Further to the below, the President issued two new proclamations this morning regarding the imposition of additional duties on imports of steel (25%) and aluminum (10%) under Section 232 of the Trade Expansion Act of 1962, as amended. Copies are attached here for your reference.
The steel proclamation (1) exempts imports from Argentina, Austrailia, Brazil and South Korea from the additional 25% duty (based on voluntary-export restraint agreements (i.e., export quotas) Argentina, Brazil and South Korea agreed to with the United States; Australia is also exempt, but thus far, no export quota has been imposed); and (2) ends the temporary exemptions previously afforded imports from Australia, Canada, Mexico and the EU. As a result, imports of steel from all jurisdictions except Argentina, Australia, Brazil and South Korea will be subject to an additional 25% duty as of 12:01 am tonight (i.e., June 1, 2018).
The aluminum proclamation (1) exempts imports from Argentina and Australia from the additional 10% duty (based on voluntary-export restraint agreements (i.e., export quotas) those countries have agreed to with the United States); and (2) ends the temporary exemptions previously afforded imports from Brazil, Canada, Mexico and the EU. As a result, imports of aluminum from all jurisdictions except Argentina and Australia will be subject to an additional 10% duty as of 12:01 am tonight (i.e., June 1, 2018).
We expect that many countries will proceed with imposing retaliatory measures. For example, the EU already announced that it is ready to impose an additional 25% duty on $3.3 billion worth of U.S. imports as of June 20, 2018. Other countries have also announced an intent to pursue this at the WTO level (e.g., Japan, India, etc.), which could lead to the imposition of more retaliatory duties on U.S. products.
At this point, it is not clear how long the additional U.S. duties will be in place. It is clear, however, that the duties are being used as leverage to influence on-going negotiations aimed at re-balancing our trade relationships with many countries (including many of our closest allies). In the meantime, companies impacted by today’s announcements should be considering all of their options, including the viability of filing product exclusion petitions with the Dept. of Commerce.
We trust that this update is helpful. If you have any questions about these issues, please let us know.
By now, you have probably seen that the President issued two new proclamations regarding the imposition of additional duties on imports of steel (25%) and aluminum (10%) under Section 232 of the Trade Expansion Act of 1962, as amended. The proclamations do the following: (1) extend the temporary exemption applicable to imports of covered articles from Argentina, Australia and Brazil while the details associated with permanent exemptions are finalized; (2) extend the temporary exemption applicable to imports of covered articles from Canada, Mexico and the EU through May 30, 2018; (3) address issues related to the application of the additional duties when foreign trade zones are involved; and (4) clarify that “[n]o drawback shall be available” with respect to section 232 duties. The steel proclamation also finalizes the permanent exemption afforded imports of covered steel articles from South Korea. Imports of aluminum covered articles from South Korea are not covered by a permanent exemption and are, therefore, subject to the additional 10% duties as of May 1, 2018. Copies of the April 30th proclamations are attached here for your reference: 2018-09841 and 2018-09840.
Since the issuance of the proclamations, it has been reported that the permanent exemption to be afforded Brazil will only apply to steel imports (in exchange for a limit on Brazilian steel exports to the USA) and that aluminum imports will be subject to the additional 10% duty. It is also been reported that the permanent exemption to be afforded Argentina will cover both steel and aluminum imports (again, in exchange for a limit on Argentine exports to the USA).
In terms of Canada and Mexico, the permanent exemptions appear to be tied to the on-going NAFTA negotiations. While those negotiations have reportedly made substantial progress in recent weeks, it is not clear whether a deal will be able to be announced in the next couple of weeks. The Administration has recently expressed concern that if a deal is not reached by May 21, 2018, then any revised agreement would need to be voted on by the next Congress, due to timing issues associated with applicable legal requirements (e.g., the Administration has to provide notice of any deal to Congress, the U.S. International Trade Commission has to do a study of any new deal, etc.). This is problematic because the next Congress (which will be sworn in in January 2019) will not have had an opportunity to help direct the negotiations (as the current Congress has) and may have a different composition as a result of the elections in October. As a result, expect the U.S. Administration to put on a full court press to get a deal done (or at least announced) before May 21st. If that does not happen, then there is an increased chance that the section 232 duties will go into effect for Canada and Mexico June 1, 2018.
In terms of the EU, the Administration has made clear that the key to getting a permanent exemption from the section 232 duties is agreeing to an export quota, or other voluntary-export-restraint-type agreement. The EU, however, has made it clear that it will not agree to any sort of quota or VRA. It has, however, reportedly offered to enter into negotiations with the United States for a new ‘trade in goods’ free trade agreement. It will be an interesting few weeks to be sure as these discussions play out.
In the meantime, we recommend that any company which imports covered articles from Canada, Mexico or the EU (or relies on covered articles from these countries imported by other U.S. parties) consider preparing product exclusion petitions now. While exclusions are not needed currently, there is a meaningful chance that such exclusions will be needed in the near future (i.e., June 1st). Given the delay in the processing of product exclusion petitions, it is important that companies which are impacted be proactive in protecting their interests (e.g., not languishing at the back of a very long line, etc.).
We hope that this update is helpful. We are assisting numerous clients deal with these section 232 issues. If you would like to discuss any of this further, please let us know.