On June 3, President Trump signed a proclamation increasing tariffs on certain imported steel and aluminum to 50% under Section 232 of the Trade Expansion Act of 1962. The proclamation increases the applicable rate of these duties from 25% and makes additional changes as to the applicable duties for certain products which could be subject to multiple tariff schemes. A summary of the effects of this June 3 proclamation are outlined in this update.
Key Points
Increased Rates for Steel and Aluminum: Effective 12:01 am on June 4, the vast majority of specifically identified steel and aluminum articles, as well as derivatives thereof, based on their US Harmonized Tariff Schedule (“USHTS”) Classification will be subject to 50% tariffs. The adjustments to the tariff rate were made based on the Administration’s allegation that the US steel and aluminum industries have yet to meet the domestic capacity goals identified to support US national security interests.
Expansion of Content Carve-out for Derivatives under USHTS Chapters 73 and 76: Prior to this proclamation, aluminum and steel derivative articles that did not fall under USHTS Chapters 73 and 76 and the included non-aluminum and/or non-steel content were only subject to the Section 232 duties based on the percentage value of the aluminum and/or steel content. For example, if the steel content of the derivative article only represented 20% of the value, then the Section 232 duties applied only to 20% of the value of the article. The proclamation expands this content carve-out to include derivative articles that fall under USHTS Chapters 73 and 76.
Reciprocal Tariffs Apply to Some Steel and Aluminum Goods: Derivative articles that benefit from the non-aluminum and/or non-steel content carve-out will now be subject to the reciprocal tariffs imposed by the President under the International Emergency Economic Powers Act (“IEEPA”) applicable to the non-aluminum and/or non-steel content. Using the example above, the Section 232 duties would apply to 20% of the value of the article and the IEEPA reciprocal duties would apply to 80% of the value of the article. Previously, articles that were subject to the Section 232 duties, even those that qualified for the non-aluminum and/or non-steel carve-outs were not subject to any IEEPA tariffs. The effective rate of the IEEPA reciprocal tariffs for all countries is currently set at 10% but may be subject to change for certain countries in the near-future. Note, however, that the duties imposed under IEEPA on Canadian and Mexico imports (the “Canada/Mexico IEEPA tariffs”) are not included in this tariff scheme. Thus, if a derivative article comes from Mexico or Canada, the non-aluminum/non-steel content of the article will not be subject to the Canada/Mexico IEEPA tariffs (and will also not be subject to the IEEPA reciprocal tariffs).
Adjustments to Stacking Order: The proclamation adjusts the prioritization of certain tariffs under the stacking order established by Executive Order 14289 issued on April 29 for articles in which multiple tariff schemes could potentially apply based on the scope of those schemes. Executive Order 14289 established that goods subject to the automotive Section 232 duties would not be subject duties imposed under IEEPA on Canadian and Mexican imports, or under the steel and aluminum Section 232 tariffs, and goods subject to the Canada/Mexico IEEPA tariffs would not be subject to duties imposed under the steel and aluminum Section 232 tariffs. The proclamation revises the prioritization between the two tariff schemes; now, articles subject to the steel and aluminum Section 232 duties are not subject to the Canada/Mexico IEEPA tariffs.
UK Imports to Remain at 25% Rate: The proclamation limits tariffs on imports of UK steel and aluminum to 25%. This limitation is in recognition of the ongoing trade negotiations between the United States and the United Kingdom and the general terms announced, which included a reduction of steel and aluminum Section 232 duties. However, the proclamation authorizes the U.S. Secretary of Commerce to adjust the rates of duty or impose import quotas on or after July 9, including an increase of the duties to 50%.
Timing of the Change: This change comes at the heels of recent decisions by U.S. federal courts, in which the courts found current tariffs imposed under IEEPA to be unlawful. These decisions are currently subject to appeal and any order giving effect to them has been temporarily stayed; as such, the IEEPA reciprocal tariffs remain in effect for now.
