Section 232 Investigations

On April 3, 2018, the Office of the U.S. Trade Representative (USTR) released the proposed list of Chinese products that could be subject to an additional 25 percent tariff as part of the Section 301 probe into Chinese IP practices.

USTR recommended that a 25 percent tariff be applied to $50 billion worth of Chinese goods, covering nearly 1,300 HTS codes. Products within the scope of the proposed duty include engines, agricultural and textile machinery, semiconductors, batteries, tires, medical products, and instruments used in aeronautical and space navigation.

In addition, China unveiled another retaliation list of U.S. goods worth $50 billion that could be subject to an additional 25 percent tariff. China’s list of 106 products includes soybeans, airplanes, automobiles, beef, and chemicals.

The Section 301 Committee will convene a public hearing on May 15, 2018 to discuss the proposed action in response to China’s IP acts, policies, and practices. Requests to appear at the hearing must be submitted by April 23, 2018. The request must also include a summary of testimony, along with the pre-hearing submission. Interested parties may submit written comments by May 11, 2018, and post-rebuttal comments by May 22, 2018.

USTR requests that public comments include the following:

  • The specific products to be subject to increased duties, including whether products listed in the Annex should be retained or removed, or whether products not currently on the list should be added.
  • The level of increase in the rate of duty, if any.
  • The appropriate aggregate level of trade to be covered by additional duties.USTR also requests that commenters specify whether maintaining or imposing additional tariffs on the product would cause economic harm to U.S. interests.
  • If a party is commenting on the inclusion or removal of a product already listed as a proposed item to be subject to additional tariffs, USTR requests that commenters address whether imposing increased tariffs on the product would be practicable or effective in eliminating China’s IP acts, policies, and practices.

On April 1, 2018, the Ministry of Commerce of the People’s Republic of China announced the country’s intention to impose retaliatory tariffs on U.S. goods. The Ministry suggested that China’s response was not designed to escalate tensions between the two countries. Instead, China hopes that the U.S. will quickly rescind the Section 232 tariffs that “violate World Trade Organization rules,” according to the Ministry’s statement on Sunday.

China informed the WTO on March 29 that it would suspend concessions on 128 U.S. products in retaliation to the Section 232 tariffs on steel and aluminum imports. According to the filing, China will apply an additional duty of 15 percent on 120 items including fruits, nuts, wine, and steel and iron tubes and pipes; and an additional duty of 25 percent on 8 items including pork and aluminum scrap. China acted pursuant to Article 8 of the Agreement on Safeguards by notifying the WTO of its intention to impose retaliatory tariffs against the United States.

The Trump administration responded to China’s retaliatory tariffs by telling China to focus on fixing its own “unfair trading practices” instead of targeting “fairly traded” U.S. exports by imposing additional tariffs.

The tariffs on the 128 U.S. goods took effect on April 2, 2018.

On March 26, 2018, the European Commission launched a safeguard proceeding against imports into the EU of a wide range of steel products in 26 different categories. Per the Notice of Initiation, the proceeding is intended to counter the threat of trade diversion by exporting producers from various countries now subject to the Section 232 national security tariff of 25 percent on imports of steel into the U.S.

Since March 2016, the EU has maintained a surveillance system for steel imports. The system has provided recent evidence imports of certain steel products are increasing. This development may be further exacerbated as third-country producers are now likely to redirect to other markets, and especially the EU, an amount of their exports originally destined for the U.S.

In accordance with the rules of the WTO Agreement on Safeguards, the EU proceeding covers the products concerned from all origins. If upon conclusion of the proceeding in 9 months it is deemed necessary to protect EU steel producers from a surge in imports, the EU may impose import tariffs or quotas. In the meantime, the EU also has the option to impose provisional measures if EU steel producers are deemed to merit immediate protection from a surge in imports.

According to the Notice, in order to obtain the information needed for its investigation, the Commission will “send questionnaires to the known producers of the like or directly competing products and to any known associations of producers, in the Union. The completed questionnaires must reach the Commission within 21 days from the date on which they are sent.”

Also, “All interested parties including exporting producers, importers and users of the products concerned and their associations are invited to make known their views in writing, submit information and to provide supporting evidence. Representations in a free format should be submitted within 21 days of the date of publication of this Notice in the Official Journal of the European Union [April 16, 2018]. Interested parties may make themselves known by contacting the Commission, preferably by email, immediately but no later than 15 days after the publication of this Notice in the Official Journal of the European Union, and request a questionnaire [April 10, 2018]. The completed questionnaire should be submitted within 21 days from the date on which they are sent.”

