More than 1,000 of the 1,300 tariff lines on the list of products that could be affected by Section 301 tariffs would impact General Electric's operations, but the company is asking for just 34 items to be removed from the list. On May 16, during the second day of the International Trade Commission's public hearing to help it refine the list of products subject to 25 percent tariffs, Karan Bhatia, who leads GE's government affairs and policy office, suggested the committee exclude intra-company inputs from owned and controlled Chinese factories because those don't involve forced technology transfer, something the Section 301 tariffs are meant to address. He suggested items that have high U.S. content by value that come from China also should be excluded.
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.
The combination of World Trade Organization rules for Most Favored Nation treatment and bound tariff rates leave the U.S. at a disadvantage within trade negotiations, Commerce Secretary Wilbur Ross said during a May 14 speech at the National Press Club. "We are now constrained by two sides of a WTO pincer," he said. The MFN, which requires level tariff rates for countries the U.S. doesn't have free trade agreements with, and Bound Tariff Rates, the ceiling on allowed tariff levels, "prevent us from having reciprocal tariffs because, in most cases, our bound rate ceiling is at or near our very low MFN applied rate, while other nations have higher levels of both." President Donald Trump has mentioned the possibility of implementing a "reciprocal tax" (see 1802120034).
Commerce Secretary Wilbur Ross, referring to press reports that the European Union may accept quotas on steel exports, told Senate appropriators on May 10, "I think there's a reasonable chance we'll work something out," while testifying about his department's budget. Ross also suggested Canada and Mexico should not be subject to quotas. Ross is handling the EU tariff exemption, but U.S. Trade Representative Robert Lighthizer is handling Mexico and Canada as part of the NAFTA renegotiation. Canada and Mexico import nearly as much steel from the U.S. as they sell here, Ross said. "We literally don't have enough aluminum production in our country without the support of Canada," Ross said. "They have not been dumping." He said that Canada's low cost of aluminum production is because of inexpensive energy inputs.
The process for importers to get product exclusions from Section 232 tariffs on steel and aluminum items is too slow, and too burdensome, according to 39 members of the House of Representatives, from both parties, who have suggestions for how to change it. Their letter, sent May 7 to the Department of Commerce, says that retroactive relief from tariffs should date back to the date of submission, not the date of posting, unless the submission was not initially complete. In that case, the lawmakers say, the refund should be from the date the submission was complete, rather than the date it was publicly posted.
The chairman and ranking member of the Senate Homeland Security and Governmental Affairs Committee told Commerce Secretary Wilbur Ross that his replies on how the department weighed the issues before recommending Section 232 tariffs were incomplete -- and said that if his next letter isn't an improvement, the committee may have to consider compelling his testimony. The letter, sent May 3, gave Ross two weeks to reply. "Clearly, these tariffs will have a much more far-reaching effect on downstream industries and consumer prices than explained in your response," Senators Ron Johnson, R-Wis., and Claire McCaskill, D-Mo., wrote. They said Ross failed to provide detailed cost-benefit analyses on the tariffs' effects, or analyses of prior tariffs' effects on downstream industries or prices. They also said he declined to say how the agency is going to measure success of the tariffs.
President Donald Trump's proclamations on the latest extensions to country exemptions on the Section 232 tariffs (see 1804300064) will be published in the Federal Register on May 7. The proclamations on steel and on aluminum say that while Canada, Mexico and the European Union face a June 1 deadline to agree to "satisfactory alternative means" to ameliorate the national security threat their imports cause, Australia, Brazil and Argentina do not have an expiration date on their exemptions. The president said since those countries have reached agreements in principle, he didn't think a deadline was necessary. But if those agreements are not finalized promptly, he reserves the right to impose tariffs.
The International Trade Commission released Revision 4 to the 2018 Harmonized Tariff Schedule, making several changes related to recently imposed Section 232 tariffs on aluminum and iron and steel products. The updated tariff schedule includes a series of new tariff subheadings in chapter 99 used to administer quotas on South Korean steel that form part of that country’s exemption agreement, as well as new language in the subchapter notes to chapter 99 on the Section 232 tariffs. The changes took effect May 1.
Argentina and Brazil recently agreed to deals resulting in permanent exemptions from Section 232 tariffs on iron and steel products and aluminum products. Argentina will be exempt from tariffs on both aluminum and steel after agreeing to new quotas on each. Brazil, on the other hand, remains subject to 10% aluminum tariffs after rejecting quantitative restrictions, though it will get an exemption from the 25% tariff on steel.
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.
Only one of the allies that have so far avoided tariffs on their steel and aluminum exports to the U.S. has agreed to reducing the volume of those exports -- and Commerce Secretary Wilbur Ross says all will have to if they don't want to face tariffs. "If people don't have the tariffs, and they don't have the quota, that would defeat the whole purpose of the [Section] 232s," he said, which is to boost aluminum and steel production domestically. Since the temporary tariff exemptions for the European Union, Canada, Mexico, Brazil, Argentina and Australia end May 1, it remains to be seen if countries in talks with the U.S. will get another extension.