In keeping with President Trump’s stated desire to assist the U.S. aluminum and steel production industries, he has issued orders to impose special duties on aluminum and steel imports into the U.S. under the authority of section 232 of the Trade Expansion Act of 1962. In other words, he is declaring that the national security of the United States is jeopardized by the potential weakening or disappearance of domestic aluminum and steel production capabilities due to foreign imports.
The presidential proclamations were issued on March 8, 2018, and were made effective by Customs and Border Protection (CBP) on March 23, 2018 (see Proclamations 9705 and 9704). The proclamations have been clarified to exempt a list of ally countries. Additionally, there is an exemption request process for users of imported steel and aluminum via the Commerce Department’s Bureau of Industry and Security (BIS).
If you are an importer of steel or aluminum into the United States, you need to understand the scope of the orders. First, you will need to know what Harmonized Tariff Schedule (HTS) numbers fall within the definitions of aluminum and steel articles:
“Aluminum articles are defined in the HTS as: (a) unwrought aluminum (HTS 7601); (b) aluminum bars, rods, and profiles (HTS 7604); (c) aluminum wire (HTS 7605); (d) aluminum plate, sheet, strip, and foil (flat rolled products) (HTS 7606 and 7607); (e) aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and (f) aluminum castings and forgings (HTS 76220.127.116.11 and 7618.104.22.168), including any subsequent revisions to these HTS classifications.”
“Steel articles are defined at the HTS 6-digit level as: 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90, including any subsequent revisions to these HTS classifications.”
CBP has issued critical information for implementing the presidential orders, and can be found on its Cargo Systems Messaging Service (CSMS). According to the most recent message, here are the more salient points to remember:
March 23, 2018 through April 30, 2018: All countries of origin except Canada, Mexico, Australia, Argentina, South Korea, Brazil and member countries of the European Union (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom).
Importers need to understand the difference between the country of origin and country of export. These orders apply to the country of origin. What defines a country of origin is a field of study, but at a high level it means the country in which the product was produced as opposed to the country from which it was last shipped. For further explanation, see this informed compliance publication by CBP.
Notice the statement in CBP’s CSMS message that these exemptions are only good through April 30, 2018. As of May 1st, all countries of origin will be impacted. Also note that there are no quotas in effect at this time, but that may change going forward.
With regard to South Korea, however, a tentative agreement on changes to the Korea/US Free Trade Agreement (KORUS) may mean that the South Korea will be indefinitely exempt from the 25% duties on steel in exchange for limiting steel exports to the US to “70 percent of the annual average Korean steel exports to the United States between 2015-2017” — in other words, a quota. President Trump has stated however, that he may hold up finalizing the agreement until a separate deal on North Korean denuclearization is reached.
Chapter 99 Special Provisions
For the proscribed list of steel and aluminum tariff numbers, importers will have to use the accompanying Chapter 99 special provision HTS numbers and pay the appropriate duties. If an import declaration line item from one of the affected countries of origin uses one of the affected HTS numbers, and the special chapter 99 number is not present; CBP’s system will send a reject message to the filer.
Importers should pay attention to the Chapter 99 Subchapter III notes #16 and #19 of the HTS. Importers will probably not be surprised that they cannot avoid duties by using special programs such as free trade agreements. Duties can be postponed by entering merchandise into a Free Trade Zone as “foreign privileged status”, but will be subject to the duties upon entry into the commerce of the U.S. Even goods placed in an FTZ in foreign privileged status before the March 23rd effective date will be subject to the Chapter 99 provisions when entered into the U.S.
Since the tariff numbers for the steel products in chapters 72 and 73 of the HTS are unconditionally free from duty, the special tariff rate is a 25% flat ad valorem rate. The aluminum tariff provisions, however, do have associated duty rates. Therefore, the special provision duty rate is 10% in addition to the normal rate of duty. For those familiar with the structure of the HTS, here are the chapter 99 provisions:
Domestic Party Exclusion Requests
There has been much discussion by economists and others as to the ramifications to domestic industries utilizing foreign aluminum and steel in their manufacturing processes. Will the number of U.S. jobs impacted by the duties be greater than the number of jobs saved in the aluminum and steel industries? While it remains to be seen if any exclusions to domestic parties will be given, there is a clear process established for making the requests through BIS. The federal register noticeexplaining the process was issued on March 19, 2018. Basically, to be granted an exclusion, the steel or aluminum materials would have to be, “… determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality or based upon specific national security considerations.” For those interested in seeing the applications for exclusions or opposing arguments to exclusion requests, see the related dockets (steel BIS-2018-0006, aluminum BIS-2018-0002) on the Regulations.gov website. It may take a while for the submitted comments to be made available for viewing, but you can see the volume of comments submitted so far.
Importers will need to stay up to date as changes occur to the current set of requirements. There is a lot going on right now due to the Administration’s aggressive trade posture, including the proposed actions to be taken against China, but it is possible to stay in compliance and plot supply chain strategies with the right information available. Stay tuned.
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