The White House last night issued amendments to its proclamations on the Section 232 tariffs placed on steel and aluminum. In sum, the amended proclamation now allows companies who import steel and aluminum from countries originally subject to quota arrangements to apply for product exclusions. Currently Argentina, Brazil and South Korea are subject to quotas. Previously, steel and aluminum from these countries were not eligible for exclusion requests. The following is an email from Rep. Walorski’s office and a report from Inside US Trade on the announcement.
Rep. Walorski’s office email:
President Trump signed a new proclamation on steel and aluminum. This is one of two shoes we’ve been waiting to drop in terms of changes to the exclusions process (the other being the final rule). You can read the steel proclamation here and the aluminum here, but the three major changes made by the proclamations are:
- Allowing companies to file for exclusions for products from countries that agreed to a quota; regulations implementing this order will follow (this was an issue highlighted in the July 24 Ways and Means Committee hearing on the exclusions process)
- Providing grandfathering for contracts for steel from quota countries that meet the following criteria: entered into before March 8, 2018, contains a schedule that specifies the quantity to be shipped, the steel is being used to construct a facilities in the US and cannot be procured from a US supplier that can meet the delivery schedule and specifications, payments in the contract constitute less than 10% of the facility’s construction cost, lack of relief would significantly disrupt the facility’s construction (you’ll recall that grandfathering was ask #7 in Rep. Walorski’s May 7 letter to Commerce)
- Extending retroactive relief back to the date of filing, as opposed to the date of posting on regulations.gov (this was ask #1 in Rep. Walorski’s letter)
The first was expected, given the potentially ruinous circumstances facing some companies. The second was not necessarily surprising as there had seemed to be some willingness to recognize contracts entered into before the tariffs, the only question was how. The third point, frankly, surprised me. I had not seen or heard anything to indicate they were sympathetic to this idea – quite the opposite – so this is great news and maybe, just maybe, an encouraging sign of things to come in the rule.
Looking ahead, we’re still waiting for a final rule that should hopefully contain a rebuttal process and some other changes asked for in Rep. Walorski’s letter. That supposedly coming out any day now. We’ll also see what the process for the exclusions from quotas looks like.
Inside US Trade
U.S. amends Section 232 product exclusion process for countries with quota deals
August 29, 2018
The U.S. on Wednesday amended a controversial Section 232 process to allow companies from countries that agreed to separate quota deals for steel and aluminum to apply for product exclusions.
“Companies can apply for product exclusions based on insufficient quantity or quality available from U.S. steel or aluminum producers,” the Commerce Department said in an Aug. 29 statement. “In such cases, an exclusion from the quota may be granted and no tariff would be owed.”
The White House on Wednesday amended its proclamations on the Section 232 tariffs placed on steel and aluminum to allow companies in countries originally subject to quota arrangements to apply for the product exclusions. President Trump earlier this year directed Commerce Secretary Wilbur Ross to head the Section 232 product exclusion process, which initially was geared only toward those countries hit by tariffs. The Office of the U.S. Trade Representative led a separate country exclusion process.
Steel and aluminum produced in South Korea, Argentina and Brazil can now be considered for exclusions, the White House said.
“President Trump has once again shown his commitment to American workers and businesses, protecting our national security from the threat posed by steel and aluminum imports,” Ross said in the Aug. 29 statement. “This proclamation provides the Department the same product exclusion authority for quotas that we already have for tariffs.”
According to Commerce, in a “limited number of cases, steel articles are being used in a facility construction project in the United States that were contracted for purchase prior to the decision to impose quotas, and cannot presently enter into the United States because a quota has already been reached.”
In such cases, the agency continued, “an exclusion from the quota may be granted, but the product may only be imported upon payment of the 25% tariff.”
Many analysts and trade lawyers have said quotas could be worse for some countries than the tariffs because they can lock some companies out of the market. Also, some have characterized an absolute quota agreed to by the U.S. and South Korea as a significant departure from past quota practices partly because eight of the 54 separate subcategories under the broad quota had already been met when the deal was signed in April.
Because many of the quotas agreed to have “already been filled for this year,” President Trump said on Wednesday, relief for workers was needed as the caps have caused significant disruptions.
“In light of these circumstances, and after considering the impact on the economy and the national security objectives of section 232 of the Trade Expansion Act of 1962, as amended, I have determined to direct the Secretary to provide relief from the quantitative limitations set forth in Proclamation 9740 and Proclamation 9759 in limited circumstances,” he said in a revised proclamation.
The proclamation adds that Commerce, on an expedited basis, should grant relief from the quotas where “(i) the party requesting relief entered into a written contract for production and shipment of such [steel or aluminum] article before March 8, 2018; (ii) such contract specifies the quantity of such [steel or aluminum] article that is to be produced and shipped to the United States consistent with a schedule contained in such contract; (iii) such [steel or aluminum] article is to be used to construct a facility in the United States and such [steel or aluminum] article cannot be procured from a supplier in the United States to meet the delivery schedule and specifications contained in such contract; (iv) the payments made pursuant to such contract constitute 10 percent or less of the cost of the facility under construction; and (v) lack of relief from the quantitative limitations on such [steel or aluminum] article would significantly disrupt or delay completion of the facility being constructed in the United States with the steel article specified in such contract.”
Lighthizer and Korean Trade Minister Kim Hyun-chong met last month to discuss the next steps for updating the U.S.-Korea Free Trade Agreement. In light of that deal, South Korea temporarily agreed not to impose sanctions on the U.S. for zeroing methodology the Commerce Department used to calculate duties on large residential washers from Seoul – leverage South Korea hoped to use in its push to ensure its companies could participate in the product exclusion process, Inside U.S. Trade previously reported. Specifically, sources said Korea pushed for modifications that would allow countries with separate quota deals to apply for steel and aluminum product exemptions.
Industry representatives and lawmakers took aim at the initial presidential proclamations because they would keep some U.S. businesses from obtaining key inputs. The proclamations did “not provide the authority to grant product exclusions for quota countries,” the Commerce Department told Inside U.S. Trade in June.
During a June 20 hearing held by the Senate Finance Committee, Ross defended the Section 232 product exclusion process when pressed by panel Chairman Orrin Hatch (R-UT) to explain the rationale behind barring countries that agreed to quota deals from product exclusions.
“The problem is that a number of countries rammed in a huge amount of product prior to the president’s decisions, and therefore have put in much more than they had in the prior year. So, there’s an intellectual challenge as to whether or not to reward those countries that were trying to game the system,” Ross said.
Also, during a July 24 hearing on the exclusion process, Rep. Dave Reichert (R-WA), chairman of the House Ways & Means trade subcommittee, urged the Commerce Department to amend process so that countries with existing quota deals could apply. – Isabelle Hoagland (firstname.lastname@example.org)