Can EV Production Thrive Despite US “China Tariffs”? | Arent Fox - Market News
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Can EV Production Thrive Despite US “China Tariffs”? | Arent Fox

Can EV Production Thrive Despite US “China Tariffs”?  |  Arent Fox

Through Section 301, “China Tariffs”, the United States Trade Representative (USTR) imposes additional ad valorem tariffs between 7.5% and 25% on most products of Chinese origin, including lithium-ion batteries, battery cells, essential minerals , and various other inputs needed to produce electric vehicles.

Section 301 “China Tariffs”

  • Pursuant to findings under Section 301 of the Trade Act of 1974 (19 USC § 2411), USTR imposed additional duties on four tranches of products between June 20, 2018 and January 22, 2020.
  • Known as “List 1”, “List 2”, “List 3”, “List 4A” and “List 4B”, the tranches cover approximately $550 billion in annual imports from China.
    • Products on lists 1-3 are currently subject to an additional 25% tariff, including battery cells, battery storage components, most automotive parts (e.g. electric motors, transmission, bodywork, axle, suspension, steering and components), critical minerals (e.g. lithium, cadmium, cobalt, lead, mercury, zirconium, magnesium), and artificial graphite and the raw materials to produce it (eg pitch coke).
    • List 4A products are currently subject to an additional rate of 7.5%, including lithium-ion batteries, certain nickel-cadmium storage batteries, and certain used lead recovery batteries. Products under Schedule 4B are currently not subject to an additional tariff.
  • When the Section 301 rates were introduced, the USTR instituted a process to exclude certain products on Schedule 1 – Schedule 4A from their corresponding Section 301 rate. All product exclusions originally granted or extended have now expired; all products subject to the Chinese tariffs pay up to 25% additional tariffs.
  • Between October 12, 2021 and December 1, 2021, the USTR accepted comments to assess whether 549 product exclusions should be reinstated.

What to know

  • By December 1, 2021, more than 2,000 recovery notices have been filed with the USTR, including the following products that are currently subject to a 25% tariff: artificial graphite, lithium hydroxide production machinery, battery balancers, electric motors, electric work trucks, electric bicycles, and various inputs that affect the production of EVs (e.g. PCBs, brake system valves and sensors, junction boxes used for EV technologies along with other electrical components, rear-view mirrors and certain axles).
  • We expect USTR announcements as to whether these 549 product exclusions will be reinstated in early 2022. If a recovery is approved, importers can avoid up to 25% import duties and request refunds back to imports from October 12, 2021.
  • Battery cells, lithium-ion batteries, essential minerals for battery manufacturing and most automotive products were not eligible for this initial recovery process and remain subject to China’s tariffs.
  • For these other products that were not subject to the initial recovery process, it seems likely that there will be at least one other round of recovery in the coming year. Given the administration’s EV supply chain goals, exclusions for EV components can hold promise.
  • The results of the Section 301 Litigation on List 3 and List 4A products, expected by summer 2022, may also provide some relief.
  • This year we expect the Dutch DPA to decide whether they are proposed rule on certain origin provisions for products imported from Canada or Mexico. If final, the origin of products made in Canada or Mexico with Chinese components could change under tariff-based rules of origin, avoiding Chinese tariffs in some circumstances and negating the effect of the CBPs. Johnson Electric pronunciation.

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