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Safeguard Tariffs on Derivative Steel and Aluminium Products Enter into Force Despite Legal Challenge

A range of derivative steel and aluminium products now face additional tariffs of 25 percent (steel) and 10 percent (aluminium) following a decision by President Trump to expand the scope of the safeguard tariffs on steel and aluminium ostensibly to thwart on-going efforts by foreign producers to circumvent those tariffs. The expanded tariffs entered into force on 8 February despite an effort by a Texas-based distributor of building materials to suspend their implementation by requesting a temporary restraining order from the U.S. Court of International Trade.

The Trump administration has adjusted the Section 232 tariffs on steel and aluminium on several occasions, including by granting exemptions and tariff-rate quotas to various countries pursuant to bi-lateral discussions. The administration has also modified the duties with little advance notice, as when it sought to punish Turkey by doubling the tariffs applicable to its exports. Many of these actions have been challenged in court, including a lawsuit by the American Institute for International Steel that questioned on constitutional grounds the “essentially unlimited definition of national security” in the statute as well as its “limitless grant of discretionary remedial powers.” The CIT upheld the constitutionality of Section 232 in March 2019 but AIIS’s appeal to the U.S. Court of Appeals for the Federal Circuit led to oral arguments from AIIS and the Trump administration on 10 January 2020. Ultimately, either side could seek to raise the issue to the U.S. Supreme Court, which may or may not accept the case for review.

The Texas-based company filed its petition for a temporary restraining order noting that “neither nails nor any other derivative steel article was listed in the annex of steel articles covered by the initial 2018 Section 232 action.” The company argues that the U.S. Department of Commerce did not conduct a new investigation under the statute, did not provide notice or consult with the U.S. Department of Defense as required by the statute, and did not follow statutorily stipulated deadlines. The plaintiff further contends that the DOC violated the Administrative Procedures Act by failing to provide for public comment and/or a public hearing, and is also of the opinion that the measure in unconstitutional.

It is unclear whether the DOC is equipped to handle the flood of new product exclusion requests that may be come with this expansion of dutiable products. Derivative products are more specialised and thus more likely to only be available from current sources. The DOC has faced many complaints about its handling of exclusion requests to date, so expanded tariffs may add to the volume of petitions facing delays.

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