If you were holding out hope that the Biden administration was going to dismantle the Section 301 tariffs on Chinese chemicals this year, USTR just handed you the answer. The Phase One interim assessment released in mid-April 2021 shows China at roughly 58% of its manufactured-goods purchase commitments for 2020, and tracking well below the 2021 targets through Q1. That single number, 58%, tells you everything about what’s coming next on your MDI, TDI, epoxy, specialty amine, and polyether polyol landed cost calculations.
The Phase One deal Robert Lighthizer signed in January 2020 committed China to $77.7 billion of additional manufactured-goods purchases in 2020 on top of a 2017 baseline, rising to $123.3 billion by end of 2021. China bought roughly $57 billion of the 2020 target. That’s the miss. And while a large chunk of that shortfall was COVID related, USTR under Katherine Tai isn’t treating COVID as a free pass.
You’ve been paying 25% on most Chapter 29 and Chapter 39 HTS codes since September 2018 on List 3, and 7.5% on List 4A since February 2020. Most of the product-specific exclusions expired on 31 December 2020. Tai’s office just confirmed, in effect, that the architecture isn’t coming down any time soon. Plan your 2021 and 2022 buying around that fact.
Why the 58% Number Means Your MDI FOB Lockout Is Locked In Through 2022
Section 301 relief was never going to be a gift. It was always going to be contingent on China hitting its Phase One purchasing commitments, showing structural progress on IP enforcement, and demonstrating market access for US manufacturers, agriculture, and services. One out of three doesn’t cut it, and China is arguably at zero out of three once you read the fine print on tech transfer.
The 58% figure matters because it’s the piece Tai’s team can point to publicly without getting into the classified intelligence or the messy IP enforcement arguments. It’s a simple ratio. China committed to a number. China delivered roughly 58% of that number. Until China closes the gap, Section 301 stays on the table as leverage.
For your chemical buying programme, that means the List 3 25% tariff on most Chapter 29 organic chemicals, Chapter 38 miscellaneous chemical products, and Chapter 39 polymers stays in place. The List 4A 7.5% on most remaining chemical HTS codes stays in place. The product-specific exclusion process, which briefly gave a small number of importers temporary relief on specific HTS subheadings between 2019 and 2020, is not being revived in any meaningful way for chemicals in 2021.
The HTS Codes That Actually Matter to Your Invoice
You need to know which list your products sit on because the rate determines everything downstream on your landed cost. Here’s the quick reference for the chemicals we see cross our desks most often.
| HTS Code | Product Description | Section 301 List | Current Rate | Effective Since |
|---|---|---|---|---|
| 2929.10.80 | Isocyanates (MDI, TDI) | List 3 | 25% | 24 Sep 2018 |
| 2910.30.00 | Epichlorohydrin | List 3 | 25% | 24 Sep 2018 |
| 3907.30.00 | Epoxy resins | List 3 | 25% | 24 Sep 2018 |
| 2921.22.50 | Hexamethylenediamine | List 3 | 25% | 24 Sep 2018 |
| 3907.20.00 | Polyether polyols | List 3 | 25% | 24 Sep 2018 |
| 3901.10.10 | LDPE, specific gravity under 0.94 | List 4A | 7.5% | 14 Feb 2020 |
| 3902.10.00 | Polypropylene primary form | List 4A | 7.5% | 14 Feb 2020 |
| 2905.31.00 | Ethylene glycol | List 4A | 7.5% | 14 Feb 2020 |
| 3903.19.00 | Polystyrene, other | List 4A | 7.5% | 14 Feb 2020 |
| 2915.70.01 | Stearic acid and salts | List 4A | 7.5% | 14 Feb 2020 |
If your customs broker is not classifying to the full 10-digit HTS on every chemical entry, you’re inviting a CBP challenge and potentially misapplied duties. The difference between a List 3 classification at 25% and a correctly classified List 4A product at 7.5% is 17.5 percentage points of landed cost. On a 20-MT ISO tank of a product with $40,000 of dutiable value, that’s $7,000 per tank in avoidable duty if the classification is wrong in one direction, or $7,000 of CBP exposure in the other direction. Get it right the first time.
What Happened to the Exclusion Process and Why It’s Not Coming Back
The product-specific exclusion process was always a safety valve, not a permanent feature. Under Lighthizer, USTR accepted exclusion requests through most of 2019 and into early 2020, granted a small percentage on narrow product descriptions, and extended a few of them into 2020. The vast majority of chemical exclusions expired on 31 December 2020. A handful were extended to 31 March 2021. Almost all of those have now sunset as well.
