11 May 2018
Steel and Aluminium Tariff Exclusion Process Criticised as U.S. Temporarily Extends Exemptions for Several Countries
The White House announced on 20 April that Mira Ricardel, who has led the U.S. Department of Commerce’s Bureau of Industry and Security since last August, will be leaving that post to become deputy national security advisor. The departure comes as BIS is under mounting pressure to handle the voluminous amount of product-specific exclusions companies are seeking from the additional tariffs President Trump imposed on imports of steel and aluminium products (25 percent and 10 percent, respectively) as of 23 March.
The following products are covered by the tariffs, which are in addition to any other applicable duties, fees, exactions and charges.
- steel articles classified under HTSUS 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.11 through 7306.90, including any subsequent revisions to these HTSUS classifications
- the following aluminium articles: (i) unwrought aluminium (heading 7601); (ii) aluminium bars, rods and profiles (heading 7604); (iii) aluminium wire (heading 7605); (iv) aluminium plate, sheet, strip and foil (flat rolled products) (headings 7606 and 7607); (v) aluminium tubes and pipes and tube and pipe fitting (headings 7608 and 7609); and (vi) aluminium castings and forgings (HTSUS 7616.99.5160 and 7616.99.5170), including any subsequent revisions to these HTSUS classifications
In a 19 April letter, Senate Finance Committee Chairman Orrin Hatch (Republican-Utah) and Ranking Member Ron Wyden (Democrat-Oregon) urged the DOC to make improvements to the exclusion request process, which they said has so far lacked “basic due process and procedural fairness for stakeholders” as well as “appropriate mechanisms” to ensure the process is not “abused for anticompetitive purposes.” For example, the letter said, the forms for requesting exclusions collect information on more than 70 attributes of each product and an additional form is apparently required whenever a single attribute differs between products. This process “increases the burden on businesses that purchase or produce products with even minor variations,” the letter said, and “appears to bar small businesses from relying on trade associations to consolidate product information and make submissions on behalf of multiple businesses.”
The letter also highlighted a lack of information on issues such as (i) the circumstances in which BIS will approve the broader application of a product-based exclusion to additional importers or how importers may request such an exclusion, (ii) a clear process for protecting business proprietary information, (iii) how BIS intends to address purchasers and producers of customised articles for which the required information may be unavailable until the article has been purchased, (iv) whether and how BIS will inform petitioners and objectors that it has issued a determination, and (v) whether and how BIS intends to ensure it issues consistent determinations across similarly-situated petitioners and objectors. The senators urged U.S. Commerce Secretary Wilbur Ross to make improvements in these areas “as soon as practicable” and to provide an update within two weeks on his progress in addressing their concerns.
Press reports indicate that one of the primary complaints about the exclusion request process is how long it takes. When the process was announced BIS said reviews would normally not exceed 90 days, but the letter noted that as of 18 April BIS had posted for comment fewer than 100 of the more than 3,800 requests received so far. Since the date a request is posted for public comment is the date back to which any exclusion granted will be retroactive, the letter said the “significant delays” in posting these requests “risk serious and permanent financial harm to many petitioners that, even in DOC’s judgment, should not be subject to the Section 232 tariffs.”
It is unclear what effect the departure of BIS chief Mira Ricardel may have on these delays. Ricardel, a former official in the departments of Defense, Commerce and State as well as a senior defence industry executive, was named on 19 April as deputy to National Security Advisor John Bolton. Bolton cited her expertise in “national security matters related to our alliances, defence posture, technology security, foreign security assistance, and arms control” among the reasons for his choice.
Lawmakers are also growing increasingly uneasy about the failure of the Trump administration to provide adequate justification for the imposition of the steel and aluminium safeguard tariffs. In a 3 May letter to Secretary Ross, Senate Homeland Security and Governmental Affairs Committee Chairman Ron Johnson (Republican-Wisconsin) and Ranking Member Claire McCaskill (Democrat-Missouri) complained that the DOC has not produced the information on these tariffs that Sen. Johnson requested on 8 March, including (i) detailed cost-benefit analyses on the effects of the tariffs on each affected sector of the U.S. economy (including potential retaliatory tariffs); (ii) data on steel and aluminium requirements for national security; (iii) retrospective economic analyses of prior tariffs to assess the downstream effects on input-reliant industries and consumer prices; and (iv) information on how the administration will quantify its measure(s) of success for the steel/aluminium tariffs. The two lawmakers said the American people “deserve to know the consequence of the steel and aluminium tariffs” because those tariffs will “ripple throughout the entire U.S. economy and affect millions of Americans.” The lawmakers warned that if the DOC fails to produce the entirety of the information requested the committee may be forced to subpoena that information.
Meanwhile, President Trump recently issued separate proclamations modifying the list of U.S. trading partners exempt from the steel and aluminium safeguard tariffs. South Korea has been permanently exempted from the steel tariff after agreeing to measures to reduce excess steel production and capacity and contribute to increased capacity utilisation in the United States. This includes a quota that restricts the quantity of steel articles imported from South Korea to 70 percent of average shipments between 2015 and 2017, or about 2.7 million tonnes. Aluminium imports from South Korea are subject to the additional tariff on that product as of 1 May.
The steel and aluminium tariff exemptions for Argentina, Australia and Brazil will be continued indefinitely while the United States works to finalise agreements in principle it has reached with these countries. However, Trump warned that these tariffs could be imposed if agreements are not finalised “shortly.” A White House statement noted that in these negotiations the United States is “focused on quotas that will restrain imports, prevent transshipment, and protect the national security.”
The tariff exemptions for Canada, Mexico and the member countries of the European Union have been extended through 31 May to allow a continuation of discussions. While the United States is pushing for these trading partners to agree to quotas as well, all three have indicated that because of their close relationships with the United States they expect permanent exemptions without such measures. The EU has said it would impose retaliatory tariffs on U.S. exports if a permanent exemption is not granted.
The proclamations also indicate that (i) no additional tariffs will be imposed on steel or aluminium imports from other countries at this time, (ii) covered steel and aluminium articles will not be subject to the additional tariffs merely by reason of manufacture in a U.S. foreign-trade zone, (iii) articles admitted to an FTZ in privileged foreign status will retain that status, and (iv) no drawback will be available with respect to these additional duties. With regard to point (i) above, the United States will maintain the safeguard tariffs at 25 percent and 10 percent, respectively, for the time being, but those rates could potentially be raised in order to compensate for the loss in derived benefits due to the implementation of any permanent exemptions.