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U.S. Still Mulling Possible Trade Remedies on Steel and Aluminium Products

As previously reported, the U.S. Department of Commerce is conducting separate investigations under Section 232 of the Trade Expansion Act of 1962 to determine whether increasing imports of foreign-made steel and aluminium threaten U.S. economic security and military preparedness. These investigations could result in the imposition of tariffs, quotas or other restrictions on a wide range of imported steel and aluminium products at some point in the future. However, it is uncertain whether the United States will ultimately impose any such restrictions or use the DOC reports to persuade its trading partners to do more to address global overcapacity in the steel and aluminium sectors.

As of late July, the Trump administration was still wrestling with the measures that could be imposed in these proceedings. It is understood that the more moderate wing of President Trump’s trade and economic team, such as Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn and President Trump’s son-in-law and senior adviser Jared Kushner, favour a more conciliatory  approach that deals with global steel and aluminium overcapacity on a multi-lateral basis. On the other hand, the more isolationist and protectionist members of the administration, such as White House strategist Steve Bannon and Director of the White House National Trade Council Peter Navarro, would rather impose import restrictions on subject merchandise.

If the DOC concludes that steel and/or aluminium are being imported in such quantities or under such circumstances as to threaten to impair U.S. national security, and the president concurs (a decision he has up to 90 days to make), the president has broad authority to adjust imports of steel and/or aluminium and their derivatives, including through the use of tariffs and quotas. Any import adjustments, or any other non-trade-related actions the president may elect to take, would be imposed within 15 days of the president’s determination to act.

The DOC is reportedly considering, among other options, the possibility of pursuing voluntary agreements with several major steel and aluminium producers, including mainland China, that may require those producers to voluntarily curb their exports to the United States. Also currently on the table is the option of imposing tariffs, quotas, or a combination of both. Commerce Secretary Wilbur Ross is aware of the complexity of this matter, including the likelihood of retaliation by the European Union and other U.S. trade partners as well as the possible negative impact that overly broad restrictions could have on the U.S. food processing sector, and is therefore proceeding with caution. It is worth mentioning that European Commission President Jean-Claude Juncker stated in mid-July that the EU is “in elevated battle mode” and prepared to “react with countermeasures within days” if the United States imposes any restrictions on EU steel.

Various U.S. companies and lawmakers are trying to persuade the administration to limit the scope of any eventual trade remedies. For example, a group of 23 House lawmakers urged President Trump on 25 July to exclude tinplate steel and aluminium for food packaging from any tariffs or other trade restrictions on steel and aluminium. Tinplate steel and aluminium are primary components in the domestic manufacturing of food packaging and ostensibly have no national security applications. The lawmakers contend that domestic can manufacturers rely on imports of tinplate steel classified under HTSUS 7210.12.0000, 7210.70.6090 and 7210.50.0000 to meet approximately 42 percent of domestic demand. Given that tinplate represents about 60 percent of the cost of a can, the lawmakers state, even a tariff as low as five percent on imported tinplate would increase the cost of goods by US$0.042 each.

In addition to tinplate steel, the lawmakers expressed concern about the potential unintended negative impact of any import restrictions on aluminium foil, a critical input in confectionery wrappings, condiment sachets, drink pouches and other food packaging. When coupled with the on-going antidumping investigation into mainland Chinese aluminium foil imports, the lawmakers argue, the U.S. food packaging and manufacturing industries could face significant increases in food packaging input costs due to aluminium foil, and particularly domestic ultra-thin foil, not being available in the United States.

U.S. food and beverage groups sent a separate letter to the president on 24 July calling for the following inputs to be excluded from any eventual tariffs or quotas on aluminium products: primary aluminium, aluminium cansheet bodystock classified under HTSUS 7606.12.3045, aluminium can lid stock classified under HTSUS 7606.12.3055, other aluminium cansheet classified under HTSUS 7606.12.3090, aluminium used beverage container scrap classified under HTSUS 7602.00.0030, aluminium waste and scrap other than used beverage container scrap classified under HTSUS 7602.00.0090, aluminium slugs classified under HTSUS 7616.99 and 7606.91, and low purity (non-military) aluminium ingot classified under HTSUS 7601.10.6000. The 34 signatories contend that any import restrictions on these items would “add hundreds of millions in costs for companies in the food and beverage industry” and “detrimentally affect over 82,000 American manufacturing jobs in industries that rely on these products.”

Meanwhile, the U.S. International Trade Commission is moving forward with its Section 201 global safeguard investigations on large residential washers classified under HTSUS 8450.20.00, 8450.11.00, 8450.90.20 and 8450.90.60, as well as crystalline silicon photovoltaic cells classified under HTSUS 8541.40.6020, 8541.40.6030, 8501.61.00, 8507.20.80 and 8501.31.80. These proceedings cover imports of subject merchandise from all sources, including Hong Kong and mainland China.

The relief being sought in the large residential washer probe is a three-year tariff-rate quota that would permit a base level of subject goods to enter the United States without safeguard tariffs while ensuring that the domestic industry would not experience further injury due to additional surges in imports. Meanwhile, the relief being sought in the investigation on crystalline silicon photovoltaic cells is up to eight years of higher tariffs and minimum prices on imports of subject merchandise from all sources, as outlined below:

  • an additional tariff starting at US$0.40/watt per cell and falling incrementally to US$0.33/watt in year four
  • a minimum price starting at US$0.78/watt per module and falling incrementally to US$0.68/watt in year four
  • a new economic investment development programme funded with the safeguard tariffs
  • an equitable distribution of AD and CV duties collected in two existing AD/CV cases
  • bi-lateral and multi-lateral negotiations to reduce global excess capacity

The USITC intends to submit its report to the president no later than 13 November in the crystalline silicon photovoltaic cell probe and no later than 4 December in the large residential washer probe. Any relief proposed by the USITC is merely advisory; it is up to the president to make the final decision on whether to provide relief as well as its form, amount and duration. The relief may initially be imposed for up to four years and extended to no more than eight. If import relief is provided, the USITC would periodically report on developments within the industry during the period of relief. At the conclusion of any relief period, the USITC would have to report to the president and Congress on the effectiveness of the relief action.

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