On 1 February, Executive Order 14195 invoked the International Emergency Economic Powers Act and imposed a 10 per cent ad valorem tariff on all Chinese-origin imports, effective 12:01 am Eastern on 4 February. The legal hook was the fentanyl precursor crisis. The operational reach was every HS code with a Chinese country of origin, stacked on top of every existing Section 301 duty and AD/CVD order already in force. Within 18 hours of the White House signing ceremony, China’s Ministry of Commerce issued Announcement No. 10, adding tungsten, tellurium, bismuth, molybdenum, and indium-related items to the export licence control list. The paperwork on those five elements now requires a dual-use item export licence through MOFCOM, with processing windows that historically run 45 to 90 days.
If you import any specialty chemical that uses any of those five elements as a precursor, a catalyst, or a functional additive, your Q2 book just got rewritten. And if you import anything else from China, your landed cost just went up 10 per cent, period. For most Sourzi clients, both apply.
The stacking is the piece your broker will walk through with you if you ask the right questions. A polymeric MDI entry that was paying 25 per cent Section 301 List 3 on FOB plus freight is now paying 25 plus 10 per cent additive. A tungsten carbide tool insert entry that was paying 25 per cent Section 301 List 3 is now paying 25 plus 10 per cent and requires MOFCOM licence documentation at origin before the container loads. A bismuth compound used in brass plumbing alloy, previously duty-free under HS 2813.90 for certain grades, is now paying 10 per cent IEEPA and waiting on licence approval. That’s not a tariff problem. It’s a three-variable problem, and the three variables are duty rate, licence processing time, and price uplift from supplier renegotiation.
What EO 14195 Actually Says and Where the Carve-Outs Live
The executive order is short, maybe five pages of operative text. Section 2 imposes the duty. Section 3 authorises CBP to collect. Section 4 is the on-water exemption that saved January’s front-loaders. Section 5 kills the de minimis exemption under 19 USC 1321 for Chinese-origin shipments, which is the bomb that went off under every e-commerce direct-ship business model using postal and express channels. Section 6 is the retaliation escalation clause, giving the President discretion to raise the duty if China takes “significant retaliatory measures”.
The key operational piece for chemical importers is that the IEEPA duty applies to every Chinese-origin article without regard to the HS code. There’s no product carve-out. There’s no “essential industrial inputs” list. There’s no humanitarian exemption. If it’s made in China, it pays 10 per cent, full stop. USTR and Commerce had been rumoured to be preparing a narrow exclusion process in the transition period, but as of 14 February, no exclusion mechanism has been published. The assumption in the broker community is that an exclusion process, if one arrives at all, won’t be operational before Q3.
Section 5 on de minimis changed overnight the economics of a chunk of specialty chemical shipments. Historically, low-value shipments under 800 USD per consignee per day could enter duty-free under Section 321. That mattered for specialty chemical samples, pilot-scale batches, and analytical standards moving through FedEx and UPS. EO 14195 Section 5 eliminated that exemption for Chinese-origin goods. A 500 USD analytical reference from Shanghai to your Houston lab now requires a formal entry, classification, duty calc, and broker filing. Three Sourzi clients got stuck at Memphis and Louisville hubs in the first week of February because their forwarder’s de minimis process hadn’t been updated.
MOFCOM Announcement No. 10 and the Licence Regime You Now Deal With
The Chinese response came the same day. MOFCOM Announcement No. 10 of 2025 added tungsten, tellurium, bismuth, molybdenum, and indium, along with their related derivative items, to the export control list under China’s Export Control Law and the Dual-Use Items Export Control Regulations. The specific HS coverage pulls in a wide net.
| Element | Key HS codes affected | Typical US end-uses | Licence status before | Licence status after |
|---|---|---|---|---|
| Tungsten | 2841.80, 8101.xx, 2846.90 | Tool steel, cemented carbide, aerospace alloy | General export, no licence | Dual-use licence required |
| Tellurium | 2804.50, 2843.30 | CdTe solar cells, free-machining steel, thermoelectrics | General export | Dual-use licence required |
| Bismuth | 2813.90, 8106.00, 2841.90 | Lead-free plumbing alloy, pharmaceutical, pigments | General export | Dual-use licence required |
| Molybdenum | 2841.70, 8102.xx | Stainless steel, catalyst, lubricant additive | General export | Dual-use licence required |
| Indium | 2846.90, 8112.92, 2825.90 | ITO glass coatings, solders, semiconductors | Partial controls existed | Expanded dual-use licence |
Processing through MOFCOM’s dual-use licence system is not a rubber stamp. The ministry requires end-use certification, end-user identification, and in most cases an end-use assurance statement from the purchasing party. Historical approval rates on established export relationships for non-sensitive end uses run above 90 per cent, but the clock is the killer. Published MOFCOM guidance indicates a 45 business day standard processing window. In practice, first-time applicants for newly listed materials have historically waited 60 to 90 calendar days for initial licences, then 30 to 45 days for subsequent consignments.
