Commerce delivers report to White House on Section 232 Investigations of Steel and Aluminum

In April 2017, the President Trump issued two executive orders directing the US Department of Commerce (DOC) to initiate reviews of U.S. imports of steel and aluminum under Section 232 of the Trade Expansion Act of 1962, as amended, to determine the effects on national security due to unfair trading practices and to recommend actions to rectify those issues.

The impetus for the orders is due to the global over capacity of steel and aluminum. This has led to job layoffs and plant closings in the United States. Having a viable domestic industry for these products is an important matter as the US defense industry does not want to rely on foreign sources for its supply.

As this process plays out, actions taken by the US may lead to retaliatory tariffs by other countries and complaints filed in the World Trade Organization (WTO).

In February 2018, the DOC issued its reports to the President with the following summary findings and recommendations:

STEEL INVESTIGATION

Findings

1. Steel is important to U.S. national security
2. Imports in such quantities as are presently found adversely impact the economic welfare of the U.S. steel industry
3. Displacement of domestic steel by excessive quantities of imports has the serious effect of weakening our internal economy
4. Global excess steel capacity is a circumstance that contributes to the weakening of the domestic economy

Conclusion: “…the Secretary has determined that the only effective means of removing the threat of impairment is to reduce imports to a level that should, in combination with good management, enable U.S. steel mills to operate at 80 percent or more of their rated production capacity.”

Recommendations

1. Impose quotas on all imported steel products at a specified percent of the 2017 import level, applied on a country and steel product basis. A 63 percent quota would be expected to reduce steel imports by about 37 percent (13.3 million metric tons) from 2017 levels.
2. Apply a tariff rate on all imported steel products, in addition to any antidumping or countervailing duty collections applicable to any imported steel product. A 24 percent tariff on all steel imports would be expected to reduce imports by 37 percent.

OR

3. Apply a tariff rate on all imported steel products from Brazil, South Korea, Russia, Turkey, India, Vietnam, China, Thailand, South Africa, Egypt, Malaysia and Costa Rica, in addition to any antidumping or countervailing duty collections applicable to any steel products from those countries. All other countries would be limited to 100 percent of their 2017 import level. A 53 percent tariff on all steel imports from this subset of countries would be expected to reduce imports by 13.3 million metric tons from 2017 import levels from the targeted countries.

ALUMINUM INVESTIGATION

Findings

1. Aluminum is essential to U.S. national security. Aluminum is needed to satisfy requirements for The U.S. Department of Defense and critical infrastructure sectors
2. The U.S. Government does not maintain any strategic stockpile of bauxite, alumina, aluminum ingots, billets or any semi-finished aluminum products such aluminum plate.
3. The present quantity of imports adversely impacts the economic welfare of the U.S. aluminum industry.
4. Global excess aluminum capacity is a circumstance that contributes to the weakening of the U.S. aluminum industry and the U.S. economy.

Conclusion: “The Secretary has determined that to remove the threat of impairment, it is necessary to reduce imports to a level that will provide the opportunity for U.S. primary aluminum producers to restart idled capacity.”

Recommendations

1. A worldwide quota of 86.7 percent on imports described above would restrict aluminum imports sufficiently to allow U.S. primary aluminum producers to increase production by about 669,000 metric tons, bringing total production to about 1.45 million metric tons, or about 80 percent of U.S. primary aluminum production capacity. A tariff rate of 7.7 percent on imports of unwrought aluminum and the other aluminum product categories listed above should have the same impact as the 86.7 percent quota. This tariff rate would be in addition to any antidumping or countervailing duty collections applicable to any product.

OR

2. A tariff rate of 23.6 percent on imports of aluminum products from China, Hong Kong, Russia, Venezuela, and Vietnam should also restrict aluminum imports sufficiently to allow U.S. aluminum producers to utilize an average of 80 percent of capacity. This tariff rate would be in addition to any antidumping or counter-vailing duty collections applicable to any product.

The next step in the process is for the US Administration to evaluate the recommendations and to implement them as shown, in part, or not at all. The decision from President Trump is due on April 11, 2018 for steel, and on April 19, 2018 for aluminum.

Livingston will continue to monitor the status of these investigations and the ultimate decision(s) by President Trump.

As always, your general questions about the information presented here may be addressed with your Livingston account representative, or by contacting Livingston’s US Regulatory Affairs group: [email protected].