Deadline of October 12th to Submit Comments

On August 28, 2023, the U.S. Department of Commerce (“Commerce”) published in the Federal Register a proposed rule that makes certain revisions to the Section 232 steel and aluminum tariff exclusions process. The proposed rule is focused on changes that are expected to assist Commerce in more efficiently handing the continuing large volume of exclusion requests and objections submitted to the agency.

The deadline for submitting comments on the proposed changes is October 12, 2023, and comments must be identified by docket number BIS-2023-0021 or RIN 0694-AJ27, and submitted through the Federal eRulemaking website: http://www.regulations.gov.

Background

On March 8, 2018, President Trump exercised his authority under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. § 1862) to impose a 25 percent tariff on imports of steel and a 10 percent tariff on imports of aluminum, following an investigation by Commerce that concluded imports of both metals posed a national security risk. Subsequent to these actions, the U.S. government negotiated several country-specific tariff exclusions, such as for Canada and Mexico. Additionally, to limit the tariffs’ potential negative impact on U.S. businesses and consumers, Commerce developed a mechanism for U.S. companies to apply for product-specific exclusions due to (1) domestic unavailability due to circumstances of quantity or quality, and (2) specific national security considerations. The exclusions process was established on March 19, 2018 pursuant to an interim final rule (“IFR”) issued by Commerce’s Bureau of Industry and Security (“BIS”). Since the implementation of the exclusions process, BIS issued four additional IFRs that made various revisions to the Section 232 exclusions process.

Proposed Revisions

The latest round of proposed revisions makes four key changes to the Section 232 exclusions process by: (1) creating a more expansive process for General Approved Exclusions (“GAE”); (2) establishing a General Denied Exclusions (“GDE”) process; (3) modifying existing certification language and introducing new certification requirements for exclusion requests; and (4) proposing similar certification language on the objection form to further ensure objectors can supply comparable quality and quantity steel or aluminum and make it “immediately available” to requesters in line with the standards described in the previously-issued Section 232 IFRs.

General Approved Exclusions

In December 2020, Commerce promulgated the fourth IFR pertaining to the Section 232 exclusions process. An important change in that rule was the creation of GAEs, which provide for an unlimited exclusion for certain products to which no domestic producer objected. The GAEs were identified at the ten-digit statistical reporting number of the Harmonized Tariff Schedule of the United States and intended to improve the overall efficiency of the exclusions process and to ease the administrative burden on the agency. As Commerce notes in the IFR, implementation of GAEs resulted in an immediate decrease of 5,000 exclusion requests annually.

BIS proposes changing the criteria from granting exclusions for products that have received no objections to HTSUS classification codes (or sub-products) with very low rates of successful objections. While BIS still believes that the number of objections received is generally the right criterion to use in identifying GAEs, the challenge with the current process is that any party seeking to prevent Commerce from establishing a GAE can submit an objection and the relevant HTSUS category would be ineligible for GAE status, regardless of the merits of the objections. BIS estimates that the suggested new approach could result in up to a 20 percent decline in the total number of exclusion requests received.

General Denied Exclusions

Similar to the existing GAE process, BIS is proposing to establish a GDE process to improve the efficiency of the Section 232 exclusions process. According to the proposed rule, GDEs will generally be implemented if, among other things, the HTSUS classification code (or sub-products) have very high rates of successful, substantiated objections. This change is aimed at reducing the burden on objectors and requesters with respect to Section 232 exclusion requests that historically have a very low likelihood of being approved. While BIS has not proposed any specific GDEs yet, in response to a public comment suggesting that semi-finished steel products should be removed from the list of products eligible for an exclusion, BIS stated that it will consider this further and that it is possible that this product could be covered by a GDE.

