Biden Administration To Increase Tariffs On Chinese Goods Including Those Related To The Clean Energy Sector

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The Biden administration is planning on increasing tariffs on a variety of goods from China including semiconductors, electric vehicles, lithium-ion batteries, critical minerals, and certain medical products.
United States International Law
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Key Takeaways:

  • The Biden administration is planning on increasing tariffs on a variety of goods from China including semiconductors, electric vehicles, lithium-ion batteries, critical minerals, and certain medical products. The tariff rate on solar cells is set to increase from 25% to 50% in 2024.
  • The new tariff plan includes the removal of the tariff exclusion for bifacial solar panels under Section 201 of the Trade Act of 1974.
  • The temporary duty-free importation of solar cells and modules from Southeast Asia is ending on June 6, 2024.
  • The administration is planning to target producers from Southeast Asia that have allegedly been circumventing antidumping and countervailing duties on solar manufacturers from China.

Background

On May 14, 2024, President Biden announced that he is directing his Trade Representative to increase tariffs under Section 301 of the Trade Act of 1974 on a wide range of Chinese goods, which will significantly impact U.S. businesses in the clean energy sector. These tariff hikes are in concurrence with the completion of the Section 301 review by the Office of the U.S. Trade Representative (USTR), which was published on May 14, 2024. Among the impacted goods are solar cells, semiconductors, electric vehicles, batteries, and critical minerals. The new tariffs are set to take effect between 2024 and 2026 and target $18 billion of imports from China with the stated aim of protecting American workers and businesses from China's anticompetitive subsidization and trade practices.

On May 16, 2024, the White House issued a fact sheet clarifying the administration's intended approach toward tariff rates on solar cells and modules. The tariff rate on solar cells and modules from China will double from 25% to 50%.

Removal of the Bifacial Module Exclusion Under Section 201

Bifacial solar panels, generally used in utility-scale solar projects, have been excluded from tariffs under Section 201 of the Trade Act of 1974. The Biden administration announced that it is planning to remove the bifacial solar panels exclusion to protect U.S. solar manufacturers from unfair imports. Importers with pre-existing contracts for bifacial solar modules to be delivered within 90 days of the removal of the exclusion will be able to certify those contracts and continue using the exclusion for that period. The administration did not provide additional information on the certification process. This change will have a significant impact on the market since imports of bifacial panels from China make up nearly all U.S. solar panel imports.

Ending the Temporary Solar Bridge and Cracking Down on Stockpiling

In June 2022, President Biden initiated a temporary, 24-month bridge to allow duty-free imports of solar modules and cells from Cambodia, Malaysia, Thailand, and Vietnam to ensure that the U.S. has access to a sufficient supply of solar modules and cells while domestic manufacturers scale up production. Those countries benefited from duty-free status on imports of solar modules and cells. This temporary bridge is now scheduled to end on June 6, 2024. The White House has announced that U.S. solar manufacturing and deployment have both grown dramatically. The administration further announced that it is aware that producers from Southeast Asia have been circumventing antidumping and countervailing duties on solar manufacturers from China, and that manufacturers engaged in such practices will be subject to the same 50% tariffs as applied to solar panels coming from China.

To combat stockpiling as the solar bridge approaches its end, the Department of Commerce requires that panels imported duty-free must be installed within 180 days. In its May 16, 2024 fact sheet, the administration announced that Customs and Border Protection (CBP) will strictly enforce this provision. Importers are required to provide CBP with a certification of solar module utilization, including detailed information about the modules being deployed. For example, a solar panel imported from Cambodia on June 5, 2024, must be installed on or before December 2, 2024.

Tariff Increases

The proposed tariff hikes are not limited to solar cells. A range of other goods, many related to the clean energy sector, are also impacted by these hikes. Below is a table outlining the expected tariff increases on the different types of impacted goods.

Product Tariff Rate Increase Timing of Increase
Electric Vehicles (EVs) Increase from 25% to 100% 2024
Battery Parts Increase from 7.5% to 25% 2024
Lithium-ion Non-EV Batteries Increase from 7.5% to 25% 2026
Lithium-ion EV Batteries Increase from 7.5% to 25% 2024
Natural Graphite and Permanent Magnets Increase from 0% to 25% 2026
Certain Other Critical Minerals Increase from 0% to 25% 2024
Solar Cells (whether or not assembled into modules) Increase from 25% to 50% 2024
Semiconductors Increase from 25% to 50% 2025
Steel and Aluminum Increase from 0–7.5% to 25% 2024
Ship-to-Shore Cranes Increase from 0% to 25% 2024
Syringes and Needles Increase from 0% to 50% 2024
Certain Personal Protective Equipment (PPE), Including Certain Respirators and Face Masks Increase from 0–7.5% to 25% 2024
Rubber Medical and Surgical Gloves Increase from 7.5% to 25% 2026


Tariff Exclusions for Certain Solar Manufacturing Equipment

In its report, the USTR proposed establishing a tariff exclusion process targeting machinery used in domestic manufacturing. This includes a proposal for 19 new temporary tariff exclusions for certain solar manufacturing equipment, with the aim of supporting investment in U.S. solar manufacturing. Below is a list of the solar manufacturing equipment included in the exclusion proposal.