If your tungsten carbide supplier in Ganzhou, Jiangxi didn’t have an export licence filing on 4 February, the next container in your book is, realistically, not shipping before late March or early April. If your bismuth oxide supplier in Hunan needs the licence refreshed because your consignee address changed, you’re looking at mid-to-late March. Factor that into your Q2 demand plan today, not when the PO is overdue.
The Stacked Landed Cost Maths That Runs Your Q2
Here’s the real-numbers walk-through on three representative chemical inputs, one broad commodity, one MOFCOM-controlled specialty, and one mid-volume performance input. These are the calculations you should be running across your book this week.
Polymeric MDI (HS 3909.31), 40 MT parcel, Houston landed. Pre-4 February baseline: FOB Ningbo 1,720 USD/MT plus freight 135 USD/MT plus insurance 38 USD/MT equals 1,893 USD/MT duty base. Section 301 List 3 at 25 per cent is 473 USD/MT. MPF and HMF at 11 USD/MT. Broker and drayage 52 USD/MT. Pre-tariff landed cost 2,429 USD/MT.
Post-4 February: same FOB, freight, insurance stays 1,893 USD/MT base. Section 301 at 25 per cent stays 473 USD/MT. IEEPA at 10 per cent on 1,893 base is 189 USD/MT. MPF and HMF recalculate to 12 USD/MT. Broker and drayage hold 52 USD/MT. Post-tariff landed cost 2,619 USD/MT. Delta is 190 USD/MT, or 7.8 per cent. On a 40 MT parcel it’s 7,600 USD. Across a 1,000 MT annual book, it’s 190,000 USD of gross margin erosion you need to recover somewhere.
Tungsten carbide powder (HS 2849.90), 5 MT parcel, Chicago landed. Pre-4 February: FOB Ganzhou 38,500 USD/MT plus freight 310 USD/MT plus insurance 250 USD/MT equals 39,060 USD/MT duty base. Section 301 List 3 at 25 per cent is 9,765 USD/MT. MPF at 22 USD/MT, HMF at 49 USD/MT. Broker and drayage 95 USD/MT. Pre-tariff landed cost 48,991 USD/MT.
Post-4 February: same duty base 39,060 USD/MT. Section 301 at 25 per cent stays 9,765. IEEPA at 10 per cent is 3,906 USD/MT. MPF and HMF modest increase to 75 USD/MT combined. Broker and drayage hold 95 USD/MT. Post-tariff landed cost 52,901 USD/MT. Delta is 3,910 USD/MT, or 8.0 per cent. Plus you need a MOFCOM export licence, so the real question is whether you can get the material at all in Q2.
Bismuth oxide (HS 2825.90), 20 MT parcel, Savannah landed. Pre-4 February: FOB Changsha 12,800 USD/MT plus freight 195 USD/MT plus insurance 140 USD/MT equals 13,135 USD/MT duty base. Section 301 List 4A at 7.5 per cent is 985 USD/MT. MPF and HMF 30 USD/MT. Broker and drayage 58 USD/MT. Pre-tariff landed 14,208 USD/MT.
Post-4 February: same 13,135 USD/MT base. Section 301 at 7.5 per cent stays 985. IEEPA at 10 per cent is 1,314 USD/MT. MPF and HMF 35 USD/MT. Broker and drayage 58 USD/MT. Post-tariff landed 15,527 USD/MT. Delta 1,319 USD/MT, or 9.3 per cent. And again, the licence is the bottleneck before the cost is.
Across the three representative parcels above, the IEEPA duty adds an average 8.4 per cent to landed cost. That’s the number you should be using in your Q2 forecast until USTR publishes any exclusion process or until the White House issues further modification.