Exclusion Request Certifications and Evidence

The proposed rule adds new certification and evidentiary requirements for exclusion requesters. Pursuant to the new rule, before filing an exclusion request, requesters must certify that they have first made reasonable efforts to source their products from a supplier in the United States and then, if unsuccessful, that they have made reasonable efforts to source their product from a supplier in a country with which the United States has arrived at a satisfactory alternative means to address the threat to the national security under Section 232 (i.e., quota, tariff-rate quota, exemption, etc.), and provide evidence of those sourcing attempts simultaneously with the request submission. These sourcing attempts need to have been made within 12 months from the date of submission of the exclusion request. Failure to provide this information will result Commerce’s rejecting the exclusion request.

Additionally, in response to a public comment, BIS stated that it encourages requesters to include in their exclusion requests evidence of lack of responsiveness to requests for quotes from domestic producers that continue to file objections.

BIS is seeking comments regarding the appropriate form and substance of evidence that must be provided by requesters to support their certification of sourcing attempts.

Objection Certifications and Evidence

The proposed rule introduces additional certification requirements on objection forms, as well as evidence requirements for objection submissions. The proposed rule states that “{t}hese certifications and additional evidentiary requirements are designed to address concerns of objectors filing objections when they cannot or will not provide the requested product.” Under the proposed certification requirement, objectors must certify that they currently manufacture the requested product at a facility in the United States and that, in response to a written request by a requester within the next year, they will offer to sell and make “immediately available” to the requester the full quantity of the product at then-existing market rates and terms in accordance with the other terms specified in the objection.

Additionally, objectors will be required to file, simultaneously with their objection submission, evidence that they have commercially sold the product subject to the exclusion request within the last 12 months, or evidence that they have engaged in sales discussions with the requesting company or another company requesting the same product within the last 12 months.

BIS is seeking comments regarding the appropriate form and substance of evidence that must be submitted by objectors to support their certification of sales discussions. BIS is also seeking comments on whether it is appropriate to require objectors to certify that they can supply comparable quality and quantity steel or aluminum and make it “immediately available,” or whether a different time period should be specified for the certification. If a commenter suggests a different time period, BIS has urged commenters to address whether different types of products may require longer periods.

Vanadium is a metallic element often used as an alloying agent in the production of steel and other metals. It is used to improve the resulting metal’s hardness, ductility, and toughness. Typical end uses for vanadium-alloyed steels include armor plates, parts of jet engines, and cutting tools.

According to the U.S. Geological Survey, vanadium is mined mostly in Brazil, China, Russia, and South Africa. Vanadium can also be produced through a secondary process. This source also indicates that from 2015-2018, U.S. demand was supplied 100 percent by imports.

Commerce’s notice provides interested parties with an opportunity to submit written comments and information pertaining to the investigation by July 20, 2020. Commerce is particularly interested in comments and information relating to the following criteria:

1. The quantity and circumstances of imports of vanadium;
2. Domestic production and capacity needed to meet projected national defense requirements;
3. Existing and anticipated availability of human resources, products, raw materials, production equipment, and facilities to produce vanadium;
4. Growth requirements of the vanadium industry to meet national defense requirements and/or requirements for supplies and services necessary to assure such growth including investment, exploration, and development;
5. The impact of foreign competition on the economic welfare of the vanadium industry;
6. The displacement of any domestic vanadium production causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;
7. Relevant factors that are causing or will cause a weakening of our national economy; and
8. Any other relevant factors, including the use and importance of vanadium in critical infrastructure sectors.

At the conclusion of the investigation, Secretary Ross will prepare a report and advise the President on whether vanadium is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.

Comments Due by July 10, 2020

Since issuing its interim final rule establishing the Section 232 exclusion request process, BIS has received over 179,000 exclusion requests (157,900 for steel and 21,100 for aluminum), with over 78,500 being granted and 25,400 being denied.

BIS is seeking public comment regarding “the appropriateness of the factors considered, and the efficiency and transparency of the process employed, in rendering decisions on requests for exclusions from the tariffs and quotas imposed on imports of steel and aluminum articles.” The notice lists various topics for comments including but not limited to expanding or restricting eligibility requirements for requestors and objectors; the Section 232 Exclusions Portal; the factors considered in rendering decisions on exclusion requests; and the incorporation of steel and aluminum derivative products into the product exclusion process.

