Unlike EU 232 Deal, Imports Under Steel Exclusions Count Against Japanese TRQ

Companies that import Japanese steel under exclusions that spare them from having to pay 25% tariffs will be filling tariff rate quotas when they bring the goods in, the Commerce Department confirmed. The department's initial release said exclusions would continue, but was silent on whether they would count against the quota (see 2202070064). Under the European Union deal, excluded products did not count toward the tariff rate quotas.

When the deal was announced earlier in the week, The Steel Manufacturers Association said, "We are particularly glad to see that exclusion-based imports of Japanese steel products will count against the quota volumes. In 2021, 58 percent of Japanese imports came to our shores as exclusions. This represents approximately 550,000 metric tons of steel products.”

Cato Institute's Scott Linicome, who directs the libertarian think tank's center for trade policy, blogged, "Given the quota amount and design, ... it's quite likely that significant volumes of Japanese will still face -- and American importers will thus keep paying -- U.S. tariffs. Most obviously, the 1.25 MMT quota limit has been set well below-pre-tariff volumes and even further below the amounts that would likely enter the U.S. today in the absence of any trade restrictions."

Lawyers at White & Case, where Linicome previously worked, told him that that Japanese steel exports to the U.S. averaged about 2 million metric tons from 2015 to 2017, and so the TRQ level is no more than 61% of current market demand. That means U.S. steel prices will remain high, "leaving steel-consuming American manufacturers at a significant disadvantage versus their global competitors."