Section 232 (Aluminum)

In March 2018, President Trump announced that under Section 232 of the Trade Expansion Act of 1962, the United States would increase tariffs on imports of certain steel products by 25 percent and imports on certain aluminum products by 10 percent on countries worldwide, including imports from the members of the European Union (EU) and Turkey. Although the EU was initially exempted from the imposition of tariffs, these tariffs came into place pursuant to two Presidential Proclamations issued on May 31, 2018. In response, the EU and Turkey announced their intent to impose retaliatory tariff measures.

On June 20, 2018, the EU announced the adoption of regulations putting in place “rebalancing measures” in response to the U.S. Section 232 steel and aluminum tariffs. The EU’s measures came into effect on June 22, 2018 and target a list of products worth $3.2 billion, ranging from industrial goods to consumer items and agricultural products. The EU’s announcement emphasized that (1) its steel and aluminum exports to the United States affected by the U.S. government’s Section 232 measures are worth approximately $7.1 billion, (2) the EU aims to rebalance $3.2 billion worth of exports immediately, and (3) the remaining rebalancing worth $3.8 billion will occur within the next three years or after a positive finding in WTO dispute settlement, whichever occurs first. A full list of U.S. products targeted by EU tariffs can be found here. The EU rebalancing measures will be effective for as long as the U.S. tariffs remain in place, in line with the WTO Safeguards Agreement and EU legislation. EU Commissioner for Trade Cecilia Malmström said, “We did not want to be in this position. However, the unilateral and unjustified decision of the U.S. to impose steel and aluminum tariffs on the EU means that we are left with no other choice.”

On June 21, 2018, Turkey also announced the imposition of retaliatory tariffs on select U.S. products. The announced tariffs follow Turkey’s notification to the WTO on May 21, 2018. U.S. products targeted by Turkish tariffs include coal, paper, walnuts/almonds, tobacco, unprocessed rice, whisky, automobiles, cosmetics, machinery equipment and petrochemical products. In announcing these tariffs, Turkey indicated that it had “repeatedly and clearly communicated that none of America’s stated criteria for imposing tariffs are applicable to Turkey or Turkish exporters” and that the United States has a trade surplus in steel commerce with Turkey. The total amount of targeted U.S. exports to Turkey equals $1.8 billion. A full list of products targeted by Turkey’s tariffs can be found here.

President Donald Trump signed yesterday two Presidential Proclamations adjusting imports of aluminum and steel into the United States. In doing so, he stated that measures are now in place to address the impairment to the national security threatened by imports of steel and aluminum from Argentina, Brazil and Australia. South Korea previously reached an agreement with the United States on April 30 to limit its imports of steel. President Trump added, however, that “similar measures are not in place with respect to steel or aluminum imports from Mexico, Canada or the European Union” and that insufficient progress had been made in ongoing negotiations with these countries. He declared that, as of June 1, 2018, the Section 232 tariffs for steel of 25 percent and for aluminum of 10 percent will no longer be suspended for such imports from these countries. The White House indicated that it will continue discussions with them and remains open to discussions with other countries that may lead to permanent country-based exemptions. Continue Reading Trump Administration Implements Section 232 Tariffs on Steel and Aluminum Imports from Canada, Mexico and the European Union

With the deadline approaching for full implementation of the Section 232 tariffs on certain steel and aluminum imports, President Trump on April 30, 2018 relented to increasing pressure and extended the tariff exemptions for key U.S. allies until June 1, 2018. In making the announcement, the Trump administration announced that it had previously reached a final agreement with South Korea on steel imports and has also reached agreements in principle with Argentina, Australia and Brazil on both steel and aluminum imports. In addition, the president indicated that he was extending the country-based exemptions for Canada, Mexico and the European Union for a final 30 days. In all these negotiations, the administration has been focused “on quotas that will restrain imports, prevent transshipment, and protect the national security.” Until June 1, 2018, the United States will maintain current tariff levels for Canada, Mexico and the EU.