BIS is also seeking suggested revisions to the exclusion process, such as time-limited annual or semi-annual windows during which all product-specific exclusion requests and corresponding objections may be submitted and decided; issuing an interim denial memo to requesters who receive a partial approval of their exclusion request until they purchase the domestically available portion of their requested quantity; requiring requestors to make a good faith showing of the need for the product in the requested quantity, as well as that the product will in fact be imported in the quality and amount, and during the time period, to which they attest in the exclusion request; and in the rebuttal/surrebuttal phase, requiring that both requestor and objector demonstrate in their filings that they have attempted to negotiate in good faith an agreement on the said product (i.e., producing legitimate commercial correspondence).

In a May 22 press statement announcing the comments, Secretary of Commerce Wilbur Ross indicated the Department’s inquiry was reflective of its ongoing efforts to improve the product exclusion process. Specifically, Ross said, “We want these critical national security measures to be applied effectively while avoiding unnecessary impacts on downstream American industries.”

Since its inception, the product exclusion process has been the subject of much criticism from the business community and Members of Congress, with concerns raised by both proponents and opponents of the tariff program. On a bipartisan basis, Members have raised the issue in letters and during various oversight hearings, and several pieces of pending legislation seeking broad Section 232 reform have also specifically addressed the product exclusion process. Additionally, last October – during the course of an audit of the Department of Commerce’s processes and procedures for reviewing and adjudicating Section 232 exclusion requests – the Department’s Office of Inspector General (OIG) issued a Management Alert raising transparency concerns.

Comments on the Section 232 exclusion process are due by July 10, 2020 (45 days after publication). All written comments must be submitted to the Federal rulemaking portal (www.regulations.gov). The regulations.gov ID for this rule is: BIS-2020-0012. Please refer to RIN 0694-XC058 in all comments and in the subject line of e-mail comments.

The investigation on electrical transformer components will cover laminations for stacked cores for incorporation into transformers, stacked and wound cores for incorporation into transformers, electrical transformers, and transformer regulators. Transformers are an essential part of the U.S. energy infrastructure. The Department’s press release notes that “[a]n assured domestic supply of these products enables the United States to respond to large power disruptions affecting civilian populations, critical infrastructure, and U.S. defense industrial production capabilities.” Several members of Congress had previously urged the Administration to initiate proceedings.

The investigation on mobile cranes follows a petition filed by domestic producer The Manitowoc Company, Inc. (“Manitowoc”), according to the Department’s press release. That petition, filed in December, alleges that “increased imports of low-priced mobile cranes, particularly from Germany, Austria, and Japan, and intellectual property (IP) infringement by foreign competition, have harmed the domestic mobile crane manufacturing industry.” Mobile cranes are considered a critical industry due to their extensive use in national defense and critical infrastructure applications. Manitowoc also alleges that low-priced imports and IP infringement of mobile cranes caused the closure of one of its two U.S. production facilities, eliminating hundreds of skilled U.S. manufacturing jobs.

The Department now has 270 days to provide a report to President Trump determining whether these imports threaten to impair U.S. national security, along with a recommendation for action. President Trump will then have 90 days to determine whether or not to impose restrictions so that imports no longer threaten national security.

Approximately one year ago, the U.S. Department of Commerce initiated a Section 232 investigation concerning imports of titanium sponge as a result of a petition filed by Titanium Metal Corporation (“TIMET”) – the sole producer of titanium sponge in the United States. TIMET’s petition was filed on the heels of the company’s failed attempt to obtain relief from what it alleged were unfairly-traded imports from Japan and Kazakhstan under Title VII of the Tariff Act of 1930. The United States International Trade Commission (“USITC”) issued a rare negative preliminary determination in that investigation based on its findings that there was no reasonable indication that TIMET was materially injured or threatened with material injury by reason of imports of titanium sponge. The Commission’s determination was largely based on the fact that TIMET self-consumed nearly all titanium sponge it produced in the United States, did not supply titanium sponge to other domestic titanium producers, and thus did not compete with imports of titanium sponge that other domestic titanium producers consume in the production of downstream mill products. The USITC determination is available here.

