On Monday March 19, 2018, the Department of Commerce published its interim rule for the submission of exclusions requests for Section 232 tariffs announced by the White House on March 8, 2018.
The rules published by Commerce are interim rules and comments on the rules must be received by Commerce no later than May 18, 2018. Meanwhile, the rules announced will be in effect.
U.S. importers and users now will need to manage to understand, navigate, and plan, based upon the onerous task of requesting exclusions. There are two different exclusion processes, which are distinct: (1) country exclusions which are handled by the United States Trade Representatives (USTR) office; and (2) product specific exclusions which will be handled by Commerce.
The presidential proclamations of March 8, 2018, state that countries “with which [the US has] a security relationship” can discuss with USTR the potential for obtaining either a complete or partial exemption from the steel and aluminum tariffs with respect to their exports.
However, in addition to this undefined “security relationship,” USTR also may consider the following factors in determining whether to exempt a country in whole or in part. No guidance is provided as to when they will be considered or how they will be weighed, if considered:
(1) whether the country seeking exemption protects its home market from underpriced imports; (2) the country’s level of support for U.S. positions in trade remedy cases at the WTO;
(3) the country’s participation in the Organization for Economic Cooperation and Development (OECD) forum on steel overcapacity, and
(4) bilateral steel and aluminum trade patterns with the USTR’s disc country in question.
Only those countries which satisfy these criteria might be able to receive a full exemption or a partial exemption via an import quota, at USTR’s discretion. Moreover, as a condition for receiving this exemption — a country must develop a “satisfactory alternative means” of eliminating the threat to US national security posed by that country’s steel and aluminum exports. What this “satisfactory alternative means” is yet to be defined or elaborated upon by the administration and will lead to a significant level of uncertainty as to how exemptions can be obtained and maintained on a country level. Likely “alternative means” may include voluntary restraint agreements (similar to those instituted on steel imports in the late 1980s) or quota limits (similar to those set up for textile imports in the 1990s).
Unfortunately, details of the process, the procedure, and USTR’s timeframe for country exemptions remain unclear. Of course, all country exemptions will be negotiated on a country-by-country (or possibly trade block in the case of the EU) basis. What is clear as that nothing will be resolved on a bilateral basis before the section 232 tariffs’ on March 23, 2018. USTR is expected to circulate some guidance and updates during the course of the week of March 19.
The product exclusions are slightly clearer given that Commerce has now published its interim regulations on the process and procedures for exclusion and exemption requests. While Commerce issued two separate procedural supplements, the exclusion process for both steel and aluminum follow the same structure, but take into account differences between the steel and aluminum industries.
Commerce will focus its consideration on the availability of the product in the United States and will consider the supply availability in other countries to the extent relevant to determining whether there are in fact specific national security considerations which warrant a product exclusion.
The process as described in the Federal Register is as follows:
- The requester must submit its request on the specific forms as published by Commerce on its website;
- Only individuals or business that use steel or aluminum in its business activities or supply steel or aluminum to a user in the United States may submit exclusion requests;
- Requests must be submitted separately for steel and aluminum products based upon the chemistry and percentage breakdown by weight, metallurgical properties, surface quality, and distinct critical dimensions.
- Separate exclusion requests must be submitted for products falling in more than one 10-digit HTSUS statistical reporting number.
- The approved exclusion will be granted by Commerce on a product specific basis and will be limited to the individual or organization that submitted the exclusion request unless a broader application was approved based upon multiple requests submitted to Commerce.
- The requests must also specify the following:
- The business activities in the United States within which the requester is engaged;
- Documentary support for the basis upon which the exclusion is sought
- Exclusions will only be granted if an article is not produced in the United States in sufficient and reasonably available quantities or is not produced in the United States in a satisfactory quality. These two factors are in addition to the catch all reference for product exclusions for a “specific national security consideration.”
While the government has said that it intends to make decisions on exclusion requests within 90 days of the requests being completed, it remains unclear as to how many resources the government will devote to staffing the process. It seems unlikely that the 90 day deadlines will be met based on the seemingly huge number of exemptions that are likely to be sought. For further information, contact Nithya Nagarajan or Jeffrey S. Neeley.