Section 301 tariffs are unilateral trade measures imposed by the United States under Section 301 of the Trade Act of 1974. These tariffs are commonly referred to as “Section 301 tariffs” and are used to address what the U.S. government deems to be unfair trade practices by other countries.
In recent years, Section 301 tariffs have primarily targeted Chinese imports, becoming a key factor in the U.S.-China trade dispute.
What Is the Section 301 Tariff?
Section 301 of the U.S. Trade Act of 1974 authorizes the President to take action—such as imposing tariffs, restricting imports, or suspending trade agreement benefits—when a foreign government is found to have violated a trade agreement or engaged in practices that are deemed “unreasonable,” “unfair,” or “discriminatory,” and that burden U.S. commerce.
The current Section 301 tariffs on Chinese goods began in 2018 following an investigation by the Office of the U.S. Trade Representative (USTR). The investigation concluded that China had engaged in unfair trade practices related to intellectual property rights, forced technology transfers, and industrial policies that harmed U.S. businesses. As a result, the U.S. imposed several rounds of additional tariffs on Chinese-origin goods, with rates typically ranging from 7.5% to 25%—and in some cases, even higher.
It’s important to note that these tariffs are unilateral measures taken by the U.S. and were not resolved through the World Trade Organization’s (WTO) dispute settlement process. In response, China implemented its retaliatory tariffs on certain U.S. exports, escalating tensions between the two countries.
Potential Impact of Additional Tariffs Under Section 301
The Section 301 tariffs have had a wide-ranging impact on the Chinese and U.S. economies, as well as on broader global trade dynamics. Here’s how these tariffs are influencing different stakeholders:
Impact on Chinese Exporters
- Higher Export Costs: The added tariffs have increased the landed cost of Chinese goods in the U.S. market, making them less competitive compared to alternatives from other countries.
- Decline in U.S. Orders: To avoid higher costs, U.S. importers may shift their sourcing to other countries, leading to a reduction in demand for Chinese exports.
- Compressed Profit Margins: Many Chinese exporters are absorbing part of the tariff costs to remain price-competitive, which puts pressure on their profit margins.
- Supply Chain Diversification: In response to long-term tariff uncertainty, some companies have adopted a “China+1” strategy—relocating parts of their production or supply chain to other countries to mitigate risk.
Impact on U.S. Importers and Consumers
- Rising Import Costs: U.S. companies that import goods from China often bear the brunt of the tariffs, which can lead to increased operational costs.
- Increased Consumer Prices: These added costs are frequently passed on to end consumers, contributing to price inflation in various product categories.
- Reduced Product Availability: Certain goods may be withdrawn from the U.S. market due to cost increases, thereby limiting consumer options.
- Competitive Disadvantage: U.S. manufacturers that rely on Chinese components face rising input costs, which can erode their competitiveness in both domestic and international markets.
Impact on Global Supply Chains
- Restructuring of Global Supply Chains: Tariff pressures have prompted many multinational companies to reassess their global sourcing and manufacturing strategies, potentially leading to a more fragmented and regionally diverse supply chain network.
- Heightened Trade Tensions: Section 301 tariffs have intensified trade tensions between the U.S. and China, raising concerns about the stability and predictability of the multilateral trading system.
Impact on Strategic Industries
According to recent U.S. government announcements, Section 301 tariffs are being significantly increased on imports from key Chinese sectors deemed strategic, including:
- Electric vehicles (EVs)
- Lithium batteries
- Solar (photovoltaic) products
- Semiconductors
- Port cranes
- Medical supplies
In some cases, tariffs can rise as high as 100%, such as on electric vehicles (EVs). These measures are expected to dramatically reshape global trade dynamics in these industries, with potential ripple effects across supply chains and markets worldwide.
Which Products Are Subject to Additional Tariffs?
