The Commerce Department has launched an investigation into the need for tariffs on cars and auto parts in a move widely seen as an attempt to pressure Mexico to accept a NAFTA rewrite. Commerce Secretary Wilbur Ross said on May 24 that "there is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” and the department will explore whether by damaging the U.S. economy and reducing research in auto-related technology, the decline of domestic auto and auto part manufacturing therefore is a national security issue. Currently, SUVs and trucks face a 25 percent tariff, while cars and auto parts face a 2.5 percent tariff outside the NAFTA region, or if a Canadian or Mexican vehicle fails to meet a 62.5 percent rules of origin quota.
Section 232 Tariffs
The United States currently maintains a 25% tariff on steel imports and 10% on tariff on aluminum imports under Section 232 of the Trade Expansion Act of 1962. In 2018, the Trump administration imposed Section 232 Tariffs on steel and aluminum imports into the United States, citing national security concerns. The U.S. agreed to lift tariffs on Canada and Mexico after the signing of the United States-Mexico-Canada Agreement (USMCA), and reached deals with the European Union, Japan and other countries to replace the tariffs with quotas for steel and aluminum imports into the U.S.
India, which earlier submitted at the World Trade Organization a list of retaliatory tariffs for the U.S.'s Section 232 action, now has filed a case challenging the action's legality. On May 23, it circulated a request for consultations with the U.S., the first step before a panel can be convened to consider the dispute. India points not only to the fact that countries are being treated differently, but also says that the Commerce Department is using voluntary export restraints and quotas to protect domestic producers. Both are against the WTO's General Agreement on Tariffs and Trade ( GATT) rules, India alleges.
The Section 232 tariffs on steel and aluminum will continue to apply to such goods from China despite a hold on new tariffs on other products from China while trade talks continue (see 1805200002), Treasury Secretary Steven Mnuchin said on May 22. "As it relates to China, the steel and aluminum tariffs will remain in force," Mnuchin said during a hearing before the Senate Appropriations Subcommittee on Financial Services. "Those were not part of discussions," which were focused on the proposed Section 301 tariffs, he said.
International Trade Today is providing readers with some of the top stories for May 14-18 in case they were missed.
CBP provided further details on how importers of goods excluded from Section 232 tariffs on steel and aluminum can file entries and receive refunds, in a May 21 CSMS message. "Importers and filers importing products granted an exclusion should submit the product exclusion number based on the last six digits of the product exclusion docket number," CBP said. Filers should not "submit the corresponding Chapter 99 HTS number for the Section 232 duties when the product exclusion number is submitted," the agency said.
Now that it is seemingly too late for Congress to ratify a new NAFTA in December (see 1805110025), predictions about what happens next vary widely. Treasury Secretary Stephen Mnuchin said on CNBC that the administration could pursue a "skinny NAFTA," and a Republican senator suggested that would be the best course of action, though a full rewrite is still preferred, Mnuchin said.
The European Union submitted to the World Trade Organization on May 18 the list of products it will impose 25 percent tariffs on if the U.S. does not spare it from steel and aluminum tariffs next month. The initial list, which runs to 181 items, is designed to counteract the tariffs on almost $7.2 billion worth of steel and aluminum that will be subject to duties from the United States under Section 232. Only 1.2 billion of that is aluminum. The EU could begin collecting tariffs on these items as soon as June 20. The list includes peanut butter, orange juice, cigarettes, steel, pipes, motorcycles and yachts.
CBP will make changes to ACE Entry Summary "that will allow CBP to validate tariff rate adjustments and exclusions in support of Section 232 measures," the agency said in a CSMS message. The update will come on June 1, the date most of the country-wide exemptions to the tariffs on steel and aluminum are scheduled to end (see 1805040046).
Trade groups representing the apparel, steel, grain and chemical industries largely agree that China is flouting World Trade Organization rules for trade, but there remains some debate over whether the use of tariffs is necessary. "I think somehow imagining that China after 17 years of noncompliance with WTO rules will somehow reverse and do it is the definition of insanity," said Scott Paul, president of the Alliance for American Manufacturing, which represents U.S. steelworkers. "We're sitting on an economy where corporations are getting $1.5 trillion in tax cuts, we have pretty robust economy growth, so in a lot of ways there's never been a better way to fight a trade war and this is a very targeted war," Paul said, speaking as a panelist at a May 17 Washington International Trade Association event.
Some major industry associations are “deeply concerned” that the process for requesting product exclusions from Section 232 tariffs on steel and aluminum “is not working well,” they said in comments to the Bureau of Industry and Security on the agency’s interim procedures. “The deficiencies in the product exclusion request process are negatively impacting U.S. manufacturers and their ability to obtain product exclusions in a timely and efficient manner,” said the National Foreign Trade Council, one of those industry groups, in a press release.