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21 February 2018 US Department of Commerce proposes duty surcharge on steel and aluminum imports On 16 February 2018, the United States (US) Department of Commerce Secretary Wilbur Ross released two anticipated reports on the Department's investigations into the impact on national security from imports of certain steel mill products and from imports of wrought and unwrought aluminum. These investigations were carried out under Section 232 of the Trade Expansion Act of 1962, as amended, and as requested by the President of the United States in April 2017. In the reports, the Department of Commerce found that the quantities and circumstances of steel and aluminum imports "threaten to impair the national security," as defined by Section 232. The reports are currently under consideration by the President, and no final decisions have been made with regard to their contents. The President is required to make a decision on the steel recommendations by 11 April 2018, and on the aluminum recommendations by 19 April 2018. The President may take a range of actions, or no action, based on the analysis and recommendations provided in the reports. Action could include making modifications to the courses of action proposed, such as adjusting percentages. The key findings of the Steel Report indicate that the US is the world's largest steel importer, with imports exceeding four times exports and has seen plant closures and job losses since 2000. This is in contrast to increases of world steelmaking capacity during the same time that exceeds global demand. Secretary Ross has recommended that the President consider the following alternative remedies to address the problem of steel imports:
Each of these remedies is intended to increase domestic steel production from its present 73% of capacity to approximately an 80% operating rate, the minimum rate needed for the long-term viability of the industry. Each remedy applies measures to all countries and all steel products to prevent circumvention. The tariffs and quotas would be in addition to any duties already in place. The report recommends that a process be put in place to allow the Secretary to grant requests from US companies to exclude specific products if the US lacks sufficient domestic capacity or for national security considerations. Any exclusions granted could result in changed tariffs or quotas for the remaining products to maintain the overall effect. The key findings of the aluminum report indicate that aluminum imports have risen rapidly since 2012 while the US industry has seen plant closures and significant drops in employment. Additionally, the current reduced military spending on aluminum is insufficient to sustain the viability of current producers, however reliance on high-quality aluminum alloy needed for military aerospace, and the use of aluminum in the Infrastructure context, is critical to national and economic security. Secretary Ross has recommended to President Trump three alternative remedies for dealing with the excessive imports of aluminum as follows:
Each of the three proposals is intended to raise production of aluminum from the present 48% average capacity to 80%, a level that would provide the industry with long-term viability. Each remedy applies measures to all countries and all steel products to prevent circumvention. The tariffs and quotas would be in addition to any duties already in place. The report recommends that a process be put in place to allow the Secretary to grant requests from US companies to exclude specific products if the US lacks sufficient domestic capacity or for national security considerations. Any exclusions granted could result in changed tariffs or quotas for the remaining products to maintain the overall effect. Both companies importing steel and aluminum products under the scope of both investigations, and those who use steel and aluminum products may be significantly impacted by any excess duties or quotas imposed. It will be difficult for many companies to adjust supply chains or sourcing patterns quickly, if they can be adjusted at all, and consequently may incur significant excess costs. Potentially impacted businesses should consider options and develop alternatives for consideration should the President take action. Note, however, as the President may choose to vary action from the recommendations, and any actions will likely include yet to be defined anti-circumvention measures, it is very difficult to plan mitigation strategies in any detail at this point. Additionally, several countries have already suggested the possibility of retaliation through counter trade measures should the President implement restrictions on steel and aluminum imports, which could have serious impact on a broader range of industries and economic sectors. For example, China could well restrict imports of agriculture products such as livestock feed sourced from the US if it determines action on steel and aluminum impacts its global trading of these commodities. Document ID: 2018-5309 |
