29 March 2018
Steel/Aluminium Tariff Exclusion Request Process Announced as Lawmaker Introduces Legislation to Nullify Tariffs
The U.S. Department of Commerce’s Bureau of Industry and Security is accepting comments by 18 May on its recently announced process for individuals and organisations to request exclusions from the additional tariffs President Trump has ordered on imports of steel and aluminium. The tariffs of 25 percent and 10 percent, respectively, were implemented as scheduled on 23 March.
Only individuals or organisations using the affected steel or aluminium articles in business activities (e.g., construction, manufacturing or supplying steel product or aluminium product to users) in the United States may submit exclusion requests. BIS notes that allowing individuals or organisations not engaged in business activities in the United States to seek exclusion requests could undermine the adjustment of imports that the president determined was necessary to address the threat to national security posed by imports of steel and aluminium articles. Any individual or organisation in the United States may file objections to exclusion requests but BIS will only consider information directly related to the submitted exclusion request that is the subject of the objection.
Exclusion requests may be submitted at any time and the review period normally will not exceed 90 days. An exclusion will only be granted if an article is not produced in the United States in a sufficient and reasonably available amount or in a satisfactory quality, or for a specific national security consideration. Approved exclusions will be made on a product basis and will be limited to the individual or organisation that submitted the request unless BIS approves a broader application to additional importers. Other individuals or organisations that wish to submit an exclusion request for a product already approved for exclusion may do so. In addition, exclusion requests may be submitted even if a previous request for the same product was denied or is no longer valid. Approved exclusions will be effective five business days after publication of the BIS response on regulations.gov and will generally be approved for one year.
BIS notes that the process set forth in these regulations is separate from the process by which countries may seek exemptions. As of 23 March, a total of seven U.S. trade partners – Argentina, Australia, Brazil, Canada, the European Union, Mexico and South Korea – had been temporarily exempted from the steel and aluminium measures until satisfactory alternative means to address the threatened impairment to U.S. national security are negotiated. These exemptions will expire on 1 May unless the president decides to extend them. Additional economies with which the United States has a security relationship remain welcome to enter into such discussions, which may address measures to reduce global excess steel and aluminium production and capacity as well as measures to increase domestic capacity utilisation. The United States has also floated the idea of imposing “quotas as appropriate” on steel and aluminium imports from exempted trade partners, an action that would appear to contravene WTO rules.
A number of the exempted economies remain wary of the negotiating tactics pursued by the Trump administration. EU leaders have signalled that any negotiations with the United States would be limited to on-going efforts to address global overcapacity in the steel and aluminium sectors as well as other related global issues, and would not delve into bi-lateral concerns. French President Emmanuel Macron declared on 23 March that while the EU would be “willing to discuss all issues” if the United States complied with WTO rules, “we don’t talk about anything out of principle with a gun to our head.” European Commission President Jean-Claude Juncker added that the 1 May deadline is not realistic given the breadth and complexity of the issues at hand.
Meanwhile, the EU has issued two lists of U.S. exports to the 28-member bloc that could be hit with new or higher tariffs at some point in the future should the EU not be able to secure a permanent exemption to the steel and aluminium tariffs. The first list comprises goods for which EU tariff concessions to the United States could be suspended as early as late June (90 days after the date of imposition of the U.S. tariffs). This list is primarily composed of a wide range of iron and steel products (including household appliances and articles) but also includes agricultural goods such as corn, rice, orange juice, whiskey and tobacco products; consumer goods such as cosmetics, t-shirts, shorts, pants and footwear; and other goods such as motorcycles and boats.
The second list details U.S. goods on which increased duties could be imposed in addition to the suspension of tariff concessions, including whiskey, citrus oils, paper products, textile products, apparel, footwear, bedding, kitchenware, household articles, playing cards, glass, jewellery, aluminium items, dishwashers, clothes washers, batteries, electronics, electrical machines, motor vehicles and boats. However, a Reuters article states that these measures would only be taken if the WTO “declared the U.S. tariffs illegal or after a period of three years.” The EU adds that its decision on whether to impose such duties will take into account “future developments including the final form of the [U.S.] measures as regards application to imports from the EU.”
Canada and Mexico have also vowed not to allow the United States to use their exemptions as leverage to obtain more favourable terms in the on-going North American Free Trade Agreement modernisation talks. On the other hand, recent press reports indicate that the United States and South Korea have reached an agreement on a quota for South Korean steel exports as part of the broader process to amend their bi-lateral free trade agreement.
In Washington, Sen. Jeff Flake (Republican-Arizona) has introduced legislation to preclude the additional tariffs on steel and aluminium by prohibiting the implementation of related changes to the Harmonised Tariff Schedule of the United States set forth in two presidential proclamations. Flake said the steel and aluminium tariffs will “do just what tariffs have always done” and lead to job losses and slow economic growth. Flake was also critical of the “poorly defined” exemption process the White House has outlined for specific countries or businesses, which “only serves to harm the economy further by creating uncertainty.”
For example, Flake said, this process would allow the president to decide to “lift tariffs or lessen the burden of tariffs” on a country that agrees to take “this or that” action on an unrelated matter but then “seek to re-impose or make the burden heavier” if the country later takes another, undesirable action. “That simply doesn't work if you're trying to achieve economic growth and if you're trying to convince countries to enter into trade partnerships with you, particularly when you're dealing with our allies,” Flake said. Flake called for support for his bill from “those who have reservations about these tariffs” or “who have expressed admiration for free trade or supply-side economics.” He also sought backing from “those who are happy with the economic growth we have recently achieved,” warning that a trade war resulting from the impending tariffs could reverse economic gains he attributed to through regulatory and tax reform.