On October 15, 2018, chief Mexican trade negotiator Jesus Seade indicated that the United States is seeking to replace Section 232 tariffs on Mexican steel with an export quota program.  Seade stated that a deal regarding any potential export quotas on Mexican steel must be reached in the coming weeks, prior to the December, 1, 2018 inauguration of new Mexican President Andres Manuel Lopez Obrador.

This announcement was issued just days after the trilateral trade agreement, the U.S.-Mexico-Canada Agreement (“USMCA”) was reached among the United States, Canada, and Mexico.  Notably, the Section 232 tariffs, imposed in June on the basis of national security pursuant to the Trade Expansion Act of 1962, remain in place for both Mexico and Canada despite the USMCA agreement being finalized.

As of June 1, 2018, imports of Mexican steel became subject to a 25 percent duty, while aluminum shipments are subject to a 10 percent duty.  Certain countries, including Argentina, Brazil and South Korea, have already negotiated export quotas to nullify the Section 232 duties.  For example, South Korean officials agreed in March to cut steel exports by 30 percent of the 2015-2017 average.
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On Friday, February 16, 2018, Secretary Ross released public versions of the U.S. Department of Commerce’s reports concerning the agency’s section 232 investigations into the impact on national security of steel and aluminum imports. As a result of its investigations, the Department of Commerce has determined that imports of steel and aluminum “threaten to impair the national security.”

The Secretary’s press release presents the agency’s key findings and lists the agency’s various recommended remedies.  With respect to steel imports, the Department of Commerce recommends three alternative options to the President:

  1. A global tariff of at least 24% on all steel imports from all countries, or
  2. A tariff of at least 53% on all steel imports from 12 countries (Brazil, China, Costa Rica, Egypt, India, Malaysia, Republic of Korea, Russia, South Africa, Thailand, Turkey and Vietnam) with a quota by product on steel imports from all other countries equal to 100% of their 2017 exports to the United States, or
  3. A quota on all steel products from all countries equal to 63% of each country’s 2017 exports to the United States.

With respect to aluminum imports, the Department of Commerce recommends three alternative options to the President:
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Late last week, the Government of China announced that it would be removing export taxes on many steel products, including wire, rods, bars, billets, and stainless steel plate, as of January 1, 2018.  The move is part of a number of tax changes.  The steel export tax has not prohibited massive volumes of Chinese steel from being shipped to other markets in the face of overwhelming overcapacity at home.  But the absence of the export tax will make it even easier for Chinese steel producers to export steel products around the world.  Notably, China typically adjusts export tax levels on an annual basis as a policy measure to encourage or discourage certain exports.  Thus, this latest decision signals not only the Government of China’s continued active intervention in the market, but its support for even greater exports of Chinese steel, which the world can hardly absorb.
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On September 11, 2017, the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) issued a judgment without opinion affirming the International Trade Commission’s (“ITC”) decision in Viraj Profiles Limited v. ITC (2016-2482) that resulted in a limited exclusion order against Indian stainless steel producer Viraj Profiles Limited (“Viraj”).  The exclusion order prohibits the importation into the United States of all stainless steel products manufactured by or on behalf of Viraj.  The order has been in effect since July 2016 and will remain in place for a period of 16.7 years.
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Yesterday, the Department of Commerce announced its preliminary determinations in the countervailing duty investigations on carbon and alloy steel wire rod from Turkey and Italy.  Commerce reached affirmative determinations in both cases, finding that wire rod producers in those countries benefitted from government subsidies.  Specifically, Commerce found an overall subsidy rate of 1.70 percent ad valorem for Italian producer Ferriere Nord S.p.A. and 44.18 percent ad valorem for Italian producer Ferriera Valsider S.p.A.  Imports of wire rod from Italy by all other producers and exporters will require a cash deposit at a rate of 1.70 percent ad valorem.
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On June 2nd, the International Trade Commission (“ITC”) voted to continue the antidumping and countervailing duty investigations on cold-drawn mechanical tubing from China, Germany, India, Italy, Korea, and Switzerland.  The ITC’s preliminary vote finding a reasonable indication that the domestic industry is material injured by reason of imports from the six countries was unanimous.  As a result of the affirmative preliminary injury finding, the Commerce Department will continue its respective investigations to determine whether cold-drawn mechanical tubing from each of the six countries is being unfairly subsidized and/or sold at less than fair value.  The petitions for trade relief, filed on April 19th, allege margins of dumping that range from the double digits to the triple digits for certain countries, including China, Germany, and Switzerland.  The countervailing duty petitions for China and India identify numerous subsidy programs including, for example, export loans, credit and insurance at preferential rates, preferential tax treatment, and government grants.  The ITC and Commerce Department are expected to issue their final determinations by or before early next year. 
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The Commerce Department has signaled that it will issue findings in its respective “Section 232” investigations covering imports of steel and aluminum before the end of June.  Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. § 1862) grants the U.S. Department of Commerce the authority to conduct an investigation to determine whether imports of particular merchandise threaten the national security.  The Commerce Department then issues its findings, along with a recommendation for action, to the President.  A conclusion that imports of steel or aluminum threaten the national security allows the President to decide whether to adjust or modify the volumes or prices of imports of foreign-made steel or aluminum into the United States. 
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