Recent Updates on the China Tariff Exclusion Process

At a glance:

• The main takeaway: Recent tariff increases on certain Chinese exports aim to protect American workers and businesses.
• The impact on your business: Tariffs could increase the price of some imported machinery, but businesses have the opportunity to apply for exclusions to many of these tariffs.
• Next steps: Schedule a consultation with Aprio’s Tariffs and Customs specialists to evaluate and reduce the impact of trade restrictions on your company, as well as to navigate the exclusion process.

The full story

The U.S. Trade Representative (USTR) has opened a new window for companies importing industrial machinery from China to apply for exclusions from Section 301 tariffs. (Reminder: Section 301 tariffs are trade sanctions that the U.S. can impose on foreign countries that engage in unfair trade practices or violate trade agreements.) While certain solar-related manufacturing equipment recently received automatic exclusions, businesses importing other types of industrial machinery will need to submit their own requests through the USTR’s designated portal.

The public docket for submitting exclusion requests opened on October 15, and the deadline for submitting exclusion requests is March 31, 2025.

Background

The opportunity for businesses to seek tariff exclusions is the latest move in a larger strategy dating back several years.

• In 2017, USTR initiated an investigation into China’s policies and practices related to technology transfer, intellectual property, and innovation.
• In 2018, USTR published their findings, which deemed China’s trading practices unfair and burdensome on U.S. commerce.
• In 2022, USTR announced that certain tariffs would remain in effect. This announcement was accompanied by a plan to measure the overall economic effect of tariff actions.
• In May 2024, USTR released a report of their findings, concluding that additional action was warranted, including updated rates of duty for certain Chinese imports.

For more background information, see Tariffs & Import Sanctions: Retaliation Against China’s Unfair Trade Acts.

The exclusion process: requests and responses

The exclusion process applies to specific machinery and devices included in Chapters 84 and 85 of the Harmonized Tariff Schedule of the U.S. (HTSUS). The recently announced process offers companies the opportunity to potentially reduce or eliminate significant tariffs on essential equipment needed for their operations. The USTR aims to encourage the diversification of supply chains and lessen dependence on China for various products and machinery. While China has not eliminated many of its technology transfer-related acts and policies, which was part of the original impetus for the tariffs, the USTR anticipates that these exclusions will support domestic industries and mitigate the impact on U.S. businesses.

In addition to filing new exclusion requests, the USTR’s portal will also accept responses from interested parties. These responses, which can argue against the need for an exclusion in the case of a domestic manufacturer being able to provide the equipment, must be submitted within 30 days of the original request being published. Importers – the businesses filing the original exclusion request – will then have the option to rebut any comments made within the following 15 to 45 days, depending on the timing of the response.

If an exclusion is granted, the relief from Section 301 tariffs will take effect immediately upon public announcement and will last until May 31, 2025. Companies are encouraged to act quickly to take advantage of this opportunity to reduce their import costs for essential machinery and other equipment.

Who should submit exclusion requests?

The China tariffs apply only to Chinese-origin products which are substantially transformed in China. Businesses that should explore exclusion requests include those importing any of the following Chinese-origin products:

• furnaces to melt ore;
• dryers for wood or paper pulp;
• hydraulic presses;
• offshore oil and natural gas drilling and production platforms;
• machinery for liquefying air or gas;
• pile-drivers and pile-extractors;
• textile calendaring or rolling machines;
• industrial robots; and
• machinery for filling, sealing, or labeling bottles or other containers.

For a comprehensive list of eligible tariff codes and product descriptions, see Federal Register from September 18, 2024.

What solar-related manufacturing equipment receives automatic exclusions?

Key items receiving automatic exclusions include the following:

• screen printing line machines, such as sintering furnaces for printing conducting contacts on solar wafers;
• polysilicon production equipment; and
• automation equipment that automates the transfer of solar wafers during the manufacturing process.

Solar cell and solar wafer making equipment exclusions are retroactive to Jan. 1, 2024, and last until May 31, 2025. However, some types of solar module making equipment were removed from the exclusions list, meaning that the following do not qualify for an automatic exclusion: frame attachment machines, cell soldering machines, and machines that handle modules during assembly.

The bottom line

The back-and-forth nature of Section 301 activity and related notices means that some companies may be experiencing understandable confusion about how best to navigate the changes and the exclusion request process. Consulting with a professional advisory service can clear up the confusion. Aprio’s experienced customs and tariffs team can assist with eligibility assessments, verifying HTSUS tariff codes, and preparing and filing exclusion requests or comments. Our services help ensure accuracy and compliance to improve your chances of securing tariff relief and minimizing the impact on your business operations. If your company does not qualify for an exclusion, you may have other options for reducing the burden of the tariffs.