On Friday, January 24, 2020, President Trump issued a proclamation expanding duties imposed on steel and aluminum articles pursuant to Section 232 of the Trade Expansion Act, commonly referred to as “Section 232 duties,” to certain downstream steel and aluminum “derivatives.”

Application of 232 duties to “derivative articles” is authorized by statute.  Indeed, while the scope of a 232 investigation is limited to certain “articles,” a remedy may be imposed on the articles subject to the investigation as well as their derivatives.  19 U.S.C. § 1862(b)-(c); see also 15 C.F.R. §§ 705.2 – 705.3.

The Trade Expansion Act of 1958 added the “derivative articles” language to the statute in order to prevent imports of derivative articles from undermining remedies imposed on imports of articles found to threaten the national security.  The President’s proclamation indicates that the determination to expand Section 232 duties was taken for this very reason – to address foreign producers’ circumvention of Section 232 duties by increasing shipments of derivative articles to the United States and because “imports of these derivative articles threaten to undermine the actions taken to address the risk to the national security of the United States.”

Products covered by the President’s proclamation are those “derivatives” of steel and aluminum articles that meet the following three criteria:

  1. the aluminum article or steel article represents, on average, two-thirds or more of the total cost of materials of the derivative article;
  2. import volumes of such derivative article increased year-to-year since June 1, 2018, following the imposition of the Section 232 duties, in comparison to import volumes of such derivative article during the 2 preceding years; and
  3. import volumes of such derivative article following the imposition of the tariffs exceeded the 4 percent average increase in the total volume of goods imported into the United States during the same period since June 1, 2018.

The proclamation also specifically identifies “steel nails, tacks, drawing pins, corrugated nails, staples, and similar derivative articles,” “aluminum stranded wire, cables, plaited bands, and the like (including slings and similar derivative articles),” and “bumper and body stampings of aluminum and steel for motor vehicles and tractors” as being covered, though it is unclear if two yet-to-be-released Annexes will identify a more expansive list of products.

Effective February 8, 2020, derivative steel articles will be subject to a 25 percent tariff, but imports from Argentina, Australia, Brazil, Canada, Mexico, and South Korea are exempted.  Similarly, derivative aluminum articles will be subject to a 10 percent tariff, but imports from Argentina, Australia, Canada, and Mexico are exempted. In the event of a surge of imports of any identified derivative article from an exempted country, however, the Secretary of Commerce is authorized extend tariffs to imports from that country or apply an alternative remedy.

The proclamation also authorizes Secretary Ross to establish an exclusion process from the additional duties “for any derivative article determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality” as well as “upon specific national security considerations.”

We will continue to monitor this important issue in the coming days and weeks as more details become available concerning the Proclamation’s coverage as well as any exclusion process established.