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New Developments in U.S. Aluminum & Steel – Import Monitoring

posted by Jennifer Diaz December 31, 2020 0 comments

Co-Authored by Sharath Patil

Background on Section 232 Investigations

There is significant discussion among the trade community about the future of the Section 232 aluminum and steel tariffs. Section 232 investigations, administered by the U.S. Commerce Department, are conducted to determine the imports of certain goods on national security. Historically, Section 232 investigations have been conducted regarding U.S. imports of crude oil and petroleum products and uranium, among other critical imports. Under the Trump administration, the Commerce Department initiated investigations of U.S. imports of aluminum and steel on April 27, 2017. The investigation resulted in an affirmative determination that such imports harm U.S. national security. The Commerce Department’s investigation reports found that:

  • The United States is the world’s largest importer of steel – with imports four times exports.
  • World steelmaking capacity is 2.4 billion metric tons, up 127% from 2000, while steel demand grew at a slower rate.
  • The recent global excess capacity is 700 million tons, almost 7 times the annual total of U.S. steel consumption. China is by far the largest producer and exporter of steel, and the largest source of excess steel capacity. Their excess capacity alone exceeds the total U.S. steel-making capacity.
  • Aluminum imports have risen to 90% of total demand for primary aluminum

As a result of the investigation’s findings, Trump imposed tariffs on certain U.S. imports of aluminum and steel on national security grounds. An exclusion process was also implemented in which U.S. importers could apply for tariffs to be excluded for certain steel and aluminum product imports.

There are disagreements among the trade community about the effectiveness of Section 232 aluminum and steel tariffs. The U.S. primary steel manufacturing community has largely been in favor of the tariffs. However, the U.S. steel consuming industry (which is significantly larger than the primary industry) argues that the tariffs have been a net harm to the U.S. economy. Furthermore, analysts have argued that the tariffs have targeted traditional allies of the United States rather than problematic actors such as China.

Recent Developments in Section 232 Exclusions & Review Policy

Additional Exclusions and Revisions to Exclusions Process

On December 14, 2020, the U.S. Commerce Department’s Bureau of Industry & Security published an interim final rule revising aspects of the Section 232 aluminum and steel exclusion request process. Commerce believes these changes will make important improvements, but is also requesting public comments to evaluate how effective these changes will be in further improving the 232 exclusions process.

Three key changes proposed are:

  1. General Approved Exclusions (“GAEs”)

Commerce has determined creating GAEs that may be used by any importing entity is warranted. This change will result in an estimated immediate decrease of 5,000 exclusion requests annually, resulting in a significant improvement in efficiency, with the possibility of more in the future. Unlike exclusion requests, GAEs do not include quantity limits.

  1. Certification Requirement re: False Statements

Commerce has identified a trend —that certain exclusion requesters may have requested more volume than they may have needed for their own business purposes compared to past usage. Submitting large numbers of unneeded exclusion requests decreases the efficiency of the 232 exclusions process for potential objectors and Commerce. It also creates issues for potential objectors. Accordingly, Commerce has created a new certification requirement for volumes requested and added a note to remind all parties submitting 232 submissions of the prohibition against making false statements to the U.S. Government and the consequences that may occur for such false statements.

  1. Same Time Standard to U.S. Objectors and Foreign Suppliers

Objectors were concerned that they were being held to a higher standard than foreign suppliers because of the interpretation that “immediately” meant the objector needed to be able to provide the steel or aluminum articles within 8 weeks, even though a foreign supplier may not be able to provide the same steel or aluminum article until much longer than 8 weeks. With this rule the term “immediately,” is retained but language has been modified to apply the same time standard to U.S. objectors and foreign suppliers for when the steel or aluminum articles need to be provided to the exclusion requester.

This interim final rule is effective December 14, 2020, except for amendatory instructions 3 and 5 that are effective December 29, 2020. Comments on this interim final rule must be received by BIS no later than February 12, 2021.

The U.S. Customs and Border Protection (“CBP”) has provided the following guidance on the interim final rule:

  • BIS has granted 108 GAEs for steel products and 15 GAEs for aluminum products.   GAEs may be used by any importer and have no quantitative limit. Exclusions are effective starting December 29, 2020, and no retroactive relief will be granted. Please review the list of excluded HTS classifications in the attached chart.
  • When an importer reports an excluded 10 digit HTS classification on an entry summary line, ACE will not require the Section 232 duties for that line.   We note that the FR Notice states that, in order to use a GAE for an exclusion for Section 232 duties, the importer must reference the GAE identifier in the ACE system that corresponds to the steel or aluminum articles being imported. In ACE, the GAE identifiers are the excluded 10 digit HTS classifications. Importers should not report any other Section 232 exclusion number or Chapter 99 Section 232 HTS classification on an entry summary line when importing goods under a GAE.
  • This guidance only applies to Section 232 duty exclusions under a GAE. Separate guidance will be issued for entry summary reporting requirements for Section 232 quota exclusions under a GAE.

Aluminum Import Monitoring and Analysis System

On December 23, 2020, the U.S. Commerce Department’s International Trade Administration (“ITA”) published a final rule in which ITA adopts the Aluminum Import Monitoring and Analysis (“AIM”) system. The goal of the AIM system is to allow for the effective and timely monitoring of import surges of specific aluminum products and to aid in the prevention of transshipment of aluminum products. Over the past two decades, Commerce has operated the similar recently updated Steel Import Monitoring and Analysis (SIMA) system that allows for the effective and timely monitoring of import surges of specific steel products, and aids in the prevention of transshipment of steel products.

Specifically, the ITA’s final rule does the following:

  • Establish a website for the AIM system that consists of an online aluminum import license application platform and public AIM monitor
  • Require importers, customs brokers or their agents to apply for and obtain an import license for each entry of certain aluminum products into the United States through the AIM system website
  • Require license applicants to identify, among other requirements, the country or countries where the largest and the second largest volume of primary aluminum used in the manufacture of the imported aluminum product was smelted (subject to certain exceptions) and the country where the aluminum product was most recently cast
  • Allow for the public release of certain import license data on an aggregate basis, as appropriate, on the public AIM monitor
  • Apply the license requirement to all imports of basic aluminum products

The final rule is effective on January 25, 2021. Furthermore, the AIM system website will be operational on January 4, 2021. Licenses will be required for all covered aluminum imports on or after January 25, 2021.

Once license data is collected, Commerce will release the data on an aggregate basis through the public AIM monitor. The monitor will track aggregate trends in U.S. imports of certain aluminum products in almost real-time, providing an early indication of trends. The AIM monitor will also identify surges of specific aluminum products suggesting potential transshipment and circumvention relating to these products. The monitor will be available here, starting on January 25, 2021.

Contact Us

Diaz Trade Law has significant experience on Section 232 matters and in drafting comments for federal rulemaking. If you require assistance filing exclusion requests or objections in the Section 232 review process for aluminum or steel imports or need assistance submitting comments for Commerce’s interim final rule, contact us today at info@diaztradelaw.com or 305-456-3830.

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