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Update and Key Developments on U.S. Increased Tariffs under Sections 232 and 301 – What Manufacturers, Importers and Retailers Need to Know

Posted By Administration, Thursday, June 14, 2018
Updated: Thursday, June 14, 2018


by Melissa Proctor, Miller Proctor Law PLLC


In March 2018, the Trump Administration imposed additional tariffs on certain steel and aluminum products imported into the United States from all countries1 for national security reasons in response to an investigation conducted by the Commerce Department's Bureau of Industry and Security ("BIS") under Section 232 of the Trade Expansion Act of 1962.2 Later that month, the Trump Administration announced that it would also impose increased tariff rates on certain goods imported from China under Section 301 of the Trade Act of 1974.3

By way of background, Section 232 gives the Executive Branch the ability to conduct investigations to assess the effects of imports on U.S. national security. In January 2018, the BIS delivered Section 232 reports on steel and aluminum to the President concluding that the quantities and circumstances of steel and aluminum imports threaten to impair national security. Specifically, the reports found that U.S. steel imports quadrupled U.S. exports of the same, and that aluminum imports had increased to 90% of the total demand for primary aluminum. Accordingly, the Commerce Department recommended that the President act to protect the long-term viability of the U.S. steel and aluminum industries.

In addition, Section 301 authorizes the Office of the United States Trade Representative ("USTR") to investigate unreasonable and discriminatory trade practices. The USTR recently investigated China's practice of requiring U.S. companies to transfer their intellectual property rights ("IPR") and technologies to Chinese companies in order to obtain business licenses and approval to invest in China. The USTR determined that these practices were indeed unreasonable and discriminatory, and effectively burden or restrict U.S. commerce.

Key Developments – Section 232
On March 8, 2018, the President issued proclamations4 announcing the increase in import tariffs on certain aluminum and steel products imported into United States from all countries. Exemptions to the increased tariffs were made for certain countries. For example, imports from Canada, Mexico, and the European Union were exempted until May 31, 2018, on which date the U.S. formally began imposing the tariffs on these countries.5 Tariff exemptions for Brazil and South Korea continue in effect as those countries negotiated quotas restricting steel and aluminum exports to the United States. Australia and Argentina also continue to be exempt while negotiations are ongoing with the U.S. There is also a process by which requests for product-specific exclusions may be submitted by U.S. persons to the Commerce Department.

On May 24th, the Commerce Department formally announced the commencement of an investigation of the impact of certain automotive imports on U.S. national security under Section 232.6 The investigation targets imports of cars, SUVs, vans, light trucks and automotive parts, and will focus on whether the decline in U.S. production of these products threatens the economy of the United States.

Key Developments – Section 301
On April 3, 2018, the U.S. Trade Representative ("USTR") published a proposed list of 1,300 Chinese products that would be subjected to additional 25% tariff rates.7 The targeted products include: chemicals and pharmaceutical products; certain rubber products; products of iron and non-alloy steel; airplanes and helicopters; aluminum; boats; electrical machinery; firearms; glass and microscopes; motor vehicles; tires and conveyor belts; and, TV image and sound recorders and reproducers. However, on May 20, 2018, Treasury Secretary Steven Mnuchin announced that the U.S. was "putting the trade war on hold" with respect to the Section 301 increased tariffs pending negotiations with China to reduce the U.S. trade deficit and address certain acts, policies, and practices related to intellectual property rights.8

Retaliation to U.S. Actions under Sections 232 and 301
The European Union, China, Japan, Russia, Turkey, and India have each notified the World Trade Organization (WTO) of their potential retaliation to the U.S. increased tariffs on steel and aluminum products under Section 232 tariffs per the WTO's Safeguards Agreement. In addition, Canada has requested the establishment of a NAFTA dispute panel on the issue as well. Further, China, the EU, Canada and Mexico have either already taken retaliatory measures or have threatened to do so in response to the U.S. actions under Sections 232 and 301 as follows:

