The United States Commerce Department is making changes to the way it administers the Section 232 tariff exclusion process.
Commerce is streamlining general approved exclusions (GAEs), changing volume limits from past usage for exclusion requesters and leveling the playing field between domestic producers and importers in terms of the timeframe under which disputed material needs to be produced.
The latter two provisions became effective on Monday December 14, but changes to the GAEs will only take effect on December 29, according to a Federal Register notice.
The changes to the GAEs will allow importers to enter products free from Section 232 duties without applying for an exclusion.
"These exclusions may be used by any importing entity and, unlike the importer-specific exclusion requests previously granted by the Bureau of Industry and Security, the GAEs do not include quantity limits. Commerce estimates this will lead to an immediate decrease of approximately 5,000 exclusion requests annually," Douglas Heffner, partner at Faegre Drinker Biddle & Reath LLP, wrote in an article published in the National Law Review on December 23.
Commerce has also decided to cut down on the ability of importers to increase volumes they bring in from pre-tariff levels "in an attempt to limit a trend whereby exclusion requesters may have requested more volume than they need," Heffner wrote.
Requestors now have to certify that they:
"The volume certification marks a win for domestic objectors that have been forced to expend resources objecting to hundreds of identical exclusion requests that appear to exceed any reasonable volume amounts from the same requester," Heffner said.
- Won't use the requested exclusion, if granted, solely to hedge or arbitrage the price;
- Expect to use the total volume of product across their active exclusions and pending exclusion requests in the course of their business activities within the next calendar year;
- Either imported the full amount of their approved exclusions last year, or intended to but could not due to a listed legitimate business reason;
- Have requested a quantity that is in line with what their organization expects to import annually based on current forecasts, and be able to provide documentation that proves this;
"In a system where Commerce’s ultimate determination often depends on whether or not an objection was filed, this placed a heavy burden on domestic producers to monitor the exclusion process to prevent even a single exclusion from being filed without objection," he noted.
The interim rules also makes changes to the information that domestic producers must provide regarding their ability to “immediately” meet the requester’s requirements for the product subject to the exclusion request.
"Some domestic producers have objected that the previous interpretation of 'immediately' required them to prove that they had the ability to provide the subject material within eight weeks, whereas foreign suppliers were not held to the same standard and could take much longer," Heffner wrote.
US imports of aluminium and steel have been limited by the Section 232 tariffs of 10% and 25% respectively. Some countries, including Brazil, South Korea and other major US trading partners, have been granted exclusions on steel items by agreeing to volume quotas or other restrictions.
US steel prices have jumped as a result.
Fastmarkets’ daily steel hot-rolled coil index, fob mill US was calculated at $51.29 per hundredweight ($1,025.80 per short ton) on December 28, up by 2.6% from $50 per cwt the previous business day and by 3.3% from $49.67 per cwt a week earlier. This is the highest level since reaching $53 per cwt in late August 2008.