed value to deter further retaliation from the PRC.
After a year’s worth of continued tension between the two nations in regard to trade, a final list was drafted to include the rest of the goods not already covered by one of the first three lists.
It finished expanding the list of subheadings of previously specified chapters and included every classification from the 14 chapters that has yet to be affected.
The import value of items making up list 4 amounts to approximately $300 billion. The good news for importers was that around the same time, the U.S. and China began drafting a new trade agreement.
The adoption of the Phase One trade agreement in January 2020 resulted in this final list being divided into an ‘A’ and ‘B’ list. Thanks to the agreement, tariffs were only added to one of them.
The subheadings free from the heightened tariff rates stretch across 51 different chapters of the HTS, but in varying quantities.
For instance, chapters 60 to 63 are largely made up of clothing items, and multiple classifications are on the 4B list. The great variety of products covered provides importers with a wide range of possible imports.
However, chapter 28, which includes codes for various inorganic chemicals, has only one commodity free from tariff - sodium bromate - a compound whose most exciting tasks involve batch dyeing and is easy to produce. Not exactly a great profit generator.
If you are importing items that may fall under any of those 51 chapters where list four wasn’t fully implemented, be sure to work with an experienced customs broker. Correct classification can be the difference in thousands of dollars worth of import duties.
The products that made up the 4B list are the only ones that don’t carry an additional tariff duty when imported from China. As mentioned, these include products from 51 different chapters of the U.S. tariff schedule, but not necessarily every commodity within those chapters.
There are items on other lists that now have lowered duties thanks to specifically granted exclusions, but those are not permanent and can be specific to the organization that requested the exclusion to begin with.
Anyone who's really been counting chapters at this point might realize we’ve covered 96 of the 99 chapters that make up the entirety of the U.S. HTS, so there’s hope that some chapters are free and clear, right? Not really, and here’s why.
There are two other options for importing products from China that don’t carry the additional tariff. Let me go over the fine print involved in importing from both Taiwan and Hong Kong.
The government of the People’s Republic of China has claimed Taiwan and considers it one of its (renegade) provinces. Despite this claim, Taiwan is an independently governed island, recognized as such by the international community.
You might get confused about its status because Taiwan is officially recognized by two other names.
You can see where the confusion on whether Taiwan is China comes into play. Even so, it remains self-governed, so the additional tariffs imposed by the U.S. on the PRC do not apply to Taiwan.
Importers could technically benefit from a wide range of products made here, and there are clear signs of that happening. Import origin reports from the Observatory of Economic Complexity continue to track a steady increase in products entering the U.S. through Taiwan.
Trade is likely to continue growing now due to the U.S.-Taiwan Initiative that was signed June 2023.
As good as the growth is, the reality is that the nation cannot fully replace the range of products affected by the current tariff hikes. Although business in Taiwan has grown, it simply does not have the same output capacity as mainland China.
Hong Kong has legally been overseen by the PRC as a special administrative region since 1997. The island, and nearby Macau island, enjoy a great deal of autonomy when it comes to business and trade.
For many years, products made here were exported and sold as “Made in Hong Kong”, making it visually distinct from China. However, on July 14, 2020, Executive Order 13936 was signed which changed the country of origin requirement for labels. Now, any goods manufactured in Hong Kong are marked as “Made in China”.
Despite this, in terms of official trade, the U.S. continues to treat Hong Kong and the PRC as separate entities. Hong Kong retains a unique ISO country code that can be applied for international trade purposes.
Products with a Hong Kong ISO code are not subject to additional duties under Section 301.
If you've imported products from Hong Kong and have been incorrectly charged section 301 duties, contact us. We'll work with you to file a Post Summary Correction (PSC) in order to fix this mistake and receive all refunds that you're eligible for.
Tariff hikes like the ones imposed on Chinese products can place a significant monetary burden on importers because they are intended to make the products cost the same or more than similar domestic products.
Some tariffs being levied against China have been set high enough to effectively act as a product ban. Between the tariff rate, NTR, and shipping costs, your chances of making any kind of profit are nonexistent.
However, if the tariff hike is only intended to bring up the cost to somewhat match domestic competition, there’s hope. Either the importer takes a significant cut off their profit margin, or ends up increasing the sale cost of the product to cover the new overhead.
Of course, you have the option to avoid the tariff all together, but that can be easier said than done. I’m going to go over various legal ways to get around the tariffs or to limit their impact on your business.
Importers can reduce the immediate impact of the tariffs by utilizing a Foreign Trade Zone (FTZ) or bonded warehouse. These are places within U.S. borders that can be used to store imports without paying the tariff duty.
Duty is only paid when the items are removed from the FTZ and enter the domestic market. This kind of strategy can be tremendously beneficial, especially to small businesses.