On March 22, President Trump issued two new Proclamations exempting Australia, Argentina, South Korea, Brazil, and EU member countries from the Section 232 aluminum and steel tariffs, which enter into force March 23, until May 1, 2018.

A statement issued by the White House said the president made the decision “based on factors including ongoing discussions regarding measures to reduce global excess capacity in steel and aluminum production by addressing its root causes.”

President Trump will decide by May 1 whether or not to continue to exempt these countries based on the status of the discussions.

Canada and Mexico were exempted in the original Proclamations on steel and aluminum issued on March 8. Both are now subject to the same May 1 deadline for the U.S. to evaluate whether the countries’ exemptions will continue.

U.S. Customs and Border Protection issued a message via its Cargo Systems Messaging Service (CSMS) late on March 22 providing direction on the exemption of the countries named above.

On March 19, Commerce published a Federal Register Notice which detailed the procedure to request product exclusions from the new imported steel and aluminum tariffs.

In addition, the agency established two web pages and accompanying exclusion request forms, one each for steel and aluminum, explaining the process, how to file exclusion requests, the detailed information to be provided, and how to file exclusion objections.

Per its new web pages and exclusion request forms, Commerce explains:

  • Exclusion Requests will be open for public review after being posted to the federal rulemaking portal.
  • There is no specific deadline to file exclusion requests, as they may be submitted at any time.
  • During the initial 30 days, U.S. parties may file objections to the exclusion request.
  • After this initial 30 day period, approximately 60 days will be necessary for complete review and vetting of the Exclusion Request and any related Objection Filings.
  • The total processing time for exclusion requests is estimated at 90 business days.
  • A single response to each exclusion request and related objection filings will be posted in regulations.gov indicating if the exclusion request has been granted or denied.

There is a link on each page to the exclusion forms and instructions on how to upload it once completed.

Further, Commerce provided some guidelines, to include:

  • A separate Exclusion Request must be submitted on each distinct type and dimension of aluminum or steel product to be imported.
  • Exclusion Request Requirements: Only individuals or organizations that use aluminum or steel products in business activities in the United States may submit an Exclusion Request. This includes those involved in construction, manufacturing, and supplying steel or aluminum products to users.
  • For an Exclusion Request to be considered, the exclusion requester must provide factual information on:
    • 1) the single type of aluminum or steel product they require using a 10-digit HTSUS code, including its specific dimension;
    • 2) the quantity of product required (stated in kilograms) under a one-year exclusion; and
    • 3) a full description of the properties of the aluminum or steel product it seeks to import, including chemical composition, dimensions, strength, toughness, ductility, magnetic permeability, surface finish, coatings, and other relevant data.
  • All exclusion requests will be reviewed for completeness. Only fully completed exclusion requests will be considered and posted for public review. All exclusion requests will be made available for public inspection and copying.

The European Commission released a list of U.S. products on Friday, March 16, that could be subject to tariffs if the President does not exclude the EU from the Section 232 tariffs. The list was released a week after President Trump signed the proclamations to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports, which officially take effect on March 23.

Canada and Mexico are currently excluded from the tariffs, but other countries with a ‘security relationship’ to the United States could be eligible for exemption. The U.S. Trade Representative, Ambassador Robert Lighthizer, is leading the negotiations with countries seeking exemptions from the Section 232 tariffs. The European Commission, along with Brazil, South Korea, Japan, India, and Australia, has pressed the United States to exempt them from the upcoming tariffs.

The products that could be subjected to the retaliatory tariffs include U.S. agricultural goods such as sweetcorn, grain rice, and cranberries, along with Kentucky bourbon, cigars, t-shirts, jeans, and motorcycles.

