For several years now, Section 301 and 232 tariffs have impacted the cost of production, resulted in price increases, shifted global supply chains and increased domestic investments in manufacturing. With new potential tariffs on the horizon, this eAlert provides an account of current tariffs and their exclusions and offers risk mitigating steps to help businesses prepare for what may come.
Tariff Increases and Exclusions
On September 13, 2024, the United States Trade Representative (USTR) announced increased Section 301 tariffs, some of which have been in effect and applicable to products imported since September 27, 2024.
Since then, tariffs increased 100% for electric vehicles; 25% for battery parts; 25% for other critical minerals; 50% for solar cells; 25% for steel and aluminum; 100% for syringes and needles; 25% for lithium-ion EV batteries and 25% for ship to shore cranes.
Scheduled for increases in 2025 and 2026 are another set of products, including a 50% increase for semiconductors; 25% for non-lithium-ion EV batteries; 25% for permanent magnets in 2026 and 25% for natural graphite in 2026.
Despite these recent tariff increases, at the time of this eAlert, 14 temporary exclusions from Section 301 tariffs have been granted for wafer and cell manufacturing. Additionally, 317 Harmonized Tariff Schedule of the United States (HTSUS) subheadings covering various machinery types are eligible for similar temporary exclusions. The USTR has published procedures to request exclusions.
In the tangled web of global trade affecting U.S. companies, tariff increases represent only one side of the coin. The less frequently discussed side consists of trade restrictions that China and other countries are imposing as contingency plans.
Election Outcomes
Election outcomes will shape the direction of our nation for the next four years, demanding that businesses build and implement flexibility into their global strategies.
Mitigation
A wait and see approach is highly risky in our current environment where change is inevitable. Below are some mitigation strategies businesses can utilize to prepare for the changes that will come:
- When Dorothy went to find the wizard she said, “I’ve a feeling we’re not in Kansas anymore.” The same adage applies to today’s global supply chains: They have already changed, and the fast pace of change continues. Assess your supply chain shifts against geopolitical decisions that will affect your business within the next four to six years. In doing so you, will understand your strengths and your weaknesses from a business and compliance perspective, and you will have a better chance to prepare for them.
- Section 301 exclusions: Become familiar with and understand Section 301 exclusions and take advantage of both exclusions and temporary exclusions. Assess Section 301 duties and exclusions language modifications of the HTSUS contained in Annex C to the Federal Register.
- While you cannot predict what tariffs may be issued and what exclusions may be available, you can plan for your business needs through your contracts. Negotiate appropriate terms to allow for renegotiations or pass-throughs where appropriate. Know your contract terms so you can better price your products considering the upcoming risks.
- Nearshoring and Onshoring: In recent years, companies have resorted to nearshoring or onshoring supply chains to insulate them from global policy changes. While this may protect some aspects of your supply chain, nearly every supply chain has a global association with some raw materials or other products coming from overseas. Nearshoring and onshoring require significant investment and proper corporate and other legal planning to assure protection.
