Section 232 Tariffs

The Office of the U.S. Trade Representative’s list of proposed tariff subheadings set for an additional 10 percent tariff on $200 billion in imports from China covers wide swaths of the tariff schedule that initially avoided Section 301 tariffs imposed July 6. While the 25 percent tariff already in place affects only goods of Chapters 84, 85, 86, 87, 88, 89 and 90 (with a few exceptions), USTR’s proposed list of additional subheadings includes products from nearly all sectors of the tariff schedule, with the notable exceptions of footwear and apparel and pharmaceuticals.

The Consumer Technology Association, the National Retail Federation and the Semiconductor Industry Association are among groups and companies requesting to appear at a July 24 Office of the U.S. Trade Representative hearing about the Section 301 tariffs on a second list of 284 lines of Chinese-sourced products proposed for the higher duties (see 1806210029). The Retail Industry Leaders Association and the National Association of Foreign-Trade Zones are also among the commenters in docket USTR-2018-0018. Written comments are due July 23, and post-hearing rebuttal comments, July 31.

CBP on July 6 published additional guidance on the application of Section 232 tariffs to steel and aluminum products. A CSMS message issued by the agency includes an overview of requirements for foreign-trade zone admissions for products covered by the tariffs, as well as information on the application of Chapter 98 provisions, temporary importations under bond, and NAFTA originating goods and duty deferral restrictions.

Importers may need to up their customs bond amounts after the Section 301 25 percent tariffs take effect on goods from China, said Laura Siegel Rabinowitz, special counsel at Kelley Drye, in a June 28 blog post. "While bonds are based on imports for the previous twelve months, the time period is rolling and we expect CBP to be aggressively reviewing imports from China beginning on July 6," she said. Rabinowitz said that after "the Section 232 duties on imported steel and aluminum went into effect recently, CBP sent letters to certain importers giving them thirty days to increase their bonds to be commensurate with the new tariffs."

Russia recently began a World Trade Organization challenge of U.S. Section 232 tariffs on steel and aluminum products, the WTO said in a press release. Russia claims the tariffs violate the 1994 General Agreement on Tariffs and Trade and the WTO safeguard agreement. The country had already announced plans to retaliate. Under WTO rules, Russia may request a panel to decide the case if consultations don’t resolve the dispute in 60 days.

Canada imposed tariffs July 1 on products from the U.S. in retaliation for Section 232 duties on steel and aluminum products that took effect one month earlier. Tariffs begin at 10 percent and 25 percent on products found in Canada’s final list of tariff subheadings, which has some changes from an initial list released for public comment May 31 (see 1806010022), “and will remain in place until the U.S. eliminates trade-restrictive measures against Canadian steel and aluminum products,” Canada said. “The countermeasures will not apply to U.S. goods that are in transit to Canada on the day on which these countermeasures come into force,” it said.

Whichever way the World Trade Organization decides on the validity of U.S. tariffs and quotas on metals and other countries' retaliatory tariffs, it hurts the rules-based system, said Jennifer Hillman, a Georgetown University law professor and former member of the WTO appellate body. Hillman spoke on a panel at a Global Business Dialogue trade policy association event. If the WTO says that a claim that an action was taken to protect national security -- when there's no war between the parties, and the item is not clearly war materiel, such as ammunition -- then almost any protectionist measure could be justified, she believes.

An effort to add an amendment to the Senate farm bill that would require approval from Congress for Section 232 tariffs to go into effect was stopped on June 27. Sen. Sherrod Brown, who said steel towns in his home state of Ohio have been devastated, blocked a vote on the amendment sponsored by Sen. Bob Corker, R-Tenn. Brown, a Democrat who largely supports President Donald Trump's approach on trade, said that Canada and Mexico "are primary targets for transshipment" of unfairly traded steel from China, and said that everyone has "seen the tricks China uses to get around the antidumping and countervailing duty laws."

New tariffs on goods from the U.S. exported to Turkey in response to Section 232 tariffs on steel and aluminum took effect on June 21, KPMG said on its website. An official June 25 notice from Turkey described the implementation of the new tariffs, a report from a KPMG firm in Turkey said. The new tariffs apply to the same subheadings listed in a World Trade Organization submission, though some of the tariff amounts differ, according to KPMG. "Retaliatory customs duty will be applicable on imports of US originated automobiles, whiskey, tobacco, coal, cosmetics, machinery equipment, paper and petrochemical products, etc.," the Turkish firm said. "Turkey will impose additional fiscal burden against various US origin goods between 4 percent to 70 percent. At the same time, [whiskey] and automobile importations will be subject to additional fiscal burden at the rate of 70% and 60% with an applicable highest rate."

The American Institute for International Steel will announce on June 27 "the launch of a legal challenge that seeks to remedy a situation that is bad for the American economy and American workers alike," the group said in a June 26 news release. AIIS said "President Trump’s Section 232 tariffs on imported steel and aluminum have already created significant collateral damage for U.S. industries." The group called the coming legal action a "critically important, first-of-its-kind initiative."