Who Absorbs the 10 Per Cent and How That Plays Out
The conventional wisdom from the first Trump-era Section 301 rounds was that Chinese exporters absorbed somewhere between 10 and 25 per cent of the tariff through FOB reductions, with the rest passed through to US landed cost and eventually to US downstream buyers. The evidence on the 2018 to 2019 tranches, reviewed in depth by the US International Trade Commission in 2023, suggested pass-through was closer to 90 per cent in the first 12 months, meaning Chinese suppliers held FOB nearly flat and let the full tariff hit US buyers.
The dynamic in February 2025 looks different on early data. Wells Fargo’s supplier invoice tracking flagged a 20 to 25 per cent quote uplift in early January driven by front-load scarcity pricing. By mid-February, that uplift had partially unwound as the front-load surge cleared and suppliers had to re-engage on normal pricing for March and April ship windows. What we’re watching now is a 5 to 9 per cent FOB reduction from major chemical producers (Wanhua on MDI, Lomon Billions on TiO2, Sinopec on acrylates) on new March contract negotiations, effectively absorbing 50 to 90 per cent of the IEEPA duty on commodity products where Chinese exporters face real competition from Korean, Japanese, and domestic US alternatives.
Where Chinese exporters don’t face alternatives, specifically on the MOFCOM-controlled specialty materials, FOB is holding firm or rising. Tungsten carbide FOB out of Ganzhou was up 3 per cent on first March quotes we’ve seen. Bismuth oxide held flat. Molybdenum-based catalyst FOB rose 4 to 6 per cent on early indications. That tells you the supply-demand calculation has shifted sharply in the direction of the supplier on controlled specialties, and you should plan procurement accordingly.
The Retaliation Escalation Ladder and Your Planning Horizon
Section 6 of EO 14195 explicitly contemplates that the President may “adjust” the tariff rate upward if China takes significant retaliatory measures. MOFCOM Announcement No. 10 was the first retaliation. Beijing also imposed targeted tariffs on US coal, LNG, farm machinery, and certain vehicles effective 10 February, ranging from 10 to 15 per cent. Those are meaningfully smaller in dollar terms than the IEEPA coverage, so the risk of further US escalation depends on whether the White House views the Chinese response as “significant” enough to trigger Section 6.
The DC trade policy base case as of 14 February is a second IEEPA tranche at 10 per cent, bringing the combined rate to 20 per cent in Q2 if fentanyl cooperation metrics don’t improve. Bull case: the 10 per cent holds and becomes the baseline. Bear case: 20 per cent in March and 25 per cent in Q2, functionally equivalent to a full Section 301 List 3 rate on every Chinese import.
Plan on the base case. Front-load for the bull, stress-test for the bear. That means your March and April book gets ordered now to lock in current pricing, your Q2 book gets scenario-planned against a 20 per cent combined IEEPA, and your Q3 book gets alternate-origin sourcing set up as optionality against the 25 per cent scenario.
Your Fortnight Action List
Three things done inside 10 business days. First, pull every HS code in your active book and run the stacking maths against your broker’s revised duty schedule. You need a single spreadsheet with FOB, freight, Section 301 rate, IEEPA applicability, MPF, HMF, and combined landed cost. If your ERP doesn’t produce that report, ask your broker for an entry-summary-level duty breakdown from your February filings and build it manually. You cannot plan Q2 pricing to your customers without this number.
Second, identify every SKU that uses tungsten, tellurium, bismuth, molybdenum, or indium as a precursor or functional component. Call your Chinese suppliers and ask directly whether they have a MOFCOM export licence filed and approved, whether your shipments are covered under their existing licence, and what their current licence renewal timeline looks like. Get that answer in writing where possible. If your supplier is evasive or says “we are applying”, assume 60 to 90 days until your next shipment clears, and plan your US customer allocations accordingly.
Third, open the alternate-origin conversation for your top three most exposed SKUs. Korean, Japanese, Indian, and European chemical producers all want your business this quarter, and many are willing to negotiate 12-month contracts at modest premiums to their current spot because they see the strategic opening. You’re not necessarily switching suppliers. You’re building a credible back-up that gives you leverage in your next Chinese supplier negotiation and genuine optionality if the tariff ladder escalates.
The 4 February transition was the clearest single-day cost shock on US chemical imports since the first Section 301 tranches in 2018. The response window is February and March. If you want a working session on your stacked duty calculation and your MOFCOM licence exposure map, Sourzi runs a 90 minute review with a Mandarin-speaking analyst and a licensed US customs broker on the call. Book before the end of February and we’ll have your Q2 plan stress-tested before your March POs go out.