 

The president’s decision last week to impose a 25 percent global tariff on certain steel imports, and a 10 percent global tariff on certain aluminum imports, includes the following products:

Aluminum products within the scope of the global tariffs:

  • Primary unwrought aluminum, not alloyed – 7601.10
  • Primary unwrought aluminum, alloyed – 7601.20
  • Semi-finished aluminum bars, rods, and profiles – 7604
  • Aluminum wire – 7605
  • Semi-finished aluminum plates, sheets, and strip – 7606
  • Foil of all types – 7607
  • Tubes and Pipe Extrusions – 7608
  • Tube or Pipe Fittings – 7609
  • Castings and Forgings – 7616.99.5160 and 7616.99.5170

Steel products within the broad scope of the global tariffs:

  • Carbon and alloy flat products – produced by rolling semi-finished steel through varying sets of rolls, including sheets, strips, and plates.
  • Carbon and alloy long products – that fall outside the flat products category, including bars, rails, rods, and beams.
  • Carbon and alloy pipe and tube products – either seamless or welded pipes and tubes, some of which may include stainless and alloys other than stainless.
  • Carbon and alloy semi-finished products – consisting of initial, intermediate solid forms of molten steel, to be re-heated and further forged, rolled, shaped, or otherwise worked into finished steel products, including blooms, billets, slabs, ingots, and steel for castings.
  • Stainless steel products – flat-rolled, pipe and tube, and semi-finished forms, containing at minimum 10.5 percent chromium and, by weight, 1.2 percent or less of carbon, offering better corrosion resistance than other steel.

The tariffs are effective on March 23.

Companies can seek to get product exclusions of the aforementioned products via exclusion requests. The Secretary will publish the procedures on the Federal Register notice by March 18, 2018.

For what is known about product exclusions at this time, please click here.

On March 8, President Trump officially signed proclamations imposing a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum pursuant to Section 232(b) of the Trade Expansion Act of 1962.

The signing of the proclamations came exactly one week after the president abruptly announced his decision to impose the global tariffs during a White House meeting with key steel and aluminum executives.

The effective date of the tariffs is March 23, exactly 15 days after the official announcement.

The proclamations provide for Country Exemptions and Product Exclusions.

Country Exemptions

The tariffs apply to steel and aluminum imported from all countries. However, Mexico and Canada are exempt from the tariffs. Certain other countries with which the United States has “a security relationship” may be eligible for a similar exemption. No countries are listed and the term “security relationship” is undefined. The U.S. Trade Representative, Ambassador Robert Lighthizer, will lead negotiations with countries seeking such exemptions. A timeframe for such discussions has not been announced.

Product Exclusions

The specific procedure to seek product exclusions has not yet been announced. The proclamations require it to be “issued within 10 days,” which is March 18. The Department of Commerce, in coordination with other agencies including the Department of Defense and the U.S. Trade Representative, is responsible for creating the procedures, as well as reviewing and approving submitted product exclusion requests.

The proclamations included certain requirements for product exclusions.

First, an exclusion request may only be made by “a directly affected party located in the United States.” Thus, foreign entities appear ineligible to submit the request.

Second, the following criteria are listed for exclusion requests:

  1. An eligible requestor must show a product is not produced in the United States in a sufficient and reasonably available amount, or of a satisfactory quality.
  2. The request must be based on specific national security considerations.

Country Retaliation

Shortly after the president announced his decision to impose a global tariff on steel and aluminum imports, the President of the European Commission, Jean-Claude Juncker, drafted a proposal for dispute settlement consultations with the United States. Other countries also announced retaliation on U.S. exports including Kentucky bourbon, orange juice, Levi jeans, Harley-Davidson motorcycles, and certain steel products under Chapters 72 and 73 of the Harmonized Tariff Schedule. This sets the stage for international negotiations.

To keep up with the latest developments on the Section 232 steel and aluminum investigations and tariffs, please click here to subscribe to the blog’s Section 232 Investigations section.

On March 1, the President announced his intention to impose tariffs of 25 percent on all imported steel and 10 percent on all imported aluminum. When finalized, the tariffs could increase costs of performance and restrict available supply for contractors across a range of industries. Federal contractors who manufacture or use products containing steel or aluminum should examine their existing contracts, as many may include risk-shifting provisions with opportunities for recovery through price adjustments or relief through schedule adjustments. Federal contractors also should consider re-evaluating pricing of offers and revising standard contract terms. Click here to read the full post on our Government Contracts blog.

 

On March 1, President Trump abruptly announced his decision to impose tariffs on steel and aluminum imports pursuant to Section 232 of the Trade Expansion Act of 1962. The day started with conflicting news reports as to whether the president would announce his decision to impose tariffs, followed by the spontaneous announcement by President Trump during a White House meeting with key U.S. steel and aluminum executives.

According to those in attendance, the president announced that the U.S. will impose a 25 percent tariff on all imported steel and a 10 percent tariff on all imported aluminum for an “unlimited period” of time. The president did not specify any country exemptions, nor did he discuss the process to exclude products from the scope.

Click here to continue reading the full version of this alert.