CBP Releases Details of Extended Section 232 Exemptions That Bring Cheers From Some, Pessimism From EU

Extended exemptions from Section 232 tariffs on aluminum and steel left some countries and importers relieved, but others uncertain as to what is around the corner on June 1. Announced the evening of April 30 just hours before the deadline, the proclamations on steel and aluminum announce full, if undefined, exemptions for Argentina, Brazil and Australia, the final details of a steel exemption for South Korea, and a delay until the beginning of June 1 for Canada, Mexico and the European Union.

South Korea remains subject to the 10 percent aluminum tariff, as well as quantitative restrictions on steel imports. Quota categories for several types of steel had already been filled as of the afternoon of May 1, according to a quota bulletin put out by CBP. Though the quota only covers steel, filers should still submit a quota entry type code to CBP for South Korean aluminum products, CBP said in a CSMS message.

New provisions in the proclamations limiting drawback for covered steel and aluminum products raise some important questions, Michael Cerny of Sandler Travis said while speaking May 1 at the National Customs Brokers & Forwarders Association of America's annual conference. “There is an outstanding question whether it is within the presidential authority to eliminate drawback under Section 232 because it’s covered under [19 USC] 1313.” Also unclear is whether the limits on drawback are retroactive to the effective date of the tariffs, he said.

The proclamations also clarified treatment of Section 232 goods for merchandise admitted into foreign-trade zones. All steel and aluminum admitted after the duties took effect March 23 must be entered as privileged foreign status, except those eligible for admission under domestic status under 19 CFR 146.43, CBP said in its CSMS message. Privileged foreign status merchandise will be subject to Section 232 duties when entered for consumption, the agency said. “Aluminum or steel articles shall not be subject upon entry for consumption to Section 232 duties, merely by reason of manufacture in a U.S. foreign trade zone.”

Though goods covered by the Section 232 tariffs are ineligible for benefits under the Generalized System of Preferences (GSP) and African Growth and Opportunity Act (AGOA) (see 1804260056), steel articles from Brazil and Argentina still qualify for GSP due to their exemptions, CBP said. Trade preferences may continue to be claimed for all other preference programs (i.e., all except GSP and AGOA), CBP said. But “Section 232 duties must be paid on imports subject to Section 232 even if trade preferences apply,” it said.

The 31-day extension of the country exemptions was cheered in countries that have satisfied the U.S. demands, but was viewed with pessimism across Europe, where the demand for export quotas is not something political leaders will accept. The White House announcement on April 30 said "in all of these negotiations, the administration is focused on quotas that will restrain imports, prevent transshipment and protect the national security."

"Australia knows where our steel comes from and where it goes, and will continue working with the US and our other trading partners to prevent practices such as dumping" and transshipment, the prime minister's office said after the proclamations were published. BlueScope, the Australian steelmaker responsible for the bulk of steel exports to the U.S., was practically giddy in its statement. BlueScope CEO Mark Vassella described the company as very pleased, and praised its government's negotiating team. "It has been a very uncertain 15-month period for BlueScope’s trans-Pacific trade," he said in a statement. “We understood the U.S. industry’s unfair trade concerns, but we were never part of the problem. In fact, we are part of the solution -- because we supply Port Kembla steel to our own factories in the US, and employ more than [3,000] Americans."

But the Aluminum Association, which represents some of the players that would benefit from 232 protections, said it wants permanent, quota-free exemptions from the 10 percent tariff on aluminum for all market economies. "Constraining aluminum supply from trading partners who play by the rules could increase incentives for China to ramp up its illegally subsidized overcapacity by making Chinese imports more competitive. This is exactly the opposite of what we, and the White House, want to achieve," Aluminum Association CEO Heidi Brock said.

The United Kingdom's steel association said quotas could be more damaging than just facing the tariffs. "Today’s announcement will be greeted with a certain sense of relief from UK steel producers. A further extension to the EU exemption gives us a little more breathing room to continue discussions and find a way through the current impasse to reach a permanent agreement that works for all parties. "However, this extension comes with a health-warning. Thirty days does not give us much time and all signs point towards a U.S. insistence on the restriction of steel exports by its allies. Such an outcome would be viewed in a dim light by many here; indeed for some it could have a greater impact than tariffs alone."

The European Commission complained that the short extension prolongs market uncertainty, and signaled again that it’s not interested in voluntary export restrictions to avoid tariffs. “The EU has also consistently indicated its willingness to discuss current market access issues of interest to both sides, but has also made clear that, as a longstanding partner and friend of the US, we will not negotiate under threat. Any future transatlantic work programme has to be balanced and mutually beneficial.”

The European Steel Association said "the EU must not bend" in the face of U.S. threats. "The U.S. decision is welcome, if temporary," Axel Eggert, director general of the European Steel Association, said in a statement. "The EU will now be exempted for another 30 days, to give time for further discussion." Eggert said the association supports retaliatory tariffs if the 232 tariffs are levied on the EU, calling it an effort to make sure the U.S. knows "it cannot take unilateral measures without trade consequences."