The president previously noted in Presidential Proclamation 9711 that the tariffs, initially implemented on March 23, 2018 for most U.S. trading partners, would be extended until May 1, 2018 in recognition of the important security relationship between the United States and these countries while the parties sought alternative means to address the threatened impairment to U.S. national security by imports of steel and aluminum articles from those countries. Unless exempted, the tariffs under these Section 232 trade actions are 25 percent on certain imported steel and 10 percent on certain imported aluminum. Separate from the White House June 1 extension announcement, Commerce Secretary Wilbur Ross stated that these countries will have to agree to reduce the volume of their exports to the United States, indicating that “If people don’t have the tariffs, and they don’t have the quota, that would defeat the whole purpose” of the Section 232 investigations and recommended actions.

It is already known that South Korea has agreed to cap its annual steel exports to the United States at approximately 70 percent of the country’s annual shipments from 2015 to 2017; the aluminum tariff remains in place for South Korea. While yesterday’s announcement indicated that agreements had been reached with Australia, Argentina and Brazil, no details were made available. Negotiations will continue with the remaining countries subject to the extensions (Canada, Mexico and the EU), significant U.S. steel and aluminum trade partners, for the next 30 days.

For additional details on these extensions, see Presidential Proclamation Adjusting Imports of Steel into the United States and Presidential Proclamation Adjusting Imports of Aluminum into the United States.

In its self-initiated investigation, the Department of Commerce has preliminarily determined that countervailing duties (CVD) should be assessed for imports of aluminum sheet from China to counteract Chinese government subsidies. Commerce calculated a 31.20 percent CVD rate for Chinese respondent Yong Jie New Material Co., Ltd.; a 34.99 percent CVD rate for respondents Henan Mingtai Industrial Co., Ltd. and Zhengzhou Mingtai Industry Co., Ltd.; and a 33.10 percent CVD rate for all other Chinese producers and exporters. Due to their failure to cooperate in the investigation, Commerce assigned a 113.30 percent CVD rate to respondents Chalco Ruimin Co., Ltd. and Chalco-SWA Cold Rolling Co., Ltd.

These rates are preliminary, and the investigation will continue into its final phase. Nevertheless, Customs and Border Protection will require cash deposits based on these preliminary rates for the merchandise covered under the scope of the investigation. Such merchandise is common alloy aluminum sheet, which is a flat-rolled aluminum product having a thickness of 6.3 mm or less, but greater than 0.2 mm, in coils or cut-to-length, regardless of width. Common alloy sheet is currently classifiable under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7606.11.3060, 7606.11.6000, 7606.12.3090, 7606.12.6000, 7606.91.3090, 7606.91.6080, 7606.92.3090 and 7606.92.6080. Merchandise that falls within the scope of these investigations may also be entered into the United States under HTSUS subheadings 7606.11.3030, 7606.12.3030, 7606.91.3060, 7606.91.6040, 7606.92.3060, 7606.92.6040 and 7607.11.9090. Specifically excluded from the scope of this investigation is aluminum can stock, which is suitable for use in the manufacture of aluminum beverage cans, lids of such cans, or tabs used to open such cans.

Commerce is scheduled to announce its final determination in this CVD investigation no later than August 30, 2018. In addition, the related antidumping investigation into aluminum sheet from China continues with a preliminary determination in that investigation due by June 15, 2018. For additional background on this investigation, see Commerce’s Fact Sheet on this CVD investigation and Thompson Hine’s International Trade Update dated November 29, 2017.

On April 12, 2018, the House of Representatives’ Committee on Ways and Means held a hearing to explore the effects on the U.S. economy and jobs of the tariff increases related to Section 232 and Section 301 investigations. Before the hearing, Chairman Kevin Brady stated, “In enforcing our trade laws, we should always take a targeted approach to address unfair practices while avoiding harm to U.S. workers and job creators. Our private sector witnesses will discuss the impact of recently announced U.S. tariff increases on their businesses, including product and country coverage of the tariffs, the process to comment on and apply for exclusions from the tariffs, and the effects of possible retaliation on U.S. exporters.” In his opening comments, Brady highlighted China’s questionable trade policies and practices, but also asked, “How do you avoid punishing Americans for China’s misbehavior?”

