Higher Tariffs on Tungsten and Silicon Products: What You Need to Know

The United States Trade Representative (USTR) has announced plans to increase tariffs on tungsten and silicon products, with the intent of applying more pressure on Chinese imports. These changes target three subheadings related to tungsten, where tariffs will rise to 25%, and two subheadings for wafers and polysilicon, where tariffs will jump to 50%.

These materials are essential for industries like electronics and manufacturing, making this tariff hike a significant development for companies relying on imports of these products. 

The Subheadings in Focus

The five specific HTS numbers proposed for tariff increases include:

• 8101.99.10: Tungsten bars, rods, profiles, plates, sheets, strips, and foil.
• 8101.99.80: Other tungsten articles.
• 2804.61.00: Silicon with at least 99.99% purity.
• 3818.00.00: Chemical elements doped for electronics use, such as wafers.

These increases are intended to put further pressure on Chinese imports, reflecting ongoing tensions over trade policies and national security concerns.

But these tariff increases, especially under Section 301, are more than just numbers on a balance sheet – they have far-reaching implications, touching on export controls, US-Taiwan relations, and national security.

Taiwan’s Role in the Semiconductor Race

Taiwan plays a key role in the global semiconductor industry. Many of the high-functionality chips essential for defense technology are produced in Taiwan, and though China is working to scale up its production, it still relies heavily on Taiwanese semiconductors. 

The US enforces strict export controls on technology that uses US blueprints or specifications, meaning these chips cannot be exported to China. This is where the US policy of “strategic ambiguity” around Taiwan’s status becomes crucial.

Taiwan’s semiconductors are vital to US national defense, and the US actively supports Taiwan through arms sales while maintaining an embargo on similar sales to China. This fine balance allows the US to support Taiwan while maintaining complex diplomatic relations with China.

Country of Origin: Navigating Strategic Ambiguity

One of the more nuanced challenges in US-China-Taiwan relations lies in the country-of-origin declarations. While Taiwan produces key components like semiconductors, products from Taiwan are often marked as originating from “Taiwan, Republic of China.” This labeling helps maintain diplomatic relations with China, which insists on Taiwan being recognized as part of its territory.

Further complicating the strategic ambiguity, when goods are imported into the US, a two-digit ISO code is required to report the country of origin of these imported goods.  Goods from China have a two-digit ISO code of CN; goods from “Taiwan, Republic of China” have an ISO code of TW.  So, not China.

For US importers, this ambiguity can lead to compliance complexities. Ensuring that products are correctly labeled while adhering to the nuanced geopolitical status of Taiwan is essential for businesses to avoid trade disruptions and penalties.

The Foreign Direct Product Rule (FDPR) and Reshoring Efforts

A critical tool in the U.S. trade arsenal is the Foreign Direct Product Rule, which governs products that are made using U.S. technology, even if they are manufactured outside the U.S.

In this sense, “technology” means blueprints, drawings, formulae, manufacturing know-how, etc. It does not mean computers, servers, routers, or hardware associated with information technology (IT).

For example, if Taiwan uses US-origin technology to manufacture semiconductors, the US government can still control where these products are sold. The FDPR has been leveraged to prevent Chinese tech companies from accessing chips made with US technology, even when they are manufactured abroad.  This is what is meant when we refer to our export control regulations as extraterritorial.

The recent tariff increases on tungsten and silicon products fit into a larger US strategy to reshore chip production and reduce reliance on foreign semiconductor manufacturers. As the US seeks to bring more of this critical manufacturing back onshore, businesses in industries that rely heavily on imported raw materials and semi-finished goods must adapt to these changes.

The Complex Trade Landscape

The recent tariff increases on tungsten and silicon products underscore the broader strategic and economic challenges in global trade, particularly as it relates to Taiwan, China, and the United States. 

For businesses, this means staying informed and compliant with evolving trade regulations, export controls, and country-of-origin requirements. The stakes are high, and the landscape is changing rapidly. Now is the time for businesses to assess the potential impacts on their supply chains and seek alternative strategies to navigate these challenges effectively.

With the USTR opening a portal for comments on these proposed tariff increases, it’s crucial for affected industries to voice their perspectives before the changes take effect.