Since 2018, the Office of the United States Trade Representative (USTR) has implemented Section 301 tariffs on Chinese imports in four separate rounds, affecting goods valued at approximately $550 billion in total. These tariffs target a wide range of products across various industries:
Lists 1, 2, and 3
These lists primarily focus on industrial and manufacturing-related goods, including:
- Industrial machinery
- Electronic components
- Information and communication technology products
- Aerospace equipment
- Robotics
- Medical devices
- Chemicals
- Steel and aluminum products
Tariff rate: Typically 25%
List 4A
This list expands the tariffs to include various consumer goods, such as:
- Apparel and footwear
- Certain household electronics
- Consumer technology products
Initial tariff rate: 15%, later reduced to 7.5%
List 4B
This list was intended to cover a broader range of consumer products, but its implementation has been suspended, and the tariffs were never enforced.
New Enforcement of Planned Section 301 Entries in 2025
To review, the Section 301 review conducted in 2024 did announce several tariff increases that would be taking place starting January 1, 2025. These include the following:
- Semiconductors: tariff increased to 50% ad valorem
- Critical minerals to include tungsten: tariff now at 25% ad valorem
- Solar components to include wafers and polysilicon: tariff increased to 50% ad valorem
While the semiconductor increase was planned from the beginning, the addition of tungsten products, wafers, and polysilicon are recent changes. These were announced by the USTR in December 2024.
Which Products Are Not Subject to Additional Tariffs?
While the majority of Chinese goods exported to the United States are subject to Section 301 tariffs, some products are either exempt or not covered by the additional duties. Here’s what you need to know:
1. Products Not Listed Under Section 301 Tariffs
If your product is not included in any of the four Section 301 tariff lists—including the most recent updates—you are not required to pay the additional Section 301 tariffs.
2. Products That Have Received Exemptions
The U.S. Trade Representative (USTR) has granted tariff exclusions for specific products over time, and some of these have been extended. Common reasons for exemption include:
- Lack of domestic alternatives: The product is only available from China.
- Economic hardship: Imposing the tariff would cause significant economic harm to U.S. businesses or interests.
- Low strategic relevance: The item is not considered strategically substantial to either the U.S. or China.
Important: These exemptions are time-limited, and the USTR regularly reviews and updates the exemption list. Many early exemptions have expired, though some—especially medical supplies such as specific face masks—were extended during the COVID-19 pandemic.
3. Special Product Categories
Some goods may qualify for tariff relief under special conditions:
- Small parcel shipments: Previously, imports valued under $800 were exempt from duties under the “de minimis” rule.
- However, effective May 2, 2025, this exemption will no longer apply to imports from China and Hong Kong, and these shipments will now be subject to Section 301 tariffs.
- Goods under Free Trade Agreements (FTAs): Products eligible for preferential treatment under certain FTAs may still be subject to Section 301 tariffs, as these duties are typically imposed in addition to standard import tariffs.
How to avoid Section 301 tariffs
The imposition of such tariffs on Chinese products could impose a significant economic burden on importers, as their purpose is to make the cost of the products equal to or higher than that of domestic products.
Some tariffs imposed on China have already reached levels high enough to constitute product bans effectively. Considering tariff rates, non-tariff rates, and shipping costs, it is nearly impossible to profit from such products.
However, if the tariff increase is merely intended to raise costs to maintain a certain level of balance with domestic competitors, there is still hope. Either importers significantly reduce their profit margins or eventually raise product sales costs to offset the new costs.
Of course, you can choose to avoid tariffs altogether, but this is easier said than done. I will introduce various legal ways to circumvent tariffs or limit their impact on your business.
Foreign Trade Zones and Bonded Warehouses
Importers can utilize foreign trade zones (FTZs) or bonded warehouses to reduce the direct impact of tariffs. These locations are situated within the United States and can be used to store imported goods without paying tariffs.
Tariffs are only required when goods are transported out of the FTZ and into the domestic market. This strategy can offer significant benefits, especially for small businesses.
- Products can be gradually removed from the FTZ or warehouse to pay tariffs in installments.
- Raw materials can be manufactured into finished products for domestic retail or export to other countries.
- Products exported from an FTZ or bonded warehouse are exempt from tariffs as long as they are sold outside the United States.
