Pursuant to recently issued Presidential Proclamations, and under authority of Section 232 of the Trade Expansion Act of 1962, as amended (“Section 232”), steep tariffs on U.S. imports of many kinds of steel and aluminum products entered into effect on March 23, 2018 (collectively, the “Section 232 Tariffs”). These tariffs, which are 25 percent for covered steel products (the “Section 232 Steel Tariff”) and 10 percent for covered aluminum products (the “Section 232 Aluminum Tariff”), are expected to cause significant challenges for many entities that import and/or use the covered products. However, as discussed below, recent actions taken by the Trump Administration may present opportunities for such entities to limit or negate the potential adverse effects of the Section 232 Tariffs.
Scope of Covered Products Subject to the Section 232 Tariffs
Before reviewing the recent actions taken by the Trump Administration, it is useful to understand the broad scope of products that are covered by the Section 232 Tariffs. The scope of products covered by the Section 232 Steel Tariff is set forth in Presidential Proclamation 9705 of March 8, 2018 (the “Section 232 Steel Proclamation”), and the scope of products covered by the Section 232 Aluminum Tariff is identified in Presidential Proclamation 9704 of March 8, 2018 (the “Section 232 Aluminum Proclamation”) (collectively, the “Section 232 Proclamations”).
Pursuant to the Section 232 Steel Proclamation, the steel products that are subject to the Section 232 Steel Tariff are defined to include products classified under the following Harmonized Tariff Schedule (“HTS”) 6-digit level subheadings: 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90 (collectively, the “Steel Products”). The Steel Products include a wide variety of steel ingots, bars, rods, angles, rails, plates, tubes, pipes, hollow profiles, wire, and sheet piling.
In accordance with the Section 232 Aluminum Proclamation, the aluminum products that are subject to the Section 232 Aluminum Tariff include products classified under the following HTS headings and subheadings: 7601, 7604, 7605, 7606, 7607, 7608, 7609, 76220.127.116.11, and 7618.104.22.168 (collectively, the “Aluminum Products”). The Aluminum Products include, among other things: unwrought aluminum; aluminum bars, rods, and profiles; aluminum wire; aluminum plate, sheet, strip, and foil (flat rolled products); aluminum tubes and pipes and tub and pipe fitting; and aluminum castings and forgings.
Given the broad the scope of the Steel Products and the Aluminum Products (collectively, the “Covered Products”), the Section 232 Tariffs could potentially have significant adverse effects on U.S. entities that rely on and use the Covered Products. Recognizing this fact, the Trump Administration recently has taken two actions that could alleviate some of the harmful economic effects that could be caused by the Section 232 Tariffs.
Expanded Country Exemptions
To begin with, President Trump has expanded the group of countries that will be granted temporary exemptions from the Section 232 Tariffs. When the Section 232 Proclamations were issued, Canada and Mexico were the only countries that were identified as having been granted temporary exemptions from the Section 232 Tariffs. On March 22, 2018, President Trump issued two new Presidential Proclamations pursuant to which the following additional countries have been granted temporary exemptions from the Section 232 Tariffs: Australia, Argentina, South Korea, Brazil and the member countries of the European Union (“EU”).
While the Trump Administration has not explicitly stated how long the temporary exemptions will last for any of these countries, it has been reported that the exemptions for Canada and Mexico will likely be kept in place as long as progress is being made in the NAFTA renegotiations, and that the exemptions for the other countries will continue as long as those countries continue to work cooperatively with the United States in developing strategies to combat the global overcapacity that exists with respect to steel and aluminum products. It also is possible that other countries could be granted exemptions from the Section 232 Tariffs if they work out arrangements with the United States similar to those that have been negotiated with Australia, South Korea, Argentina, Brazil and the EU.
Procedures for Seeking Product Exclusions
The Trump Administration also recently has established procedures that will permit U.S. users of the Covered Products to request that certain products be excluded from the scope of the products covered by the Section 232 Tariffs. Specifically, on March 19, 2018, the U.S. Department of Commerce (“DOC”) issued an interim final rule that establish separate, but similar, scope exclusion request procedures relating to the Steel Products and the Aluminum Products (the “Interim Final Rule). The DOC will accept comments on the Interim Final Rule until May 18, 2018, although it entered into effect upon its publication in the Federal Register on March 19 (see 83 Fed Reg. 12106).
Pursuant to the procedures established by the Interim Final Rule, entities that use Steel Products or Aluminum Products in business activities in the United States may submit scope exclusion requests. The DOC has created a specific form for exclusion requests relating to Steel Products (the “Steel Product Exclusion Request Form”) and a specific form for exclusion requests relating to Aluminum Products (the “Aluminum Product Exclusion Request Form”). These very detailed forms must be completed for each separate product for which an exclusion is being requested, and they must be submitted electronically to the DOC via the Federal rulemaking portal (which can be accessed at http://www.regulations.gov). (Copies of the Steel Product Exclusion Request Form and the Aluminum Product Exclusion Request Form can be obtained from any of the FisherBroyles attorneys referenced at the end of this Client Alert.) Significantly, separate exclusion requests must be submitted for Steel Products and Aluminum Products with distinct critical dimensions covered by a common HTSUS subheading.
Once a scope exclusion request has been posted on the Federal rulemaking portal, parties wishing to object to the proposed scope exclusion request will have 30 days in which to file objection submissions. Such submissions must be done on specific forms that have been created by the DOC, and they must be submitted electronically to the DOC via the Federal rulemaking portal. (Copies of the Steel Product Exclusion Objection Form and the Aluminum Product Exclusion Objection Form can be obtained from any of the FisherBroyles attorneys referenced at the end of this Client Alert.) Objection submissions cannot exceed 25 pages, including all attachments.
After the 30-day objection period has closed, the DOC will endeavor to render a decision on the exclusion request within 60 days (i.e., within 90 days from the date on which the exclusion request was filed). In order for an exclusion request to be granted, the DOC must determine that the requested item is not produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality, or that the request is justified by national security considerations.
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In summary, given that the Section 232 Tariffs have taken effect on March 23, 2018, importers and users of Steel Products and Aluminum Products will need to develop strategies that will help them to limit or negate the potential adverse effects of the Section 232 Tariffs. If you have any questions regarding the Section 232 Tariffs or would like to discuss possible strategies for addressing them, please contact any of the attorneys referenced below.