While most members of the committee and witnesses acknowledged that China engages in unfair trade practices, opinions on the appropriate response and strategy varied. The chairman acknowledged his belief that tariffs are taxes that will “ultimately be passed onto consumers. Like taxes, they also curtail economic growth, discourage new investment, delay new hiring, and put American workers at a huge disadvantage to foreign competitors.” Ranking Member Richard Neal indicated that the logic of the tariffs is “pretty direct” given China’s behavior, but that the tariffs “will bring disruption to the U.S. economy” and, thus, a key question is whether the Trump administration “has a plan to use these tariffs effectively.” Several other members of the committee questioned whether the president and his trade advisers have a long-term strategic trade policy, with Representative Ron Kind going so far as to assert that the president’s trade agenda is “seriously off the rails” with its unilateral actions, threats to “blow up” NAFTA, and failure to undertake any new, meaningful bilateral trade agreement negotiations since taking office.

Industry witnesses expressed a variety of viewpoints. Kevin Kennedy, president of Kennedy Fabricating, stated, “The impact is that it’s already shifting our jobs and work outside of the U.S. What was presented as a tariff on foreign steel has effectively become a tax on U.S. manufacturers like us.” Ann Wilson of the Motor & Equipment Manufacturers Association noted that her industry operates in an integrated global supply chain in which tariffs could cause disruptions and increased costs, and cautioned restraint before additional tariffs are imposed. In supporting the president’s implementation of tariffs, Roger Newport of AK Steel Corporation testified that the steel industry “has taken the brunt of [China’s] unfair trade practices over the last several decades” and that it is “only a matter of time before others are afflicted by unfair trade.” Links to all witnesses’ written testimony are provided below.

Before the hearing, a group of over 100 industry associations “representing U.S. manufacturers, farmers and agribusinesses, retailers, technology companies, importers, exporters, and other supply chain stakeholders” submitted a letter to the committee expressing “deep concern” with the potential impact of the president’s tariffs toward China and the escalating tariff threats. The group added that these tariffs and threats “will not effectively advance our shared goal of changing these harmful Chinese practices.”

Witnesses’ Statements:

  • Kevin Kennedy, President, Kennedy Fabricating
  • John Wolfe, Chief Executive Officer, Northwest Seaport Alliance
  • Roger Newport, Chief Executive Officer, AK Steel Corporation
  • John Heisdorffer, President, American Soybean Association
  • Calvin Dooley, President and Chief Executive Officer, American Chemistry Council
  • Ann Wilson, Senior Vice President, Motor & Equipment Manufacturers Association
  • Scott Paul, President, Alliance for American Manufacturing

The Department of Commerce has released information setting forth the process for how parties in the United States may submit requests for product-based exclusions from tariffs implemented by President Trump under Section 232 of the Trade Expansion Act of 1962 to protect national security from threats resulting from imports of aluminum and steel, as previously detailed in two presidential proclamations. The March 8, 2018 proclamations authorize the secretary of Commerce to grant exclusions from the tariffs upon the request of affected parties if the steel or aluminum articles are determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality or based upon specific national security considerations.

In a Federal Register notice to be published on Monday, March 19, 2018, Commerce is issuing an “interim” final rule seeking comments on the manner in which it intends to implement the requirements for submissions requesting product-based exclusions from the tariff remedies. While interim in nature, the notice indicates that sufficient conditions have been met to immediately implement the rule and, in turn, the requirements for seeking a product-based exclusion. Because, the notice states, normal clearance procedures would prevent or hinder the collection of information for national security purposes, and a delay in an effective date while seeking public comment could harm national security, the requirements for requesting product-based exclusions from the Section 232 aluminum and steel tariffs will be effective March 19.

The notice provides specific guidance as to how individuals or companies using steel or aluminum articles in business activities (e.g., construction, manufacturing or supplying steel/aluminum to users) in the United States may submit product-based exclusion requests. The notice is clear that these exclusions will be limited to entities located in the United States, since allowing those not engaged in business activities in the United States to seek such exclusions “could undermine the adjustment of imports that the President determined was necessary to address the threat to national security posed by the current import[s]” of these articles. Further, any approved exclusions will be made on a product basis and will be limited to the individual or organization that submitted the request, unless Commerce approves a broader application of that particular product’s exclusion. The notice also makes clear that the country-based exemptions to be handled through negotiations by the U.S. Trade Representative are separate and apart from the product-specific exclusion process.

