Section 232 (Aluminum)

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?” Continue Reading House Committee Holds Hearing on Effects of Tariff Increases on U.S. Economy and Jobs

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 www.regulations.gov. 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.”

Secretary of Commerce Wilbur Ross released today the Section 232 reports prepared by the Commerce Department and submitted to President Trump last month on the national security impact of U.S. imports of steel mill products and of wrought and unwrought aluminum. As expected, Commerce found that the quantities and circumstances of steel and aluminum imports “threaten to impair the national security.” The reports remain under consideration by the president. He is required to make a decision on the steel recommendations by April 11, 2018, and on the aluminum recommendations by April 19, 2018. The president can take a range of actions or no action, based on the analyses and recommendations provided in these reports. Continue Reading Commerce Releases Section 232 Steel and Aluminum Reports Submitted to President Trump Last Month

President Trump and several Cabinet members hosted a meeting with congressional Republicans and Democrats on February 13, 2018 at the White House to discuss possible trade remedies in the Section 232 steel and aluminum investigations. The purpose of a Section 232 investigation is to determine the effect of imports on the national security of the United States, and the president stated that his administration is reviewing the final Department of Commerce reports submitted last month and considering all options. He told those attending that quotas and tariffs are options on the table.

In opening the discussions, President Trump stated that while he wants to keep prices down, he also wishes to “make sure that we have a steel industry and aluminum industry, and we do need that for national defense. If we ever have a conflict, we don’t want to be buying the steel from a country that we’re fighting because somehow that doesn’t work very well.” Several senators urged caution, however, including Senator Roy Blunt, who said, “we do need to be careful here that we don’t start a reciprocal battle on tariffs” because the United States not only makes aluminum and steel but also must buy and import these products to satisfy domestic demand. Others cautioned President Trump on the issue of jobs, noting that with so many items manufactured in the United States using steel and aluminum, import tariffs could actually result in a net job loss. In response, the president stated, “In one case, you’re going to create jobs. You may have a higher price or maybe a little bit higher, but you’re going to have jobs. In the other case, you may have a lower price, but you’re not going have jobs; it’s going to be made in China and other places.”

Senator Pat Toomey cautioned the president to proceed cautiously under Section 232 for national security reasons, arguing that U.S. defense needs account for only about 3 percent of domestic steel consumption. “So I think it’s implausible to believe that we’re not able to meet the needs of our defense industry,” he said, indicating that invoking national security concerns could be difficult to support and invite retaliation. Others urged caution in the scope of any enforcement action resulting from the investigations. Commerce Secretary Ross noted that Section 232 remedies do not require “the same tariff on every single country. It doesn’t have to mean the same tariff on every single product. It can be applied in a much more surgical way. And we presented the President with a range of alternatives that goes from a big tariff on everything from everywhere, to very selective tariffs from a very selective group of countries.”

The meeting also included brief comments by multiple participants on other trade matters, including South Korea (the KORUS FTA is a “very bad trade deal”), China (is “violating the international rules, stealing our intellectual property, overproducing steel products”), Canada (has “treated us very, very unfairly when it comes to lumber and timber”), and NAFTA (the renegotiations are “making real headway” but still working through a number of issues).

A full transcript of the meeting is available on the White House website: Remarks by President Trump, Members of Congress, and Members of the Cabinet in Meeting on Trade.

On January 19, the Department of Commerce submitted its Section 232 report to the White House on the national security implications of aluminum imports one business day ahead of its statutory deadline. The president now has 90 days from that date, January 19, to determine whether he agrees with the Commerce Department’s findings or will use his “statutory authority to adjust imports,” according to the Trade Expansion Act of 1962, to devise his own remedy. Commerce’s report was confidential, and Commerce stated that it will publish a summary of the report only after the president announces his decision.

The domestic aluminum industry is in support of any action specifically addressing Chinese overcapacity, said Aluminum Association President and CEO Heidi Brock this past Sunday, January 21. According to an industry source at the recent 2018 Aluminum Symposium, such an action must be carefully measured to ensure that it does not result in increased costs for U.S. consumers and does not create a situation where a key source of supply, like Canada, is affected. China has questioned whether a Section 232 investigation is consistent with U.S. WTO obligations, arguing that the WTO’s legal framework does not permit members to impose trade restrictions through an “abusive invocation” of national security.