More Developments in the Section 232 and Section 301 Tariff Fronts

Earlier this year, the U.S. imposed tariffs on certain steel and aluminum products imported into the United States from all countries for national security reasons in response to an investigation conducted by the Commerce Department’s Bureau of Industry and Security (“BIS”) under Section 232 of the Trade Expansion Act of 1962—Section 232 gives the Executive Branch the ability to conduct investigations to assess the effects of imports on U.S. national security. Shortly thereafter, the Trump Administration announced that it would also impose increased tariff rates on certain goods imported from China under Section 301 of the Trade Act of 1974—Section 301 authorizes the Office of the United States Trade Representative (“USTR”) to investigate unreasonable and discriminatory trade practices. In an effort to keep you updated on the most recent developments in the  Section 232 and Section 301 tariff fronts, the following provides a recap of the events that have occurred in June and July to date.

July 2018 Developments to Date: 

• China Files WTO Complaint against the US: Yesterday, China filed an additional complaint at the World Trade Organization (“WTO”) challenging the U.S. proposal to impose an additional 10% tariff on a list of products from China worth $200 billion. The United States, which issued the new list last week, intends to retaliate against China’s retaliatory tariffs against U.S. products.

• US Initiates WTO Dispute Settlement Proceedings with 5 Key Trading Partners: Yesterday, the U.S. initiated its own WTO dispute settlement proceedings with Canada, Mexico, the European Union, Turkey and China over tariffs that those countries have imposed on U.S. products in response to the steel and aluminum duties imposed by the U.S. under Section 232 of the Trade Expansion Act of 1962. The USTR stated that the administration’s steel and aluminum tariffs are justified under the national security exception in Article XXI of the General Agreement on Tariffs and Trade (GATT). The USTR also noted that the retaliatory duties imposed by the five countries are completely without justification under international rules. 

• Senate Non-Binding Motion to Restore Congressional Authority in Section 232 Cases: Last week, the Senate approved a non-binding motion to restore congressional authority over tariffs enacted under Section 232 to protect national security. The motion requires the Senate energy and water appropriations bill to include language that would give Congress a role in determining national security concerns under Section 232.  

• Possible Introduction of Senate Bill to Revise and Modify Section 232 Processes: Also, last week, it was reported that Senator Rob Portman (R-OH) intends to introduce a bill to reform Section 232 by narrowing the scope of the definition of “national security,” including the Department of Defense in initial national security determinations, giving Congress a role in the decision to take Section 232 actions against allies and strategic trade partners, as well as  expanding the current statutory provisions relating to Congressional joint motions of disapproval. With respect to the latter, the bill will likely seek to expand the process for motions of disapproval in Section 232(c) to apply to all products and not just to petroleum or petroleum products (which are currently the only products specified under the statute). The bill reportedly has not been drafted as of yet, but it has been reported that Sen. Portman would like to introduce the legislation in the next couple of weeks.

• U.S. Proposes to Impose Retaliatory 10% Tariffs against Additional Chinese-Origin Goods in Response to China’s Retaliation: Late in the day on July 11th, the U.S. Trade Representative (“USTR”) announced that the United States may impose additional 10% ad valorem duties on an entirely new list of Chinese-origin goods valued at $200 billion. The new list covers certain Chinese agricultural goods, chemicals, materials used in building construction projects, and electronics. The USTR’s proposal was issued in response to China’s retaliation against the first round of Section 301 tariffs that took effect on July 6th. 

• Section 301 Product Exclusion Requests: On July 11th, the USTR announced the process for submitting exclusion requests from the application of the Section 301 tariffs against imports of certain Chinese-origin products into the United States. Each request will need to identify a particular product, provide supporting data and describe the rationale for the requested exclusion. The USTR will evaluate each request on a case-by-case basis taking into account whether the exclusion would undermine the objective of the Section 301 investigation. Approved exclusions will be applied retroactively, starting from July 6, 2018, and will extend for one year after the publication of the exclusion in the Federal Register. 

• Section 301 Tariffs Take Effect on Chinese-Origin Goods: On July 6th, additional 25% tariffs on the initial group of Chinese-origin products imported into the United States took effect.

• China Imposes Tariffs on US-Origin Goods in Response to Section 301 Tariffs: On July 11th, the very same day that the Section 301 tariffs went into effect, China retaliated by imposing increased tariffs on U.S.-origin products imported into China. China is now assessing 25% tariffs on U.S.-origin goods classified under 545 Harmonized System subheadings, which include agricultural products, SUVs, electric vehicles, whiskey, dog food and tobacco. China is also threatening to impose tariffs on 114 additional U.S.-origin goods if the U.S. takes further action under Section 301.

June Developments: 

• USTR Publishes List of Goods Subject to Section 301 Tariffs: On June 20th, the USTR published a notice in the Federal Register announcing the imposition of the 25% ad valorem duties on certain Chinese-origin products–the ones that took effect on July 6th. Affected goods included items classified in over 800 HTSUS subheadings valued at $34 billion—these items are identified in Annex A of the June 20th Federal Register notice published by the USTR. In addition, the USTR also requested public comments on the proposed imposition of additional tariffs on more Chinese-origin goods, which are valued at $16 billion—they are identified in Annex C of the June 20th Federal Register notice. The public comment process for the proposed on the Annex C items is ongoing.

• Section 232 Product Tariff Exclusions: In late June, the Commerce Department began issuing decisions on requests for exclusions from the Section 232 tariffs on steel and aluminum products. Commerce Secretary Wilbur Ross testified before the Senate Committee on Finance and stated that the Department of Commerce (“DOC”) received more than 22,000 exclusion requests, and that  it had processed 98 of the steel-related requests as of June 20th of which 42 (43%) were approved. The 42 exclusion requests that were granted cover seven different companies importing steel products from Japan, Sweden, Belgium, Germany, and China, as follows: Schick Manufacturing, Inc. of Shelton, Connecticut; Nachi America Inc. of Greenwood, Indiana; Hankev International of Buena Park, California; Zapp Precision Wire of Summerville, South Carolina; U.S. Leakless, Inc. of Athens, Alabama; Woodings Industrial Corporation of Mars, Pennsylvania; and PolyVision Corporation of Atlanta, Georgia. In addition, as of June 20th, the DOC rejected approximately 3,000 exclusion request submissions and received approximately 4,000 objections to requests. By way of background, in March, the DOC published rules for requesting exclusions from the Section 232 tariffs on imported steel and aluminum products. Separate exclusion requests must be submitted electronically to the Commerce Department (using the forms available on the Commerce Department’s website) for each type or dimension of imported steel or aluminum product at issue. The DOC may grant exclusions for products that are not produced in the United States in a sufficient quantity and reasonably available amount or of satisfactory quality, or based upon specific national security considerations. However, only individuals or organizations operating in the United States that use the subject steel or aluminum in their business activities can submit the applications, and any approved product exclusion will be limited to the individual or organization that submitted the specific exclusion request. Further, exclusion request approvals are valid for only a one-year period and will not be applied retroactively.

If you have any questions or need further information as to the applicability of the Section 301 tariffs to your products, the product exclusion process or other international trade-related issues, please contact Miller Proctor Law PLLC (Melissa Proctor – melissa@millerproctorlaw.com).