Commerce is requiring that submissions requesting exclusion be filed using specific forms – Steel Exclusion Forms and Aluminum Exclusion Forms – that will be posted shortly on Commerce’s website. Forms for objecting to exclusion requests will also be posted at these web pages. Commerce notes that information submitted in exclusion requests and objections to submitted exclusion requests will be subject to public review and made available for public inspection and copying. Parties that have proprietary or business confidential information they believe to be relevant for consideration will need to indicate so on the forms. A party making an exclusion request must specify its business activities in the United States that provides it authorization and sufficient reason to request an exclusion. Exclusion requests (i.e., forms) that are incomplete will be denied. There is no time limit for submitting a product-based exclusion request.

The review process for considering an exclusion request (and any objections) will normally not exceed 90 days. Approved exclusions will be effective five business days after publication of the responses in the appropriate dockets for aluminum (Docket No. BIS-2018-0002) and steel (Docket No. BIS-2018-0006) on Starting on that date, the requesting party will be able to rely upon the approved exclusion request in calculating the duties owed on the product imported in accordance with the terms listed in the approved exclusion request. Exclusions will generally be approved for one year.

The European Union (EU) has published a list of U.S. products it might target in retaliation if President Trump moves forward with tariffs on imports of steel and aluminum from the Section 232 investigations. The list is divided into two categories:

  • Part A is a list of U.S. products that face immediate retaliation if the United States implements its steel tariffs. These products could face proportional EU tariffs of up to 25 percent. The EU also plans to file a complaint over the U.S. tariffs with the World Trade Organization (WTO).
  • Part B is a list of U.S. products that would also be included if the WTO rules that the U.S. aluminum and steel tariffs are illegal.

The EU has indicated in a notice seeking comments that the publication of this list is a procedural step in preparing a response to any potential U.S. tariffs. The European Commission, which coordinates trade policy for the 28 EU members, has invited comments from private stakeholders affected by the forthcoming U.S. tariffs of 25 percent on steel imports and 10 percent on aluminum imports. The commission is considering, as a first step, suspending tariff concessions under Article 8 of the WTO Agreement on Safeguards and, as a second step, subsequently and at the appropriate level, imposing increased customs duties on certain products from the United States.

The Thompson Hine Trump and Trade team recommends that U.S. companies that export to Europe review this proposed list to determine any potential impact on business activities. For additional background on the Section 232 investigations, the Department of Commerce’s reports and the subsequent presidential proclamations, please see Thompson Hine’s International Trade Update of March 13, 2018.

President Trump has signed two proclamations imposing 25 percent tariffs on imports of steel mill products and 10 percent tariffs on wrought and unwrought aluminum pursuant to his announcement on March 1, 2018. The president stated that these actions were necessary to address global overcapacity and unfair trade practices in the steel and aluminum industries and to protect national security. As past Trump and Trade updates have indicated, these tariffs are being implemented pursuant to Section 232 of the Trade Expansion Act of 1962, which provides the president with authority to adjust imports entering the United States in quantities or under circumstances that threaten to impair national security. The tariffs are scheduled to be implemented 15 days from today, on March 23, 2018.

Pursuant to the proclamation on steel, “steel articles” for which tariffs will be levied are defined at the Harmonized Tariff Schedule (HTS) six‑digit level as: 7206.10 through 7216.50; 7216.99 through 7301.10; 7302.10; 7302.40 through 7302.90; and 7304.10 through 7306.90, including any subsequent revisions to these HTS classifications.

Pursuant to the proclamation on aluminum, “aluminum articles” are defined in the Harmonized Tariff Schedule as: (a) unwrought aluminum (HTS 7601); (b) aluminum bars, rods and profiles (HTS 7604); (c) aluminum wire (HTS 7605); (d) aluminum plate, sheet, strip and foil (flat rolled products) (HTS 7606 and 7607); (e) aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and (f) aluminum castings and forgings (HTS 7616.99.51.60 and 7616.99.51.70), including any subsequent revisions to these HTS classifications.

