Section 232 Investigations

Last updated on 6/15/2018: added new U.S. Section 301 tariffs; added translated version of Mexican retaliatory measures and updated Mexico section.

U.S. Trade Actions

Action Covered Products Rate Increase Effective Date
Section 232 Steel and Aluminum Steel – 25%
Aluminum – 10%
6/1/2018
Status: Steel – all countries of origin except South Korea, Brazil, and Argentina (agreed to quotas); and Australia (exempted).

Aluminum – all countries of origin except Argentina (agreed to quota); and Australia (exempted).

Section 232 Autos and Automotive Parts TBD TBD
Status: For the latest status, please click here.
Section 301 For covered products in List 1, please click here.

 

For covered products in List 2, please click here.

25%

 

 

TBD

7/6/2018

 

 

TBD

Status: List 1 is composed of 818 of the original 1,333 tariff lines, and goes into effect on 7/6/2018.

List 2 is composed of 284 proposed tariff lines identified by the interagency Section 301 Committee. These will see further review, to include a public hearing.

For full details, please click here.

Retaliatory Actions

Canada For covered products, please click here. Table 1 – 25%
Table 2 – 10%
7/1/2018
Status: Canadian companies/industry associations have until 6/15/2018 to submit comments supporting or expressing concern about items on the list.
EU For covered products, please click here. Annex I – 10% or 25%
Annex II – 10% – 50%
Annex I – 7/1/2018 (tentative);
Annex II – 3/23/2018 or 5th day after WTO Dispute Settlement Body rules against the U.S. action, whichever is first.
Status: For the latest status, please click here.
Mexico For the translated list of covered products, please click here. 7% – 25% (pages 1-4)

10% – 15% (page 5)

6/5/2018

7/5/2018

Status: Most retaliatory measures effective as of 6/5/2018. An “exception” list is effective on 7/5/2018.
China For covered products, please click here. Annex I – 15% – 25% 4/3/2018
Status: For the latest status, please click here.

 

On June 6, the European Commission (Commission) issued a press release stating, “The College of Commissioners endorsed today the decision to impose additional duties on the full list of US products notified to the World Trade Organisation (WTO), as part of the EU’s response to the US tariffs on steel and aluminium products.”

The release went on to state, “Following today’s decision to apply additional duties to selected imports from the United States, the Commission expects to conclude the relevant procedure in coordination with Member States before the end of June so that the new duties start applying in July.”

The Commission asserts the “rebalancing duties is fully in line with WTO rules, and corresponds to a list of products previously notified to the WTO. The WTO Safeguards Agreement allows for a rebalancing corresponding to the damage caused by the US measures with EU exports worth €6.4 billion (2017) being affected. The EU will therefore exercise its rights immediately on US products valued at up to €2.8 billion of trade. The remaining rebalancing on trade valued at €3.6 billion will take place at a later stage – in three years’ time or after a positive finding in WTO dispute settlement if that should come sooner.”

The retaliation tariffs (the rebalancing duties) may be found here. Those expected to begin in July are listed in Annex I (almost all at 25 percent). Annex II contains those to begin in three years, or after a positive finding in WTO dispute settlement. Those tariffs range from 10 to 50 percent.

 

On June 5, U.S. Customs and Border Protection (CBP) issued a message providing instructions for importers who receive approval for a steel or aluminum product exclusion from the Department of Commerce (DOC).

The message states, “Upon receipt of the approved product exclusion from the DOC, for the importer of record listed in the approved exclusion, please provide that company’s name, address and importer of record number, and the associated product exclusion number, to U.S. Customs and Border Protection (CBP) at Traderemedy@cbp.dhs.gov. You must provide this information to CBP before the importer of record submits the exclusion number with entries to CBP.”

Further instructions on how to provide the information are included.

It adds, “Exclusions granted by DOC are retroactive on imports to the date the request for exclusion was posted for public comment at Regulations.gov. To request an administrative refund for previous imports of excluded products granted by DOC, importers may file a Post-Summary Correction (PSC) and provide the product exclusion number in the Importer Additional Declaration Field.”

The message also states if an “entry has already liquidated, importers may protest the liquidation.”

 

 

Media sources are reporting the Department of Commerce will not consider steel and aluminum product exclusions for countries subject to quotas. Only countries facing the tariffs will be considered for product exclusions.

