On January 24, 2020, President Trump issued a Proclamation on Adjusting Imports of Derivative Aluminum Articles and Derivative Steel Articles into the United States under section 232 of the Trade Expansion Act of 1962. Except as otherwise provided in the proclamation, all imports of derivative aluminum articles specified in Annex I to the proclamation shall be subject to an additional 10 percent ad valorem rate of duty, and all imports of derivative steel articles specified in Annex II to this proclamation shall be subject to an additional 25 percent ad valorem rate of duty, with respect to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on February 8, 2020.
These rates of duty, which are in addition to any other duties, fees, exactions, and charges applicable to such imported derivative aluminum articles or steel articles, shall apply to imports of derivative aluminum articles described in Annex I to the proclamation from all countries except Argentina, Australia, Canada, and Mexico and to imports of derivative steel articles described in Annex II to this proclamation from all countries except Argentina, Australia, Brazil, Canada, Mexico, and South Korea.
The additional duties are being imposed because the Secretary of Commerce (the Secretary) has determined that domestic steel producers’ capacity utilization has not stabilized for an extended period of time at or above the 80 percent capacity utilization level identified in his report as necessary to remove the threatened impairment of the national security. Capacity utilization in the aluminum industry has improved, but it is still below the target capacity utilization that the Secretary recommended in his report. The Secretary has also informed the President that imports of certain derivatives of aluminum articles (identified in Annex I to the proclamation) and imports of certain derivatives of steel articles (identified in Annex II) have significantly increased since the imposition of the tariffs and quotas. The net effect of the increase of imports of these derivatives has been to erode the customer base for US producers of aluminum and steel and undermine the purpose of the proclamations adjusting imports of aluminum and steel articles to remove the threatened impairment of the national security.
Extension to excepted countries
Pursuant to the proclamation, the Secretary is required to monitor imports of such articles from excepted countries and, with the concurrence of the USTR, is authorized to extend application of the tariff imposed by the proclamation on imports of any derivative article experiencing a surge of imports from any excepted country, or to adopt appropriate quotas for imports of such derivative article from such country, or to negotiate a voluntary agreement with such country to ensure that imports of such derivative article from such country do not undermine the effectiveness of the adjustment of imports made in Proclamation 9704 and Proclamation 9705, as amended.
Exclusions
The Secretary, in consultation with the Secretaries of State, Treasury and Defense, the USTR, the Assistant to the President for National Security Affairs, the Assistant to the President for Economic Policy, and such other senior executive branch officials as the Secretary deems appropriate, is authorized to provide relief from the additional duties for any derivative article determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality and is also authorized to provide such relief based upon specific national security considerations. Such relief shall be provided for a derivative article only after a request for exclusion is made by a directly affected party located in the United States.
Foreign Trade Zones
Derivative articles that are subject to the tariffs, except those eligible for admission under “domestic status” as defined in 19 C.F.R. 146.43, that are admitted into a US foreign trade zone (FTZ) on or after 12:01 a.m. EST on February 8, 2020, may only be admitted as “privileged foreign status” as defined in 19 C.F.R. 146.41, and will be subject upon entry for consumption to any ad valorem rates of duty related to the classification under the applicable HTSUS subheading.
Any derivative article that is described in Annex I or Annex II, except those eligible for admission under “domestic status,” that is subject to the duty imposed by clause 1 of this proclamation, and that was admitted into a US FTZ under “privileged foreign status” prior to 12:01 a.m. EST on February 8, 2020, will likewise be subject upon entry for consumption to any ad valorem rates of duty related to the classification under the applicable HTSUS subheading added by the proclamation.
Derivative articles shall not be subject upon entry for consumption to the duty established in clause 1 of this proclamation merely by reason of manufacture in a US FTZ. However, derivative articles admitted into a US FTZ in “privileged foreign status” pursuant to the proclamation shall retain that status.
Drawback
No drawback shall be available with respect to the duties imposed on any derivative article imposed under the proclamation. It is expected that the new proclamation will be challenged because of the strict time limits imposed by section 232. When the President raised Turkish steel tariffs to 50%, a three-judge panel of the US Court of International Trade, in Transpacific Steel LLC v. United States, et al (Slip Op. 19-142, Nov. 15, 2019), held that while section 232 gave the President broad discretion, it must be exercised within section 232’s time limits and procedures.
