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232 strikes at midnight March 23; EU exempt?

Mar 12, 2018 | 05:15 PM | Michael Cowden

Tags  Section 232, Commerce Department, Wilbur Ross, Donald Trump, imports, steel, Michael Cowden


CHICAGO — President Donald Trump’s Section 232 tariffs on imported steel and aluminium will go into effect on Friday March 23 at 12:01am New York time.

In the meantime, Trump is mulling exclusions for the European Union.

"[US Commerce Department Secretary] Wilbur Ross will be speaking with representatives of the European Union about eliminating the large tariffs and barriers they use against the [United States]. Not fair to our farmers and manufacturers," the president tweeted on Monday March 12.

Trump signed the 232 tariffs – 25% duties on foreign steel and 10% duties on aluminium – into law with two separate proclamations on Thursday March 8.

Under Section 232 of the Trade Expansion Act of 1962, the president may place restrictions on imports on national security grounds. The proclamations define national security broadly, contending that imports pose a threat to the US because they “weaken our internal economy.”

North American Free Trade Agreement partners Mexico and Canada were excluded from the duties at the signing. Australia has since been granted an exemption, and other countries are now seeking the same.

Besides what countries might be exempted, other details of when and how the 232 will be implemented remained unclear on Monday. Still, countries and companies aren't waiting for the specifics to be spelled out, but are already seeking exclusions, market participants said.

Ross is expected to issue procedures for those seeking exclusions “within 10 days” of the signing, according to the text of the proclamations.

While 10 calendar days would put that deadline at Sunday March 18, 10 business days would place it on Thursday March 22 - a day before the tariffs are slated to go into effect. A Commerce spokesman did know which date was correct and referred questions from American Metal Market to other agency staff who did not immediately respond.

The 232 tariffs will come on top of any existing duties and will be assessed when goods are “withdrawn from warehouse for consumption” on or after 12:01am March 23, according to the proclamations.

That terminology makes sense for the aluminium industry, which relies on a warehouse system. As for the steel market, that phrasing likely translates to duties based on the fob price at the port where the steel is loaded, sources said.

The Commerce spokesman could not confirm on what price - fob port or fob mill, for example - duties would be assessed.

Trump in his proclamations said exclusions might be granted for products that are not made in sufficient quantity or quality in the US, or for products that are subject to specific “security-based considerations.”

As for when the tariffs might be lifted, the proclamations call for the Commerce Secretary to monitor imports and “from time to time” tell the president whether further action is necessary or whether the 232 duties are no longer needed.

Opponents of the 232 have criticized the national security basis for the tariffs as dubious. But citing national security has one key advantage: The World Trade Organization (WTO) gives member countries broad leeway to adjust trade for reasons of national security - something that could make a WTO challenge complicated.

Canada and Mexico are a “special case” and have been exempted from the tariffs because of “the physical proximity of our respective industrial bases” and “the robust economic integration between our two countries,” according to the proclamations. Their continuing exemptions, however, hinge on the outcome of the Nafta renegotiations.

Michael Cowden
mcowden@amm.com



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