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

New Tariffs : Definition and Exclusion

Posted in Aerospace & Defence, Antidumping, Border Security, Buy America, Corporate Counsel, Cross-border deals, Cross-border trade, Customs Law, Export Controls & Economic Sanctions, Government Procurement, Imports Restrictions, Legal Developments, Trade Agreeements, Trade Remedies

When President Trump announced the 25% steel and 10% aluminum tariffs on March 8, 2018, he instructed the  Secretary of Commerce to issue regulations explaining how American companies could seek exclusions from those tariffs no later than March 19, 2018, and that deadline has been met.  These new regulations can be found at:  https://www.commerce.gov/sites/commerce.gov/files/federal_register_vol_83_no_53_monday_march_19_2018_12106-12112.pdf

Before we discuss the new regulations, we should start with the data Customs and Border Protection (CBP) released with its programming updates to implement these safeguard tariffs:

The HTS numbers added are:

9903.80.01        STEEL PROD, NOTE 19, EX CA/M               25%

9903.85.01        ALUMINUM PROD, NOTE 19, EX CA/M    10%

with respect to goods entered, or withdrawn from warehouse for consumption, on or after 12:01 a.m. EDT on March 23, 2018.  [The text of Note 19 has yet to be published.] This rate of duty, which is in addition to any other duties, fees, exactions, and charges applicable to such imported steel and aluminum products, and shall apply to imports of steel and aluminum products from all countries except Canada and Mexico.

(1) “Aluminum” products are defined in the Harmonized Tariff Schedule (HTS) as: (a) unwrought aluminum (HTS 7601); (b) aluminum bars, rods, and profiles (HTS 7604); (c) aluminum wire (HTS 7605); (d) aluminum plates, sheets, strips, 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.

(2)  “Steel” are defined in the HTS as: (i) 7206.10 through 7216.50, (ii) 7216.99 through 7301.10, (iii) 7302.10, (iv) 7302.40 through 7302.90, and (v) 7304.10 through 7306.90, including any subsequent revisions to these HTS classifications.

Turning now to the exclusion process, we begin with the statement in the Federal Register notice that an exclusion will apply only if the steel or aluminum products 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 other words, do not expect a lot of requests to be granted.

There is one docket for the steel case (BIS-2018-0006) and another for the aluminum case (BIS-2008-0002).

Any exclusion request must be filed by an individual or organization which uses the steel or aluminum products in its U.S. domestic business activities, such as construction, manufacturing, or supplying steel/aluminum products.   Any individual or organization in the U.S. may file objections, but they will only be considered if the information submitted relates to the basis for the exclusion request, no general objections will be entertained.  Anyone wishing to object must locate the exclusion request and object by adding comments to that original filing.

Exclusion will be approved on a per product basis and be limited to the party seeking the relief. However, Commerce reserves the right to approve a broader application, meaning to additional importers.  Even once an exclusion is approved,  parties may still file objections. Similarly, even if a prior application was rejected, a later exclusion request for the same product is permitted.

15 C.F.R. part 705 has been amended so that Supplement No. 1 addresses steel products and Supplement No. 2 aluminum products.  In each case, the required form can be found on regulations.gov and on the BIS website.  The steel form is here – https://www.bis.doc.gov/index.php/232-steel – and the aluminum case form here – https://www.bis.doc.gov/index.php/232-aluminum.

The Federal Register notice reinforces that all filings for exclusion requests and objections are subject to public inspection and copying, so business proprietary or classified information should be submitted accordingly.

In seeking an exclusion, parties would be wise to first identify the grounds on which they will rely bearing in mind the President found that “steel and aluminum are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security of the United States and therefore the President is implementing these remedial actions … to protect U.S. national security interests.”

When the exclusion request is prepared, it must include the submitter’s name, date of submission, the grounds for the request, plus specify the business activities in which the requester is engaged, that the party submitting the request is authorized to do so and the 10 digit HTS statistical reporting number.

A separate request is required for steel products with chemistry by percentage breakdown by weight, metallurgical properties, surface quality (e.g., galvanized, coated, etc.)  and distinct critical dimensions (e.g.,  0.25” rebar, 0.5” rebar, 0.5” sheet, or 0.75” sheet) even if covered by a common HTS subheading.  With aluminum products, separate exclusion requests must be submitted for distinct critical dimensions covered by a common HTS statistical reporting number, e.g. 10 mm diameter bar, 15 mm bar, or 20 mm bar.  Separate requests are also required for products falling into more than one HTS subheading.

Exclusion requests are permitted at any time. However, objections must be filed within 30 days of an exclusion request being published.  When filing an objection, the party doing so should clearly identify and provide support for its opposition by responding to the specifics urged in the exclusion request.  There is a 25 page limit. If the submission is incomplete, the exclusion will be denied or the objection not considered.  BIS’ findings will respond to any objections. Any approved exclusion is effective five (5) days after it is published, and typically remains valid for one (1) year.

BIS has indicated that processing of any exclusion request generally will not take more than 90 days, including consideration of any objections and any input needed from other agencies.  The way the Federal Register notice is written, CBP is expected to provide a means (as yet undefined)  by which the importer will be able to reference his exclusion once granted, and that exclusion is expected to be reported at time of entry.

One other major point was emphasized in the Federal Register notice – the procedure by which American companies will be permitted to seek exclusion or object to such requests has nothing to do with the grounds on which the U.S. may grant exclusion to any country.   On that topic, there is lots of speculation, most of which focuses around the following likely factors:

1)         That country has a “security relationship” with the U.S., but “security relationship” remains undefined;

2)         How that country protects its home market from underpriced imports;

3)         The position that country has taken in the past in response to U.S. positions in trade remedy cases at the World Trade Organization; and

4)         That country’s participating in various multilateral and bilateral steel overcapacity programs, including what are the trade patterns in that country for steel and aluminum products.

Another significant unanswered question is whether any country’s  exemption will be complete or whether quotas or other conditions might apply, or for that matter whether any exemption might be limited in time or scope.

The countries/blocs most often mentioned as potentially being exempted include Brazil, Japan, South Korea, Australia and EU, with China mentioned as likely to retaliate.  The interesting framework for the EU is the oft-repeated comment by President Trump that the EU must lower its tariffs on unrelated products, such as automobiles.  The EU has already published a list of products for comment on which retaliation is proposed, and it does include jeans, bourbon and similar iconic American products, see http://trade.ec.europa.eu/doclib/docs/2018/march/tradoc_156648.pdf for the full list.  The China metal industry is proposing China retaliate against American coal.