Exclusion Product Description
Silicon growth furnaces, including Czochralski crystal growth furnaces, designed for growing monocrystalline silicon ingots (boules) of a mass exceeding 700 kg, for use in solar wafer manufacturing (described in statistical reporting number 8486.10.0000).
Band saws designed for cutting or slicing cylindrical monocrystalline silicon ingots (boules) of a mass exceeding 700 kg into square or rectangular ingots (boules), for use in solar wafer manufacturing (described in statistical reporting number 8486.10.0000).
Machines designed to align and adhere monocrystalline silicon ingots (boules) of a mass exceeding 400 kg to plastic support boards on metal mounting plates to provide support during diamond wire sawing, for use in solar wafer manufacturing (described in statistical reporting number 8486.10.0000).
Diamond wire saws designed for cutting or slicing silicon ingots (boules) of a mass exceeding 400 kg into solar wafers of a thickness not exceeding 200 micrometers (described in statistical reporting number 8486.10.0000).
Wire guide roller machines, presented with diamond wire saws designed for slicing monocrystalline silicon ingots (boules) of a mass exceeding 400 kg into solar wafers of a thickness not exceeding 200 micrometers, all of the foregoing for use in solar wafer manufacturing (described in statistical reporting number 8486.10.0000).
Coolant fluid recycling machines, presented with diamond wire saws designed for slicing monocrystalline silicon ingots (boules) of a mass exceeding 400 kg into solar wafers of a thickness not exceeding 200 micrometers, all of the foregoing for use in solar wafer manufacturing (described in statistical reporting number 8486.10.0000).
Degumming machines designed to remove adhesives from solar wafers (described in statistical reporting number 8486.10.0000).
Texturing and cleaning machines designed to repair, clean, and texture the solar wafer substrate, whether or not containing automation equipment for transferring solar wafers from one process station to the next, for use in solar wafer manufacturing (described in statistical reporting number 8486.20.0000).
Thermal diffusion quartz-tube furnaces and boat loading machines, designed to diffuse dopant impurities into square or rectangular silicon wafers, for use in solar cell manufacturing (described in statistical reporting number 8486.20.0000).
Plasma enhanced chemical vapor deposition machines designed to deposit amorphous or nanocrystalline layers on one or both surfaces of a solar wafer, whether or not containing automation equipment for transferring solar wafers from one process station to the next, for use in solar cell manufacturing (described in statistical reporting number 8486.20.0000).
Physical vapor deposition (PVD) machines, designed to deposit a thin film of transparent conducting oxide on one or both surfaces of a solar wafer, whether or not containing automation equipment for transferring solar wafers from one process station to the next, for use in solar cell manufacturing (described in statistical reporting number 8486.20.0000).
Screen printing line machines, including sintering furnaces for printing conducting contacts on both surfaces of a solar wafer, whether or not containing automation equipment for transferring solar wafers from one process station to the next, and whether or not containing equipment for solar cell testing, for use in solar cell manufacturing (described in statistical reporting number 8486.20.0000).
Cell interconnection machines designed to electrically solder solar cells to each other to form a complete electrical circuit, for use in solar module manufacturing (described in statistical reporting number 8486.20.0000).
Module encapsulant preparation machines designed for encapsulant cutting and placement, butyl dispensing equipment, and equipment for the transport of encapsulant materials, all the foregoing for use in solar module manufacturing (described in statistical reporting number 8486.20.0000).
Machines designed to laminate an interconnected cell string and to attach junction boxes, all the foregoing for use in solar module manufacturing (described in statistical reporting number 8486.20.0000).
Frame attachment machines designed for attaching metal frames to the perimeter or rear surface of solar modules (described in statistical reporting number 8486.20.0000).
Machines designed for transporting polysilicon material to growth furnaces and machines designed for transporting monocrystalline ingots (boules) and wafers throughout the solar wafer manufacturing process, including machines for loading or unloading solar wafers during the diamond wire slicing process (described in statistical reporting number 8486.40.0030).
Machines designed for lifting, handling, loading, or unloading of solar wafers of a thickness not exceeding 200 micrometers, for use in solar wafer manufacturing (described in statistical reporting number 8486.40.0030).
Machines designed for lifting, handling, loading, or unloading in the assembly of solar modules (described in statistical reporting number 8486.40.0030).


Next Steps

The final details about the dates on which the proposed tariffs will take effect are not yet available. Additionally, administration officials have not provided further details about the proposed exclusions. However, USTR will issue a Federal Register notice announcing procedures for interested persons to comment on the proposed modifications and information concerning an exclusion process for machinery used in domestic manufacturing.

Foley Hoag will provide additional updates as more information becomes available and can assist in effectively submitting comments to the USTR on the proposed modifications once a Federal Register notice is issued.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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