Currently, South Korea, Brazil, and Argentina have agreed to an absolute quota deal on certain steel products that are subject to the Section 232 tariffs.

The steel quotas are separated into 54 subcategories for South Korea, Argentina, and Brazil. Argentina has already reached its absolute quota for 40 of the 54 subcategories, while 18 subcategories have been filled for Brazil, and 9 have been filled for South Korea.

As of June 1, 2018, all countries of origin except Argentina and Australia are subject to the 10 percent tariff on aluminum products. Argentina agreed to cap exports of aluminum at 100 percent of the average exports to the U.S. over the last 3 years. The absolute quota is divided into two subcategories, equaling over 180,000 short tons per year.

Once a country reaches its quota for the quota period no entry for consumption of the product will be permitted.

Australia is currently the only country to have maintained a country-based exemption without having agreed to a quota regime.

 

 

On May 31, 2018, the Department of Commerce announced the imposition of tariffs on imported steel and aluminum products from Canada, Mexico, and the European Union (EU). The 25 percent tariff on imported steel and the 10 percent tariff on imported aluminum products officially took effect on June 1, 2018. Canada, Mexico, and the EU had been temporarily exempted from the Section 232 tariffs during the ongoing renegotiation of NAFTA and trade discussions with the EU.

In response to the Section 232 measures, all three countries immediately condemned President Trump’s decision to eliminate the temporary country exemptions.

Canada unveiled a trade-restrictive tariff list valued at over $12.8 billion worth of U.S. products that will take effect on July 1, 2018 and will remain in place until the U.S. terminates the steel and aluminum tariffs on Canada. The scope of countermeasures is separated into two tables. Table 1 includes steel and aluminum products, which will be subject to a 25 percent duty; while goods selected from Table 2 will be subject to a 10 percent duty. Canada lodged a WTO challenge last Friday and is also asking for the establishment of a NAFTA dispute settlement panel.

Earlier in May, the EU also published two retaliation lists targeting American exports that could reach up to $7.5 billion. The first phase of tariffs will be implemented on June 20th, which will equal 2.8 billion euros (over $3.3 billion USD) worth of U.S. goods. The second phase will either be implemented on March 23, 2021, or the 5th day following the date of the adoption by, or notification to, the WTO Dispute Settlement Body of a ruling that the U.S. Section 232 tariffs violate the WTO Agreement, whichever comes first.

Mexico announced on June 4 that it “will initiate a dispute settlement process against the U.S. at the WTO.” Furthermore, Mexico’s Ministry of Economy published a list of U.S. goods that will be subject to equivalent measures to the Section 232 tariffs – including flat steel, lamps, pork legs, sausages, food preparations, apples, grapes, blueberries, various cheeses, and other products.

Please click here for the full list in Spanish.

 

 

On May 31, 2018, President Trump signed two new presidential proclamations adjusting steel and aluminum duties initiated under Section 232 of the Trade Expansion Act of 1962.

These ended temporary exemptions of duties for imports of steel and aluminum products from the European Union (EU), Canada, and Mexico. As a result, a 25 percent duty on steel products and a 10 percent duty on aluminum products are now being collected on imports from those countries.

President Trump originally announced the Section 232 tariffs on March 8, 2018. However, on March 22, he temporarily exempted imports of steel and aluminum from Australia, Argentina, South Korea, Brazil, Canada, Mexico, and EU member countries from the tariffs until May 1, 2018. President Trump subsequently extended this deadline to June 1.

The most recent May 31 proclamations continued tariff exemptions for imports from Brazil, Argentina, and South Korea, as those countries negotiated quotas restricting steel and aluminum exports to the U.S. The Proclamations announced the aggregate limits of imports from Argentina and Brazil, while the administration previously announced specific quota amounts for steel products from South Korea on April 30, 2018. The only country exempted from the tariffs and not subject to quotas is Australia.

A statement issued by the White House noted that “measures are in place to address the impairment to the national security threatened by imports of steel and aluminum from Argentina, Brazil, and Australia” and that “similar measures are not in place with respect to steel or aluminum imports from Mexico, Canada, or the European Union.” The statement also said “the Administration will continue discussions with [Mexico, Canada, and the European Union] and remains open to discussions with other countries.”

On May 23, 2018, the Secretary of Commerce initiated an investigation to determine the effects on the national security of imports of automobiles, including cars, SUVs, vans and light trucks, and automotive parts. This investigation has been initiated under section 232 of the Trade Expansion Act of 1962, as amended.