  • China: On April 2, 2018, China increased import tariffs on 128 U.S. goods in retaliation against the U.S. Specifically, China imposed a 15% tariff on nuts, fresh and dried fruits, grape wine, denatured ethyl alcohol, ginseng roots, and seamless tubes, pipes and hollow profiles of iron and steel. It also imposed a 25% tariff on aluminum waste and scrap, as well as pork products.9 On April 4th, China proposed a second set of potential retaliatory tariffs on 106 U.S. products affecting $50 billion in U.S. exports – those goods reportedly include: aircraft and automobiles, including parts and components; industrial equipment and machinery; plastic products; agricultural products; alcohol; and, tobacco.10 However, the Chinese Ministry of Commerce has not advised when these tariffs might become effective.
  • Canada: Canada announced a trade-restrictive tariff list, targeting over $12.8 billion of U.S. products, that will formally take effect on July 1, 2018 – these measures will remain in effect until the U.S. terminates the Section 232 increased tariffs on Canada.11 The trade-restrictive list provides that steel and aluminum products will be assessed a 25% tariff rate, and the following products will be assessed a 10% tariff rate:
  • Aluminum products
  • Dishwasher detergents
  • Pens and markers
  • Iron or steel beer kegs
  • Coffee
  • Refrigerators, freezers, dishwashers, washing machines
  • Certain water heaters
  • Certain vegetables
  • Handkerchiefs, cleansing tissues, facial tissues, towels
  • Plastic household articles
  • Inflatable boats, motorboats, sailboats
  • Insecticides and herbicides
  • Licorice, toffee
  • Manicure and pedicure products
  • Maple sugar and syrup
  • Mattresses
  • Mayonnaise, salad dressing, condiments, seasonings, sauces
  • Lawn mowers
  • Nut and fruit purees, pastes, jams and jellies
  • Orange juice
  • Liquid or cream skin products and preparations
  • Iron or steel parts for stoves, ranges, grates, cookers, BBQs, and similar non-electric domestic appliances
  • Playing cards
  • Plywood
  • Perfumes or deodorizers for rooms
  • Prepared meals, pizza, soups and broths
  • Postcards and greeting cards
  • Shaving products
  • Sleeping bags
  • Tablecloths, tableware and kitchenware
  • Toilet paper
  • Waters (still or aerated, with or without sugar, sweetening, flavors)
  • Whiskey
  • Yogurt
  • EU: In May, the EU published two retaliation lists targeting U.S. exports valued at $7.5 billion. The increased tariffs will be imposed in two phases.12 In the first phase, tariff concessions will be suspended as of June 20th on products including corn, cranberries, tobacco, cosmetics, clothing and steel products. The second phase of tariffs will either be implemented on March 23, 2021 or the 5th day following the date of the WTO's finding that the Section 232 tariffs violates the WTO – those tariffs would target:
  • Aluminum
  • Apparel and footwear
  • Batteries
  • Bourbon
  • Ceramics, glass
  • Fishing vessels
  • Household articles
  • Motor vehicles and boats
  • Paper
  • Textiles
  • Washing machines
  • Yarn
  • Mexico: On June 4th, the Ministry of Economy published a list of U.S. goods13 that will be subject to equivalent measures to the Section 232 tariffs, as follows:
  • 25% tariff on flat steel products
  • 25% tariff on pork products (legs, hams, sausages)
  • 20% tariff on agricultural products (apples, potatoes, cranberries, parmesan and grated cheese)
  • 25% tariff on Tennessee whiskey and bourbon, fresh cheese
  • 7% - 15% tariffs on certain metal furniture, lamps and lighting fittings, fans and air pumps, aluminum kitchen wares and motor boats

Key Takeaways
Both the Section 232 and Section tariffs imposed by the United States, as well as the retaliatory measures (both taken and proposed) by U.S. trading partners, continue to be fluid situations. It is critical for U.S. companies to review the products that may be subjected to the tariffs proposed by the United States and its trading partners, assess how these measures may impact their international operations, and stay up-to-date on new developments as they rapidly arise to ensure that they have sufficient lead time to adapt to changes that will impact their international supply chains.

[1] See https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states-4/. See also https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states/.
[2] See 19 U.S.C. Ch. 7.
[3] See 9 U.S.C. § 2411.
[4] See https://www.whitehouse.gov/presidential-actions/page/2/.
[5] Id.
[6] See https://www.commerce.gov/news/press-releases/2018/05/us-department-commerce-initiates-section-232-investigation-auto-imports.
[7] See https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/april/under-section-301-action-ustr.
[8] See https://www.reuters.com/article/us-usa-trade-mnuchin/u-s-china-putting-trade-war-on-hold-treasurys-mnuchin-says-idUSKCN1IL0JG.
[9] See https://www.reuters.com/article/us-usa-trade-china/china-hammers-u-s-goods-with-tariffs-as-sparks-of-trade-war-fly-idUSKCN1H81J3.
[10] See also https://ig.ft.com/us-china-tariffs/.
[11] See https://www.fin.gc.ca/activty/consult/cacsap-cmpcaa-eng.asp.
[12] See http://trade.ec.europa.eu/doclib/docs/2018/march/tradoc_156648.pdf.
[13] See https://www.wsj.com/articles/mexico-details-its-list-of-retaliatory-tariffs-against-u-s-adds-bourbon-1528217507.


Melissa Proctor is the founder of Miller Proctor Law PLLC, an international trade law firm located in Scottsdale, Arizona. For more than twenty years, she has advised companies on the full of array of international trade issues, including export controls, embargoes and economic sanctions, customs laws, anti-corruption compliance, and other agency requirements that impact the cross-border movement of goods, information and services. She may be reached at 480-447-8986 or melissa@millerproctorlaw.com.

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