This solution does have some drawbacks—for example, the cost of using these spaces. Additionally, you are not avoiding tariffs; instead, you are mitigating the overall impact of tariffs by paying them in installments when the goods are shipped to the domestic market.
If you are importing for re-export, then yes, you can avoid the entire 301 tariff.
Exclusion Request
Section 301 provides for tariff exemptions that can exempt or reduce the tariff rate you pay on specific products. To have your product considered for an exemption request, you should send the following information to the Office of the U.S. Trade Representative:
- Identify the exact product and provide a detailed description, including its weight, dimensions, composition, and color.
- Demonstrate how the product differs from other similar products listed.
- Include the complete 10-digit HTSUS code identifier.
- Provide detailed information on how Customs and Border Protection (CBP) will manage the exemption if granted.
- Include import frequency, quantity of goods, cost of purchasing/manufacturing the goods, and shipment value.
- Indicate whether the product is only available in China.
- Explain whether the tariff would cause severe economic harm to you or the general public in the United States.
- Demonstrate that the product is of significant importance to China’s industrial plans (e.g., the “Made in China 2025” plan).
Tariff exemptions may apply only to a single importer of a specific product, or the Office of the United States Trade Representative may choose to add it to a list of products from which any importer may benefit.
If granted, the product will be fully exempt from Section 301 tariffs. However, the exemption is only valid for one year after the ruling is published, after which tariffs will be reinstated.
If you have already imported and paid tariffs and then obtained an exemption, you may choose to request a refund.
Since the tariff increases took effect in 2018 and during the period of additional and modified tariff measures, the Office of the U.S. Trade Representative has been accepting exemption applications. Before exemption applications were made confidential, the U.S. Congressional Research Service (CRS) recorded over 53,000 applications. On average, only 13% of applications were approved.
The excluded products cover a limited number of products across all four lists, most of which have now expired.
According to the latest official review, out of the 352 exemptions originally set to expire, 164 have been extended until May 31, 2025. Anyone seeking an exemption must submit a separate application to the U.S. Trade Representative’s Office to be eligible for further extensions.
For specific information on which products are included in these exclusion lists, it is advisable to consult a professional customs broker familiar with the relevant Harmonized System (HS) codes.
Tariff Refunds
For some importers, another option is a tariff refund. If imported goods are exported or properly disposed of within three years, a refund may be claimed.
Imports of Section 301 goods are most likely to qualify for one of four versions of tariff refunds.
- Manufacturing Direct Identification: Materials enter the United States for manufacturing purposes and are then re-exported. Businesses may claim a refund of 99% of the duties paid.
- Manufacturing Replacement: This refers to imported products that are identical to domestic products and can be substituted for each other in the production of re-exported goods. As long as the final products are indistinguishable, businesses may apply for a 99% refund.
- Unused Goods Direct Identification: Unsold or unaltered goods may be returned to their foreign suppliers. The return period is three years, but a 99% refund is available. This policy also applies if the goods are destroyed before entering the domestic market.
- Replacement of unused goods: This rule is similar to manufacturing substitution, but it applies to imported finished goods. As long as they are entirely interchangeable, a tax refund can be used.
The most important documents required for applying for a tax refund are the export certificate, U.S. manufacturing records, and the specific tax refund being claimed.
Tariff classification review
If you believe your product falls within an exclusion or is one of the 4B list items that have never had tariffs increased, but you are still being charged, your product may have an incorrect HTS code.
If the product classification may be incorrect, you can submit a request for product reclassification to the U.S. Customs and Border Protection (CBP) or a qualified customs broker.
To submit a classification request, you must provide the CBP with specific information about the product:
- Detailed description
- Its components
- Its primary use in the United States
- Its generic, commercial, or technical name
- Drafts, sketches, or photographs
- Chemical analysis
- Laboratory reports
- What do you believe the HTSUS code should be, and why
- Any other information that may assist in classifying the item
Reclassification can be a hassle, but if you’re correct, you could save thousands of dollars in tariffs.
