301 Exclusions Continue Through May; Comments to Reopen

More than 400 products that are excluded from Section 301 tariffs will continue to enter under normal duties through May 31, the Office of the U.S. Trade Representative announced Dec. 26. The exclusions had been scheduled to end at the end of this year.

When last extended, in September, the agency said the time was needed "to provide a transition period for the expiring exclusions and to allow for further consideration under the four-year review" (see 2309060066).

USTR Katherine Tai told senators earlier this year that the review would be completed in the fall (see 2307190069), and added, "as part of this review, we are considering the existing tariffs structure and how to make the tariffs more strategic in light of impacts on sectors of the U.S. economy as well [as] the goal of increasing domestic manufacturing."

This time, the agency said extending the extension will "facilitate the alignment of further decisions on these exclusions with the ongoing four-year review," and could help the agency identify which products could shift production to other countries or the U.S., given more time.

To identify which products deserve a longer exclusion from the tariffs, the agency is soliciting comments. The notice said it decided comments are necessary "in light of public comments submitted in the four-year review."

In those comments, AdvaMed, the trade group that represents medical device companies, said that about 40% of all medical equipment or consumables imported from China owe Section 301 duties, with about $1.25 billion of the imports subject to a 25% tariff, and $1.25 billion subject to a 7.5% tariff.

The tariffs have not countered China's ambition to dominate in advanced medical equipment, the group said. It said that China is moving up the value chain in categories covered by Section 301, such as CT scans, MRIs, ventilators and cardiac pacemakers.

"We provide this analysis because we want USG officials to understand that we are not underestimating the competitiveness of the Chinese industry nor the potential threat posed by the power and resources of the Chinese government. Rather, we think the Section 301 tariffs have not been the most effective tool to meaningfully respond to these challenges and have had the unintended consequence of undermining U.S. competitiveness in our sector," AdvaMed said.

Medline, a medical equipment manufacturer and importer, said it was more expensive to move production to Southeast Asia, Mexico, Central America, the U.S. or Canada, and, for some products, it either couldn't source outside China, or it couldn't find enough supply outside China. Again and again, it wrote, "there is currently not enough international capacity available to move out of China."

"The focus of the evaluation will be on the availability of products covered by the exclusion from sources outside of China, efforts undertaken to source products covered by the exclusion from the United States or third countries, why additional time is needed, and on what timeline, if any, the sourcing of products covered by exclusion is likely to shift outside of China. In addition, USTR will consider whether extending the exclusion will affect U.S. interests, including the overall impact of the exclusion on the goal of obtaining the elimination of China’s acts, policies and practices covered in the Section 301 investigation," a pre-publication notice said.

The new comment period is Jan. 22 to Feb. 21. The portal to submit comments is here (and will not open until Jan. 22).

Americans for Free Trade said the continuance of the exclusions provides economic relief, but added: "However, we are frustrated that USTR announced this short-term extension with little notice, making it difficult for businesses to plan."

The trade group also said USTR should create a robust exclusion request process for all products covered by Section 301 tariffs. The group also complained the review that began in May 2022 of the overall program is taking too long.