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U.S. Imposes Tariffs on Derivative Steel and Aluminum Imports

In Short

The Situation: The Trump administration announced new tariffs on imports of certain derivative, or "downstream," steel and aluminum articles with exemptions for certain countries. These tariffs are in addition to the existing tariffs on certain raw steel and aluminum imports.

The Result: On February 8, 2020, certain aluminum and steel derivative articles will become subject to additional tariffs of 10 percent and 25 percent, respectively.

Looking Ahead: U.S. companies that import steel or aluminum derivatives subject to the additional tariffs should consider the impact the tariffs will have on their businesses and look for a potential product exclusion request process through the U.S. Department of Commerce's ("Commerce") 232 Exclusions Portal.

On January 24, 2020, President Trump issued a presidential proclamation ("Proclamation") under Section 232 of the Trade Expansion Act of 1962 ("Section 232") expanding the scope of duties on steel and aluminum imports from raw steel and aluminum products to certain derivatives of aluminum and steel, including nails, wire, staples, and stampings. The additional duties of 10 percent on aluminum derivative products and 25 percent on steel derivative products will go into effect on February 8, 2020, subject to exemptions for certain countries. President Trump indicated that the expanded duties are necessary to address "circumvention that is undermining the effectiveness" of existing steel and aluminum tariffs. 

Background

In January 2018, Commerce transmitted a report to the president pursuant to Section 232 finding that aluminum and steel articles were being imported into the United States in quantities and under circumstances that threatened to impair the national security of the United States. In response, President Trump imposed additional tariffs of 25% on steel imports and 10% on aluminum imports in March 2018, with exemptions and quotas for certain countries. 

The Proclamation follows a new report from Commerce finding that, while imports of aluminum and steel articles have declined, imports of certain derivatives of aluminum and steel articles have significantly increased since the imposition of the 2018 tariffs and quotas. Based on the report's assessment, the Proclamation found that this increase in shipments of derivative articles is tied to an attempt by foreign producers to "circumvent" the duties on aluminum and steel and concluded that duties on derivative products were therefore "necessary and appropriate to address circumvention that is undermining the effectiveness" of the steel and aluminum tariffs.

What Is a Derivative Article? 

In conjunction with the Proclamation, Commerce released Annex I (aluminum) and Annex II (steel), which identify the specific derivative articles subject to the new tariffs. The aluminum derivative articles include certain stranded wire, cables, plaited bands, slings, bumper stampings, and body stampings. The steel derivative articles include certain nails and tacks (other than thumb tacks, drawing pins, corrugated nails, staples, bumper stampings, and body stampings).

Commerce determined that the products included in the annexes satisfy the following criteria set forth in the Proclamation: 

  • The aluminum article or steel article represents, on average, two-thirds or more of the total cost of materials of the derivative article; 
  • Import volumes of such derivative article increased year-to-year since June 1, 2018, following the imposition of the 2018 tariffs in comparison to import volumes of such derivative article during the two preceding years; and
  • Import volumes of such derivative article following the imposition of the tariffs exceeded the four percent average increase in the total volume of goods imported into the United States during the same period since June 1, 2018.

Excepted Countries 

The tariffs will apply to aluminum derivatives from all countries except Argentina, Australia, Canada, and Mexico and steel derivatives from all countries except Argentina, Australia, Brazil, Canada, Mexico, and South Korea.

Product Exclusions

The Proclamation authorizes Commerce to provide relief from the additional duties in the form of product exclusions for: (i) any derivative article determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality; and (ii) specific national security considerations. As of this writing, a product exclusion process has not been announced for derivative steel and aluminum products.

Three Key Takeaways

  1. Effective February 8, 2020, certain aluminum and steel derivatives will be subject to duties of 10 percent and 25 percent, respectively.
  2. U.S. companies that import aluminum or steel derivatives should review and evaluate whether their imports will be subject to additional tariffs. 
  3. Stakeholders should monitor developments for a potential product exclusion request process to seek relief from the additional duties

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