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March 9, 2018 US President Trump imposes tariffs on steel and aluminum products – Mexico and Canada excluded On 8 March 2018, United States (US) President Trump signed Presidential proclamations imposing additional tariffs of 25% on specifically defined articles of steel, and additional tariffs of 10% on specifically defined articles of aluminum, effective on 23 March. Both proclamations specifically exclude Canada and Mexico, and leave the door open to approving exemptions for additional countries that are able to reach agreement with the US on "satisfactory alternative means to address the threat to the national security" caused by imports from that country. The imposition of tariffs follow the US Commerce Department's investigations and recommendations to the President under Section 232 of the Trade Expansion Act of 1962, as amended, which concluded that imports of certain steel and aluminum products "threaten to impair the national security of the United States."1 According to published information from the Department of Commerce, the top international sources of steel imported into the US are: Brazil, Canada, Germany, Japan, Mexico, Russia, South Korea and Turkey, each exporting one million metric tons or more of steel annually to the US. The Department of Commerce aluminum Investigation under Section 232 found that the top exporters of aluminum into the US are: Argentina, Bahrain, Canada, China, India, Qatar, Russia, South Africa and the United Arab Emirates. Canada alone accounts for roughly 50% of the US' aluminum imports. The articles that fall under the scope of the steel proclamation are: (a) carbon and alloy flat products (sheets, strips and plates); (b) carbon and alloy long products (bars, rails, rods and beams); (c) carbon and alloy pipe and tube products (pipe and tube products); (d) carbon and alloy semi-finished products (semi-finished products such as blooms, billets, slabs and ingots); and (e) stainless products: steel products, in flat-rolled, long, pipe and tube, and semi-finished forms, containing at minimum 10.5% chromium and, by weight, 1.2% or less of carbon, offering better corrosion resistance than other steel. These products are classified under the Harmonized Tariff Schedule (HTS) subheadings 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90. The articles that fall under the scope of the aluminum proclamation are: (a) unwrought aluminum; (b) aluminum bars, rods, and profiles; (c) aluminum wire; (d) aluminum plate, sheet, strip, and foil (flat rolled products); (e) aluminum tubes and pipes and tube and pipe fitting; and (f) aluminum castings and forgings. These products typically fall under HTS headings 7601, 7604 through 7609 and 7616.99.51.60 and 7616.99.51.70. The Presidential proclamations follow reports from the Department of Commerce issued on 16 February recommending additional tariffs. To address certain articles in which the Commerce Secretary determines there is a lack of sufficient US production capacity of comparable products in response to specific requests from affected domestic parties, the President, through the proclamations, has provided authorization to the Commerce Secretary to exclude import restrictions on those steel articles as necessary. A number of countries have warned of retaliation in the event that the US adopted the additional tariffs. The European Union (EU) Commission, meeting on 7 March, endorsed a proposal of potential counter measures against US products ranging from US steel, agricultural products, bourbon, peanut butter, to cranberries and orange juice. China and South Korea have also stated they are reviewing options. As with the EU proposal, actions by a country believed to be injured by the additional US duties on steel and aluminum could impact a wide range of US exports. Companies importing steel and aluminum products under the scope of both orders, and those who use steel and aluminum products may be significantly impacted by the additional duties 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. Impacted business should review sourcing options, and consider short supply exemptions if merited. US exporters will want to carefully monitor reactions of primary export locations, as the scope of any retaliatory measures could be very broad. ——————————————— 1 See EY Global Tax Alert, US Department of Commerce proposes duty surcharge on steel and aluminum imports, dated 20 February 2018. ——————————————— For additional information with respect to this Alert, please contact the following: Ernst & Young LLP, Chicago
Ernst & Young LLP, Dallas
Ernst & Young LLP, Houston
Ernst & Young LLP, Irvine
Ernst & Young LLP, New York
Ernst & Young LLP, San Jose
Ernst & Young LLP, Seattle
——————————————— PDF version of this Tax Alert
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