On May 30, 2018, the Department of Commerce (Commerce) published in the Federal Register details on the public hearing, scheduled for July 19-20, as well as the schedule for commenting and submitting rebuttal comments.

Interested parties are invited to submit written comments, data, analyses, or other information pertinent to the investigation to the Department of Commerce by June 22, 2018. Rebuttals to those comments are due by July 6, 2018.

June 22 is also the deadline for requesting to appear at the public hearing and for submissions of a summary of expected testimony.

Commerce will hold a public hearing on the investigation on July 19 and 20, 2018 in Washington, DC. The notice identifies the issues on which the Department is interested in obtaining the public’s views and discusses the procedures for public participation in the hearing.

Per the notice, Commerce is particularly interested in the following criteria as they affect national security:

 

 

  • The quantity and nature of imports of automobiles, including cars, SUVs, vans and light trucks, and automotive parts and other circumstances related to the importation of automobiles and automotive parts;
  • Domestic production needed for projected national defense requirements;
  • Domestic production and productive capacity needed for automobiles and automotive parts to meet projected national defense requirements;
  • The existing and anticipated availability of human resources, products, raw materials, production equipment, and facilities to produce automobiles and automotive parts;
  • The growth requirements of the automobiles and automotive parts industry to meet national defense requirements and/or requirements to assure such growth, particularly with respect to investment and research and development;
  • The impact of foreign competition on the economic welfare of the U.S. automobiles and automotive parts industry;
  • The displacement of any domestic automobiles and automotive parts causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;
  • Relevant factors that are causing or will cause a weakening of our national economy;
  • The extent to which innovation in new automotive technologies is necessary to meet projected national defense requirements;
  • Whether and how the analysis of the above factors changes when U.S. production by majority U.S.-owned firms is considered separately from U.S. production by majority foreign-owned firms; and
  • Any other relevant factors.

According to a May 23 U.S. Department of Commerce (Commerce) press release, “U.S. Secretary of Commerce Wilbur Ross initiated an investigation under Section 232 of the Trade Expansion Act of 1962, as amended. The investigation will determine whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts into the United States threaten to impair the national security as defined in Section 232.”

The results of the Section 232 national security investigations into imports of aluminum and steel should give the auto and automotive parts industry pause. Steel was assigned a 25 percent tariff and aluminum 10 percent. There are opportunities for country exemptions and product exclusions. Country exemptions are handled by the Trump administration, but product exclusions must be submitted by U.S. companies to Commerce. To date, more than 10,000 comments have been filed with Commerce related to steel product exclusions, as well as 1,500 related to aluminum product exclusions.

Commerce is also considering a Section 232 investigation into uranium, though no decision on that has been made.

Commerce now has 270 days to conduct an investigation and prepare a report on its findings for submission to the President.

The Secretary of Commerce must consult with the Secretary of Defense during the investigation and may request of his counterpart an assessment of the defense requirements for autos and automotive parts. The communications Commerce receives from other U.S. Government agencies, such as the Department of Defense, is not available for public inspection. In the course of its investigation, Commerce may also solicit additional information from other sources through the use of questionnaires or other means.

In the event action against auto and automotive imports is found to be necessary based on Commerce’s report, the President has authority to take action to “adjust imports” of autos and/or automotive parts. The potential remedies available to the President in this context include changing the rate and form of import duties on autos and/or automotive parts without apparent limitation, as well as limiting or restricting autos and/or automotive parts imports, including through the negotiation of an agreement to that effect.

Commerce stated in the press release that a notice will be published shortly in the Federal Register announcing a hearing date and inviting comment from industry and the public to assist in the investigation. This is the only time interested parties will be afforded an opportunity to present information and advice relevant and material to the investigation (e.g., written comments, opinions, data, information or advice). The public hearing will also allow interested parties the opportunity to submit oral or written information.

Using the Section 232 investigation into imports of steel as a guide, below is an approximate timeline for the auto and automotive parts investigation.