After insisting last week that the tariffs would cover steel and aluminum imports from all countries, President Trump scaled back that threat in the actual proclamations. Citing the need for “flexibility” and “cooperation” with allies and those who “treat us fairly on both trade and the military,” the president offered some restraint in implementing the tariffs. President Trump recognized that Canada and Mexico present a “special case” and will be excluded for now from the tariffs, indicating that his administration will continue ongoing discussions with those countries to address concerns (i.e., NAFTA negotiations). The president stated that he “welcomes any country with which we have a security relationship to discuss alternative ways to address our concerns, including our concerns about global excess capacity.” His administration will provide appropriate avenues, via negotiations with the U.S. Trade Representative, for potentially modifying or removing a tariff under certain conditions for individual countries.

The White House also announced that there will be a mechanism, via the Department of Commerce, for U.S. parties to apply for exclusion of specific products based on demand that is unmet by domestic production or on specific national security considerations. The proclamations make clear that such relief will be provided only after a request for exclusion is made “by a directly affected party located in the United States.” Exclusion request procedures are scheduled to be issued by March 18, 2018.

In the category of “we can’t make this stuff up,” there reportedly has been in the past 24 hours an all-out war within the Trump administration over any tariffs to be implemented as a result of the Section 232 investigations into steel and aluminum imports. On February 16, the Department of Commerce publicly released reports on the national security impact of U.S. imports of steel mill products and of wrought and unwrought aluminum, finding that these imports threaten to impair the national security and recommending a range of remedy options, including tariffs and quotas. In the weeks since, U.S. industry and members of Congress have weighed in on the potential impact of these prospective tariffs and quotas on the U.S. economy, taxpayers and other industries reliant upon steel and aluminum imports, and the potential negative impact of tariffs and quotas on key U.S. allies.

A press announcement was initially planned for today, March 1, to announce the president’s decision, then it was postponed, then it was ostensibly cancelled. The scheduling problems appeared to be related to reports that National Economic Council Director Gary Cohn and White House trade adviser Peter Navarro were seeking vastly different remedies. Cohn reportedly wanted a more targeted approach to applying any tariffs, while Navarro was pushing for global tariffs at rates higher than recommended in Commerce’s reports. Chief of Staff John Kelly, Defense Secretary James Mattis and National Security Adviser H.R. McMaster had also sought a more nuanced response. When the White House announced instead that a meeting today with steel and aluminum industry executives would take place, it was expected to be nothing more than a “listening session” for the president.

And, it was … right up until the end of the session. After receiving comments from industry executives and repeatedly mentioning bad trade deals that have destroyed U.S. companies, the president said, “We’re going to take care of the situation, okay? So steel and aluminum will see a lot of good things happen. We’re going to have new jobs popping up. We’re going to have much more vibrant companies.” And then, in response to a question from the White House press pool, the president announced ­– likely to the surprise of his staff and everyone in the room – that he intended to implement tariffs for an unlimited time period of 25 percent on steel imports and 10 percent on aluminum imports, stating that “it’s [the policy is] being written now.”

A transcript of the “listening session” is available here. By the end of the trading day, the Dow Jones Industrial Average had fallen almost 2 percent; however, U.S. steel and aluminum companies saw gains. China and the European Union have already announced they will retaliate, either through their own measures or through remedies obtained in the WTO dispute settlement process. Stay tuned!

In an undated memo from the Department of Defense (DoD) to the Department of Commerce that was released last night, DoD concurred with Commerce’s recent Section 232 reports on steel and aluminum that have been submitted to President Trump for review. DoD agreed that “imports of foreign steel and aluminum based on unfair trading practices impair the national security” but noted that U.S. military requirements for steel and aluminum only represent approximately 3 percent of U.S. production and would not impact DoD’s ability to acquire necessary product to meet national defense demands.

Overall, DoD focused on the potential “negative impact” of Commerce’s recommendations (i.e., tariffs and quotas) on key allies. DoD recommended that an inter-agency working group be convened to “further refine the targeted tariffs, so as to create incentives for trade partners to work with the U.S. on addressing the underlying issue of Chinese transshipment.” If the president takes action on steel, DoD suggested “waiting before taking further steps on aluminum.” The delayed action on aluminum “may be sufficient to coerce improved behavior of bad actors.” DoD emphasized that the United States needed to “reinforce to our key allies that these actions are focused on correcting Chinese overproduction and countering their attempts to circumvent existing antidumping tariffs – not the bilateral U.S. relationship.”