Canada-U.S. Blog Trade Lawyers Cyndee Todgham Cherniak and Susan K. Ross

Here Come Those New Steel and Aluminum Tariffs!

Posted in Aerospace & Defence, Agriculture, Antidumping, Border Security, Buy America, Controlled Goods Program, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Export Controls & Economic Sanctions, Exports, Imports Restrictions, Legal Developments, Politics, Trade Agreeements, Trade Remedies, World Trade Organization

Earlier today, March 8, 2018, President Trump signed two Presidential Proclamations, one dealing with additional tariffs on steel and the other with additional tariffs on aluminum. As has been widely reported in the general press, those rates are 25% on steel and 10% on aluminum. The only countries exempted are Canada and Mexico.

Steel articles are defined as those which are classified under HTSUS 7206.10 through 7216.50 (including ingots, bars, rods and angles), 7216.99 through 7301.10 (including bars, rods, wire, ingots, and sheet piling), 7302.10 (rails), 7302.40 through 7302.90 (including plates and sleepers), and 7304.10 through 7306.90 (including tubes, pipes and hollow profiles). Aluminum products are defined as unwrought aluminum (HTS 7601); aluminum bars, rods, and profiles (HTS 7604); aluminum wire (HTS 7605); aluminum plate, sheet, strip and foil (flat rolled products) (HTS 7606 and 7606); aluminum tubes and pipes and tube and pipe fittings (HTS 7608 and 7609); and aluminum castings and forgings (HTS 7616.99.5160 and 7616.99.51.70).

The stated reason supporting these safeguards is the “failure of countries to agree on measures to reduce global excess capacity [and] the continued high level of imports since the beginning of the year.” The national security ground is the weakening of the U.S.’ “internal economy and the shrinking of its ability to meet national security production requirements in the case of a national emergency,” citing to 19 U.S.C. 1862(d):

For the purposes of this section, the Secretary[of Commerce] and the President shall, in the light of the requirements of national security and without excluding other relevant factors, give consideration to domestic production needed for projected national defense requirements, the capacity of domestic industries to meet such requirements, existing and anticipated availabilities of the human resources, products, raw materials, and other supplies and services essential to the national defense, the requirements of growth of such industries and such supplies and services including the investment, exploration, and development necessary to assure such growth, and the importation of goods in terms of their quantities, availabilities, character, and use as those affect such industries and the capacity of the United States to meet national security requirements. In the administration of this section, the Secretary and the President shall further recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports shall be considered, without excluding other factors, in determining whether such weakening of our internal economy may impair the national security [emphasis added].

The Proclamation also acknowledged a “shared concern about global excess capacity” and invited any “country with which [the U.S. has] a security relationship… to discuss… alternative ways to address the threatened impairment of the national security caused by the imports from that country.” As a result of those negotiations, modifications to the Proclamation may result.

Regarding Canada and Mexico, the Proclamation states that “ongoing discussions” are the desired form of action, but also carries the caveat that both Canada and Mexico are expected to “take action to prevent transshipment.”

These safeguards take effect on any entries filed on or after 12:01 a.m. on March 23, 2018. The Secretary of Commerce is directed to consult with the Secretaries of State, Treasury and Defense, the U.S. Trade Representative, the Assistants to the President for National Security Affairs and Economic Policy, and other Executive Branch members to provide relief from these safeguards for any steel or aluminum “not produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality and is also authorized to provide such relief based upon specific national security considerations.” A request for exclusion must be made by a directly affected party “located” in the U.S. Notice of any exclusion determination is to be published in the Federal Register and Customs and Border Protection is to be notified. The relevant procedures to seek exclusion are to be published no later than March 18, 2018.

The Secretary of Commerce (in consultation with the above designated Executive Branch members) is also ordered to continue to monitor imports of steel and aluminum and bring to the President’s attention any “circumstances” that might “indicate the need for further action” under section 232.

The most recent example of exclusion factors was published by the U.S. Trade Representative in the Federal Register on February 14, 2018 in conjunction with the solar safeguard case. This list may provide some idea of the criteria that could apply in the current matter and reads:

  1. Any request for exclusion clearly should identify the particular product in terms of the physical characteristics (e.g., dimensions, wattage, material composition, or other distinguishing characteristics) that distinguish it from products that are subject to the safeguard measures. USTR will not consider requests that identify the product at issue in terms of the identity of the producer, importer, or ultimate consumer; the country of origin; or trademarks or tradenames. USTR will not consider requests that identify the product using criteria that cannot be made available to the public.
  2. In evaluating requests for exclusion, the interagency group may consider the following factors or information:
  3. The names and locations of any producers, in the United States and foreign countries, of the particular product;
  4. Total U.S. consumption of the particular product, if any, by quantity and value for each year from 2014 to 2017, the projected annual consumption for each year from 2018 to 2022, and any related information about the types of consumers;
  5. Details concerning the typical use or application of the particular product;
  6. Total U.S. production of the particular product for each year from 2014 to 2017, if any;
  7. The identity of any U.S.-produced substitute for the particular product, total U.S. production of the substitute for each year from 2014 to 2017, and the names of any U.S. producers of the substitute;
  8. Whether the particular product or substitute for the particular product may be obtained from a U.S. producer;
  9. Whether qualification requirements affect the requestor’s ability to use domestic products;
  10. Whether the particular product is under development by a U.S. producer who will imminently be able to produce it in marketable quantities;
  11. Inventories of the particular product in the United States;
  12. Whether excluding the particular product from the safeguard measure would result in a benefit or advantage to the long-term competitiveness of the solar manufacturing supply chain in the United States, including by fostering research and development, supporting manufacturing innovation, or by leading to the development of differentiated products that command higher prices;
  13. The ability of U.S. Customs and Border Protection to administer the exclusion; and
  14. Any other information or data that interested persons consider relevant to an evaluation of the request.

The other important indicator of what may be coming takes the form of a caveat in that same Federal Register notice, which cautioned that USTR “will grant only those exclusions that do not undermine the objectives of the safeguard measure.” A similar restrictive framework was articulated in the Commerce recommendations regarding both the steel and aluminum safeguards stating the Secretary would grant the exclusion based on “a demonstrated: (1) lack of sufficient U.S. production capacity of comparable products; or (2) specific national security-based considerations.” However, we will have to wait for the final list.

No doubt companies will look carefully in the next few days at what documentation they have which might prove helpful to seeking an exclusion, while awaiting the final criteria on which any exclusion request must rely, but given the current climate, one should be prepared for close scrutiny and little wiggle room when it comes to exclusion being granted.