Event Allotted Time Approximate Date
Initiation of DOC investigation May 23, 2018
Federal Register Notice announcing public hearing and soliciting comments approx. 7 days May 30, 2018
Request to participate in public hearing with summary of oral presentation approx. 21 days June 20, 2018
Participation in public hearing approx. 35-42 days July 11, 2018
Submission of post-hearing comments approx. 7 days  

July 18, 2018

 

Overall conduct of DOC investigation 270 days February 17, 2019
Presidential determination whether to act 90 days May 18, 2019
Delay within which action must be taken 15 days from President’s determination June 2, 2019
President must inform Congress 30 days from President’s determination July 2, 2019

On April 30th, the President issued two proclamations extending country exemptions for certain U.S. allies on the steel and aluminum tariffs pursuant to Section 232(b) of the Trade Expansion Act of 1962.

The President extended temporary exemptions for Canada, Mexico, and the European Union, granted a permanent exemption on steel tariffs for South Korea, and is considering permanent exemptions for Australia, Argentina, and Brazil. Trump’s administration unveiled its decision to extend the country exemptions just prior to the May 1st deadline, leaving the countries unaware whether the tariffs would go into effect by midnight.

In addition, the proclamation creates new limitations by eliminating the ability of manufacturers to receive a refund on steel/aluminum duties when exporting from the United States. Specifically, the new proclamation eliminates drawback claims on steel and aluminum. The elimination of drawback claims follows the elimination of foreign trade zone benefits for steel/aluminum imports in the earlier revisions to the steel/aluminum proclamations.

The United States temporarily extended the country exemptions for Canada, Mexico, and the European Union until June 1st, 2018. Trump originally stated that a successful NAFTA renegotiation between the three countries would result in a permanent exemption for Canada and Mexico. However, Canada and Mexico said that there is no connection between the NAFTA renegotiations and the Section 232 tariffs.

The United States determined to permanently exempt South Korea after the two countries concluded discussions to reduce steel overcapacity. South Korea agreed to limit its exports of steel products to 70 percent of its current volume, or 2.86 million tons of steel, to the U.S. each year. However, South Korea is no longer exempted from the aluminum tariffs as of May 1, 2018.

The proclamations also indefinitely extended temporary exemptions for Australia, Argentina, and Brazil. Although the agreements with Australia, Argentina, and Brazil will be finalized shortly, the President threatened to re-impose the tariffs if the deals are not finalized quickly. “Because the United States has agreed in principle with these countries, in my judgment, it is unnecessary to set an expiration date for the exemptions. Nevertheless, if the satisfactory alternative means are not finalized shortly, I will consider re-imposing the tariff,” the President said in the steel and aluminum presidential proclamations.

What’s Next?

China, India, and Turkey have requested WTO consultations with the United States over the Section 232 tariffs on imported steel and aluminum products. If the European Union does not receive a permanent exemption, then it is also likely that the EU will request WTO consultations with the U.S.

Countries argue that the tariffs violate the WTO’s Agreement on Safeguards and Article XXI’s National Security Exception pursuant to the 1994 GATT Agreement. If the U.S. successfully sets a precedent of Article XXI for national security reasons, then other members of the WTO could invoke the never-before-used Article to apply tariffs or sanctions as retaliation against U.S. exports.

On April 19, Crowell & Moring’s International Trade Attorneys hosted a webinar on “Trade in 2018 – What’s Ahead?”

Please click here to register and view the webinar on demand.

Summary

From the Section 232 national security tariffs on steel and aluminum imports to the ongoing NAFTA re-negotiation, the Trump administration is seeking to implement significant changes in international trade policy and enforcement. Economic sanctions on Russia continue to expand, the future is far from clear regarding Iran, and perhaps North Korea is coming into focus. A new Asia trade agreement without the United States, and a bumpy road ahead for Brexit all make for uncertainty and the need for enhanced trade risk management. Join us as we identify the international trade risks and opportunities likely to continue and grow in 2018.

Our Crowell & Moring team discussed predictions for the remainder of the year, with cross-border insights from our practitioners in the U.S., London, and Brussels. Topics included likely trends and issues in the U.S. and EU including:

  • Trade policy developments: Section 232, NAFTA renegotiation, and trade remedies
  • Sanctions in Year Two of the Trump Administration: Russia, Iran, North Korea, and beyond
  • Anti-money laundering (AML) and beneficial ownership
  • Supply chain risk management: blockchain, forced labor, the U.K. Modern Slavery Act, and GDPR
  • Europe: Brexit, the EU’s 4th AML Directive, and the EU/U.K. AML enforcement
  • CFIUS: how significant is the new legislation?
  • Export controls: Wither reform?
  • Import and customs