This solution does have some downsides. For instance, the costs of using such spaces. Also, you’re not actually avoiding the tariff so much as lessening the full impact of it by being able to pay it in increments as you move items into the domestic market.
If you are importing for re-export, then yes, the entire 301 tariff is avoided.
Section 301 provisions leave room for tariff exclusions which can remove or reduce the duty rate you’ll need to pay for specific products. In order for the product exclusion request to be considered, the following information should be sent to the USTR:
The tariff exemption can apply to just the one importer with a specific product, or the USTR can choose to add it to a list of products that any importer would be able to benefit from.
If an exclusion is granted, the product will be completely free from the 301 duties. On the downside, it’s only good for a year after the decision is published, and then the duties will once again be added.
If an exclusion is granted after you have already imported and paid duties, you have the option to request a refund.
Related: Tariff Refund: Eligibility and How to Apply
From the time the tariff increases started taking effect in 2018 and throughout the add-ons and modifications, the USTR has continued to accept applications for exclusion requests. Up until exclusion requests were made private, the Congressional Research Service (CRS) recorded over 53,000 applications. On average, just 13% of these were granted.
The exclusions included a limited number of products from all four lists, most of which are now expired.
Per last official review, 164 of the 352 exclusions that were set to expire have been extended until May 31, 2025. Anyone wishing to be granted an exception will have to apply specifically to the USTR should they allow another extension.
For specific information on which products are included in those exclusions, it’s best to work with a professional customs broker familiar with the specific HTS codes involved.
Related: Track the Section 301 Tariff Exclusions
Another option for some importers is duty drawback. A duty drawback is possible when imported goods are later exported or properly disposed of within three years.
There are four versions of duty drawback that imports are more likely to qualify for with Section 301 commodities.
Related: Section 301 Duty Drawback
The most important documents involved in the process of applying for a drawback are proof of exportation, U.S. manufacturing records, and the specific drawback being applied for.
If you feel that your product falls under an exclusion or is one of the 4B list items that never received a tariff increase, and you’re still being charged, your product may have the wrong HTS code.
In the case of potentially misclassified products, you can submit a request to the CBP or to a qualified customs broker for product reclassification.
To submit a classification request, you will need to submit specific information to CBP about the product in question:
Going through reclassification can be a bit of a hassle, but if you’re right, that could be several thousand dollars in duty fees saved.
Section 321 De Minimis, also called Section 321 ACE, are provisions that allow certain products to be imported duty-free.
It might sound too good to be true, but that’s because you need to meet very specific criteria to qualify.
When filing an informal 321 De Minimis shipment, no customs bond is required and no duties need to be paid. However, customs will only release one such shipment to one entity per day, which is not a practical solution for most large-scale companies.
Smaller companies that work with less inventory at once, can certainly use this provision for their benefit. Provided you meet the list of qualifications, it’s probably the best way to avoid extra tariffs outright.
Related: Section 321 Shipments
If none of the other solutions presented seems to work for you, and the additional tariffs are simply too much, then the only reasonable option left may be to find another supplier.
In the case of products or raw materials, finding other suppliers is a little easier. There are a number of online B2B marketplaces where you can search for products. You may have started with Alibaba, but there are dozens of alternates available.
Related: Top Alibaba Alternatives
Because of the ongoing trade tensions between the U.S. and China, several countries have been improving their own manufacturing industries to offer quality, competitive products.
Countries in Asia worth taking a closer look at as potential suppliers include:
For businesses that are considering moving the actual manufacturing centers and offshoring facilities, there’s a bit more headache involved. Shifting manufacturing is a massive undertaking, especially for larger companies.
Some of the more popular destination options for these moves are the countries we’ve just mentioned. However, Mexico has also emerged as a contender in the race to relocate U.S.-owned manufacturing centers.
The chance to access a ready labor pool and reduce shipping costs has many businesses focused on nearshoring their operations to the USA’s southern neighbor or other countries in Central America working on growing their manufacturing capabilities.
Section 301 tariffs have disrupted the normal business operations of thousands of companies, and many are scrambling to find ways to overcome the chaos. To make sure your company doesn’t fall by the wayside, you’ll need a strong strategy for overcoming the increased costs.
There is no perfect solution, but the experts at USA Customs Clearance can help you find options that best suit your business.
Ready to solve your Section 301 issues? Give us a call at (855) 912-0406 or submit a specific request online.
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any update on 321 being rescinded?
If a product is imported from another country than China but contains many Chinese components, how is it determined if the product should carry any Chinese tariffs?
If I import the Manufactured Homes, TYPE Mobile Homefrom CHINA,This type the product have any DUTY? if yes How much? or is EXEMPT?
DO Samples still qualify for section 301 tariffs .. example 9817.85.01
Hi
Can you tell me what import rules I need to know to import resin and hardener kits for artists?
Is there a chemical registration body I need to apply to?
Also do you assist non US residents with importing?
Thanks