Changes Coming in 2022 to Section 301, Section 201, and AD/CVD Regulations

On January 20, 2022, a coalition of 140 bipartisan U.S. lawmakers sent a letter to the Ambassador of the Office of U.S. Trade Representative, Katherine Tai, requesting immediate approval and implementation of Section 301 exemptions. The lawmakers claimed that failure to do so would irreparably harm US businesses in multiple industries, and further argued that the list of categories currently under consideration for exemptions– 549 items, or 1% of the original exclusion list– is too narrow, and called for a vast expansion.

The Section 301 tariffs were overhauled by the Trump Administration in 2018, and affected nearly $350 billion worth of Chinese goods, including solar panels, household appliances, steel imports, and certain medical devices. China then imposed retaliatory duties on U.S. farm exports, which cost the agricultural sector $27 billion in lost exports between 2018 and 2019 according to the USDA’s Economic Research Service.

In January of 2020, the Trump administration negotiated a Phase 1 agreement with China, wherein China committed to purchasing an additional $200 billion worth of US goods over the two-year period of 2020 - 2021. As of January 2022, however, China has not come close to that number, with purchases amounting to just $124 billion. This has led to a chorus of criticism and may give the Biden administration pause in lifting the tariffs, yet the desire to punish China for its non-adherence to Phase 1 terms are firmly at odds with the need to reduce the current duties for U.S. businesses.

On October 4, 2021, the possible reinstatement of exemptions from tariffs related to Section 301 on Chinese imports was announced by the USTR. Industry officials anticipate that some exemptions will be reenacted, however many argue that the scope of products being considered is too restrictive. Currently, the USTR is reviewing for 80 exclusions for possible reinstatement; notably, these exclusions also appeared on the COVID-19 USTR extension docket, as they were identified as products needed to combat COVID-19. As of now, the exclusions for these products are set to expire on May 31, 2022.

In addition to the review of Section 301, the US Department of Commerce finalized a serious revamp of antidumping and countervailing duty (AD/CVD) rules on September 20, 2021, which were the most consequential change to these regulations since 2001. The purpose of this overhaul is to improve the Customs and Border Patrol’s ability to identify tariff evasions and supplement their enforcement response. Some of the new rules include procedural changes to shipper reviews, enhancements on USDC’s authority to require certifications by importers, and revisions to procedures for filing importer reimbursement certifications.

Additionally, an investigation is underway to determine if crystalline silicon photovoltaic cells assembled in Malaysia, Thailand, Vietnam and Cambodia are dodging AD/CVD rules. These cells are commonly used in solar panels, and while the assemblies are occurring wholly within these four countries, they are using components originally from China. If it is determined that a violation has occurred, future AD/CVD tariffs on these cells may materialize.

Section 201 duties have also been the subject of policy changes– on February 4 2022, the Biden administration extended the Section 201 duties for solar panels. The requirements for these panels were eased significantly, however– the new import allowance is 5 gigawatts per year, which is far more than what is typically imported in a calendar year. The administration also excluded bifacial solar panels, which generate electricity on both sides and are usually found in large utility-scale projects. The original tariffs were devised to promote domestic solar panel production, however U.S. manufacturers maintained that their locally-produced products were unable to match the standards of foreign-made panels, including those from China.

Trade experts predict that instead of taking a firm stance on either side, the Biden administration is most likely to reopen talks with China in 2022 to address their inadequate Phase 1 performance, as well as tentatively discuss a Phase 2 option that may eventually give some tariff relief, but only on a limited basis. Potential obstacles that could implode such negotiations are the Biden administration’s Xinjiang forced labor allegations, tensions over Taiwan’s status, and diplomacy concerns related to the 2022 Beijing Winter Olympics.

How Allyn Can Help

At Allyn we have the experience, systems, and best practices in place to help guide clients through developments regarding the Section 301 tariffs, AD/CVD rules, and Section 201 duties. If your business has been affected by these duties, Allyn International is able to provide effective guidance to help minimize costs and traverse any new progressions involving U.S. - China relations and regulations. If interested, please contact us at trade@allynintl.com.

Contributors: Jennifer Nowicki

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About Allyn International

Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China, Prague, Czech Republic, and Dubai, U.A.E. For more information, visit www.allynintl.com.