Last month, the Trump Administration increased tariffs on certain steel and aluminum products imported into the United States for national security reasons under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. Ch. 7). Three weeks later, the United States announced that it would also increase tariff rates on additional goods imported from China under Section 301 of the Trade Act of 1974 (9 U.S.C. § 2411). As the U.S. and China continue trading import tariff-related volleys, the following is intended to provide the “need-to-know” developments to U.S. companies operating in global markets.
The Increased Tariffs on Aluminum and Steel
Section 232 of the Trade Expansion Act of 1962 gives the President the ability to conduct investigations to determine the effects of imports on U.S. national security. In January 2018, the Commerce Department’s Bureau of Industry and Security delivered Section 232 reports on steel and aluminum to the President concluding that steel and aluminum imports threaten to impair national security. Accordingly, the Commerce Department recommended that the President act to protect the long-term viability of the U.S. steel and aluminum industries. On March 8, 2018, the President announced the increase in import tariffs on certain aluminum and steel products. See https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote/section-232-investigations. See also https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states/; https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states/.
The increased tariffs apply to products originating in all countries—except for those countries that were specifically exempted. The new tariff rates went into effect on March 23, 2018. The affected steel products include goods classified in HTSUS Subheading 7206.10 – 7216.50, 7216.99 – 7301.10, 7302.10, 7302.40 – 7302.90 and 7304.11 – 7306.90. The affected aluminum products include: unwrought aluminum in HTSUS Heading 7601; aluminum bars, rods and profiles in Heading 7604; aluminum wire in Heading 7605; aluminum plate, sheet, strip and foil in Headings 7608 – 7609; and, aluminum castings and forgings in HTSUS Subheadings 7616.99.5160 and 7616.99.5170. U.S. Customs and Border Protection issued instructions to the import community for the filing of entries subject to the increased tariffs. U.S. importers must report the regular HTSUS classifications applicable to the imported steel products as well as HTSUS Subheading 9903.80.01. For aluminum products, U.S. importers must report the applicable HTSUS classifications of those goods as well as HTSUS Subheading 9903.85.01. See https://www.cbp.gov/trade/programs-administration/entry-summary/232-tariffs-aluminum-and-steel.
The tariffs were intended to apply to imports of the covered products form all countries; however, the following countries have been excluded from the tariffs: the European Union member states; Argentina; Australia; Brazil; Canada; Mexico; and, South Korea.
Relief may be available for U.S. companies and their imports of affected aluminum and steel products. That is, companies may formally request that their products be excluded from the increased tariffs if they can demonstrate that the goods cannot be produced in the U.S. in a sufficient and reasonably available amount or in a satisfactory quality. Products may also be excluded by request based on national security issues. The BIS will accept public comments until May 18, 2018 on the process that will allow interested parties to request exclusions from the increased tariffs. Parties eligible to request such exclusions are individuals or entities that are suppliers of the covered products in the United States or that use them in the United States in construction and manufacturing operations. (Note that any individual or entity in the U.S. may also file objections to the requests for exclusions under the announced process.)
In response, on April 2, 2018, China increased import tariffs on 128 U.S. goods totaling approximately $3 billion in U.S. exports to China. Specifically, China imposed a 15% tariff on the following products: nuts; fresh and dried fruits; grape wine; denatured ethyl alcohol; ginseng roots; and, seamless tubes, pipes and hollow profiles of iron and steel. It also imposed a 25% tariff on aluminum waste and scrap, as well as pork.
Proposed Increase in Tariffs on 1,300 Chinese Products
Section 301 of the Trade Act of 1974 authorizes the Office of the United States Trade Representative (USTR) to investigate unreasonable and discriminatory trade practices. The USTR recently investigated China’s practice of requiring U.S. companies to transfer their intellectual property rights (IPR) and technologies to Chinese companies to obtain business licenses and approval to invest in China. The USTR determined that these practices were indeed unreasonable and discriminatory, and effectively burden or restrict U.S. commerce.
Accordingly, on April 3, 2018, the USTR published a proposed list of 1,300 Chinese products that may be subjected to additional 25% tariffs. (Note that the proposed Section 301 tariff increases would be in addition to the increased duties assessed on aluminum and steel products from China). These tariff increases have not yet taken effect. The Chinese products targeted for the proposed increase in import duties: chemicals and pharmaceutical products; certain rubber products; products of iron and non-alloy steel; airplanes and helicopters; aluminum; boats; electrical machinery; firearms; glass and microscopes; motor vehicles; tires and conveyor belts; and, TV image and sound recorders and reproducers. Interested parties may submit written comments to the USTR on the proposed tariff increase by May 11, 2018, and a public hearing is scheduled to be held on May 22, 2018. Thereafter, the USTR will issue a final determination as to which products will be subject to the increased import duties and the deadline on which those increases will go into effect. See https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/march/section-301-report-chinas-acts. See also https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2018/march/section-301-fact-sheet.
In retaliation, China has proposed to impose an additional 25% tariff on more than 100 U.S. products, such as corn, cotton, sorghum, soybeans and wheat, beets, cranberries, orange juice, tobacco and whiskey. China has also proposed to target certain manufactured items for an additional 25% tariff as well (e.g., aircraft, automotive parts and components, chemicals, off-road vehicles, passenger cars, SUVs and plastics). In addition to the tariff increases, the U.S. has also proposed the imposition of restrictions on Chinese investment in the United States.
As noted above, the U.S. tariff increases under Section 232, as well as China’s retaliatory actions, are currently in effect, and U.S. importers should confirm that they are in full compliance with the new entry requirements applicable to imported aluminum and steel products. However, the tariff increases proposed by the United States and China relating to the Section 301 investigation have not yet gone into force. U.S. companies should be reviewing the list of products that may be subjected to the tariffs proposed by the United States and China and assess how these measures may impact their international operations and supply chains. As with all things international trade-related, U.S. companies need to stay up-to-date on any new developments to ensure that they have sufficient lead time to adapt to these rapid changes.
If you have any questions pertaining to the recent tariff increases on imports of steel and aluminum products, the proposed Section 301 tariff increases on goods imported from China, or other international trade issues, please contact Melissa Proctor at Miller Proctor Law PLLC (email@example.com).