International Law

Tariff Exclusions Still Available, But There?s a Catch

By Fred Rocafort

Last week, the U.S. Department of Commerce approved our request to exclude a client’s steel imports from the Section 232 tariff. This exclusion will translate into 25% savings for our client when importing the steel products subject to the exclusion.

What are Section 232 tariffs?

With all the talk about “China tariffs” it is easy to lose sight of the fact there are other tariffs as well, some of which have nothing to do with China. The Section 232 tariff applies to all steel imports, irrespective of country of origin, with the exception of imports from Canada and Mexico. In addition, there is a 10% Section 232 tariff on all aluminum imports.

Under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862), as amended, when an article “is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security,” the president “shall . . . adjust the imports of such article and its derivatives … so that such imports will not so threaten to impair the national security.”

According to the presidential proclamation imposing the tariffs,

The Secretary [of Commerce] found that the present quantities of steel articles imports and the circumstances of global excess capacity for producing steel are ?weakening our internal economy,? resulting in the persistent threat of further closures of domestic steel production facilities and the ?shrinking [of our] ability to meet national security production requirements in a national emergency.?  Because of these risks and the risk that the United States may be unable to ?meet [steel] demands for national defense and critical industries in a national emergency,? and taking into account the close relation of the economic welfare of the Nation to our national security . . . the Secretary concluded that the present quantities and circumstances of steel articles imports threaten to impair the national security . . . .

The tariff exclusion process

As happened with the Section 301 tariffs imposed on Chinese products, a process to request exclusions from the Section 232 tariffs was established. Contrary to the Section 301 process, however, no time limit has been set for submitting exclusion requests.

The Section 232 exclusion process requires much more information about the product whose exclusion is being requested than its Section 301 counterpart. It was clearly designed by people who know about the tariffed products, i.e., steel and aluminum. By contrast, the Section 301 process felt like the U.S. Trade Representative (USTR) version of “Change My Mind,” with the requests centered on demonstrating the lack of sourcing alternatives outside of China. In some instances, product specs were critical to the question of availability, such as when a similar products were available in the United States. Even then, however, it was up to the requestor to determine which specs to use.

What comes next?

As with other aspects of U.S. trade policy, the continuing imposition of Section 232 tariffs could potentially be impacted by the results of the upcoming presidential election. However, while Joe Biden has been critical of tariffs imposed by Trump,

Biden is backed by labor unions who want job protections and infrastructure spending, and progressives who want action on climate change, lower drug prices and human rights, while facing demands from farmers and U.S. corporations eager for tariff cuts and a less disruptive China trade relationship.

The mix of conflicting interests adds up to a wait-and-see approach that could keep many of the tariffs Biden would inherit from Trump in place for years, say former and current advisers, lobbyists and trade analysts.

.      .      .      .

‘I will use tariffs when they are needed, but the difference between me and Trump is that I will have a strategy – a plan – to use those tariffs to win, not just to fake toughness,’ Biden wrote in a statement to the United Steelworkers union in May. Steel and aluminum tariffs would stay until a global solution to limit excess production – largely centered in China – can be negotiated, it said.

This of course does not mean President Biden would be bound by what candidate Biden said. Once in the Oval Office, courting the labor vote may become less important than regaining the trust of the many allies who feature among the top importers of steel to the United States. Plus, Foreign Policy points out, “Democratic presidential candidates have a history of campaigning as trade skeptics and governing as trade liberalizers.” At the same time, though, an “about-face on trade would deepen rifts with the increasingly powerful left wing of the Democratic Party and make Biden and the party vulnerable to Trump?s Republican successors.”

The bottom line is that, even in the event of a Biden victory, the Section 232 tariffs could remain in place for the foreseeable future so you should apply for your Section 232 tariff exclusion now.

Full post as published by China Law Blog on October 19, 2020 (boomark / email).