In April 2021, Tai signalled that USTR would conduct a comprehensive review of the Section 301 programme, but she did not commit to restarting the exclusion process. What she did commit to, in her early testimony, is using tariffs as leverage and maintaining them until China demonstrates compliance. Read that signal carefully. The exclusion process is not coming back in its previous form. If you’ve been assuming you can apply for an exclusion and get your 25% rate knocked back to zero on a specific HTS code, that assumption is wrong for 2021 and almost certainly wrong for 2022.
The practical consequence is that your buying strategy needs to assume the 25% rate on List 3 chemicals and the 7.5% on List 4A chemicals is a fixed cost for at least the next 18 to 24 months. Building a pricing model that assumes relief in Q3 or Q4 2021 is financial planning based on a scenario that isn’t going to happen.
Landed Cost on an MDI Shipment With the 25% Still Baked In
Let’s run the actual maths on a typical shipment so you can see what the 58% report really means for a chemical importer. Assume a 20-MT ISO tank of polymeric MDI from Wanhua at a Q2 2021 FOB Shanghai price of $2,100 per MT. Freight rates in April 2021 are running hot but not yet at the July blowout levels, so figure $200 per MT for ocean freight to the US Gulf.
| Cost Component | Per MT | Per 20-MT ISO Tank |
|---|---|---|
| FOB Shanghai, Wanhua polymeric MDI | $2,100 | $42,000 |
| Ocean freight to US Gulf Coast | $200 | $4,000 |
| Section 301 List 3 duty at 25% of customs value | $525 | $10,500 |
| MPF and HMF | $10 | $200 |
| Customs brokerage and port handling | $45 | $900 |
| Inland trucking to plant | $60 | $1,200 |
| Total landed cost | $2,940 | $58,800 |
The $525 per MT in Section 301 duty is the line you would have hoped to strike off. After the 58% report, you’re not striking it off. It’s baked into every tank you bring in for the next two years. On annual volume of 2,000 MT, that’s $1.05 million per year of pure tariff cost that isn’t going anywhere.
The counterfactual is worth sitting with. If the exclusion process had been revived and this HTS subheading got relief, you’d be at $2,415 per MT landed instead of $2,940. That’s a 17.8% improvement on your landed cost. That scenario isn’t happening. Build your 2021 customer pricing, your 2022 contract negotiations, and your volume commitments around the $2,940 number, not the $2,415 number.
What Katherine Tai’s Early Signals Tell You About 2022
Tai is not Lighthizer. She comes from a congressional background, she’s been explicit that she views labour standards and environmental provisions as core trade policy, and she’s publicly aligned with the Biden administration’s framing of China as a strategic competitor that needs to be managed, not accommodated. Chemical imports don’t have a natural constituency in her priority list. Steel, aluminium, EV batteries, semiconductors, and critical minerals are where her office spends its political capital.
What that means in practice is that chemical importers should not expect any product-specific advocacy from Tai’s office. If you want relief, you’ll need to organise industry-wide through trade associations, build coalitions with downstream US manufacturers who depend on your imported chemicals, and make the domestic-supply-security case rather than the cost-of-doing-business case. The cost argument is not going to move the needle in 2021 or 2022.
The realistic near-term ask is a narrow, structural exclusion process for chemicals where domestic US capacity genuinely does not exist: specific specialty intermediates, pharmaceutical precursors with single-source Chinese production, and a handful of specialty amine and fluorochemical products. Even that is an 18 to 24 month advocacy effort. Nothing is coming in the next two quarters.
The Two Things Worth Doing Before 30 June 2021
First, audit every chemical entry you’ve filed in the last 18 months and confirm the HTS classification. If you’re paying 25% on something that should be classified to a List 4A line at 7.5%, or to a line with no Section 301 tariff at all, that’s money you can get back through a protest or a post-entry adjustment within the CBP window. We’ve seen six-figure recoveries on misclassified polyols and specialty intermediates. If you’re paying 7.5% on something that should be 25%, you’ve got disclosure exposure and it’s better to surface it now than have CBP find it in an audit.
Second, run the landed cost calculation on your top ten chemicals, with the full Section 301 duty locked in through end of 2022, and use that number for your customer pricing conversations this quarter. The 58% report eliminates the scenario where tariffs come off and you pass savings downstream. Price for reality. If your downstream customers want to push back on the tariff pass-through, point them at the USTR Phase One interim report dated April 2021 and the simple ratio embedded in it. China at 58% of target, US chemical tariffs at 25%, everyone’s landed cost structure stays where it is, and that’s the playing field through the next Congress.