The Presidential Memoranda issued as a result of the Commerce Department’s Section 232 investigation indicates that the Secretary of Commerce determined that imports of titanium sponge are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States. Although that report was transmitted to the President on November 29, 2019, it has not yet been made publicly available.

The memorandum also noted that nearly 95 percent of U.S. imports of titanium sponge are from Japan – a country with which the United States “has an important security relationship.” At least in part as a result of this relationship, on the Secretary of Commerce’s recommendation, the President determined it would be inappropriate to adjust imports at this time. The memorandum nevertheless directs the Secretaries of Defense and Commerce to form a working group to agree upon measures to ensure access to titanium sponge in the United States for national defense and critical industries in the case of an emergency.

Overall, the President’s determination was supportive of the position taken by the domestic titanium industry and the many downstream users of titanium mill products, including the defense and aerospace industries.

Yesterday, the proclamation and accompanying annexes were published in the Federal Register revealing that the list of products covered by the new duties was extremely limited. It is unclear, however, whether the criteria laid out in the President’s proclamation will be used to apply duties to additional derivative steel and aluminum articles in the future.

For additional information regarding the President’s proclamation, please click here.

For a copy of the proclamation and accompanying annexes, please click here.

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.

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.

The President’s plan was developed after a meeting with administration officials including Treasury Secretary Steve Mnuchin, Secretary of State Mike Pompeo, and National Security Advisor Robert O’Brien. The increased steel tariffs will work in tandem with sanctions imposed by an Executive Order issued on Monday and enforced by the Secretary of the Treasury in consultation with the Secretary of State. Our sanctions analysis can be found here.

While the Trump Administration has taken heat on Capitol Hill for its liberal use of tariffs to achieve its policy goals, there is broad, bipartisan and international support for some form of action against Turkey. President Trump’s statement on Turkey notes he is “fully prepared to swiftly destroy Turkey’s economy if Turkish leaders continue down this dangerous and destructive path.” Others, including Speaker Nancy Pelosi, have voiced the opinion that stronger sanctions are appropriate now. Finland, France, Germany, and Sweden also announced on Monday that they will suspend arms exports to Turkey.

The impact and duration of the sanctions are as of yet unclear. Hours after President Trump’s announcement, Turkish President Erdoğan expanded the military operation amidst broad domestic support.

At this time, Turkish President Erdoğan is still expected to visit Washington, D.C. next month.

The deal does not impose quotas – which the United States had sought – but does requires the parties to develop and implement surge-monitoring procedures. In the case of a surge “beyond historic volumes of trade over a period of time,” the exporting country faces the risk of reimposed tariffs. In monitoring surges, however, steel that is “melted and poured in North America” may be separately counted.

The deal also requires Canada and Mexico to adopt anti-circumvention enforcement measures to avoid transshipment of non-Canadian and non-Mexican steel and aluminum across their borders.

Eliminating the Section 232 tariffs for Canada and Mexico removes a major hurdle to Congressional approval of the U.S.-Mexico-Canada Agreement (USMCA). Senator Grassley (R-IA), chairman of the Senate Finance Committee (with jurisdiction over international trade issues), has repeatedly tied ratification of USMCA to lifting the tariffs for Canada and Mexico.

The announcement comes in response to a Department of Commerce investigation initiated a year ago under Section 232 of the Trade Expansion Act of 1962. The Department submitted its statutorily-required report to the President on February 17, 2019, concluding that imports of automobiles and certain automobile parts threaten to impair the national security of the United States. Specifically, the Department highlighted the importance of domestic R&D expenditures and innovation in ensuring “long-term automotive technology superiority” that is critical to the defense industry.

The President’s proclamation highlighted a near-doubling of automobile imports into the United States from 1985 to 2017 and the declining share of the U.S. automobile market held by American-owned producers during the same time period (now 22% vs. 67% in 1985). Additionally, the proclamation cites the difficulty of U.S. producers to export as a result of protected foreign markets – specifically in the European Union and Japan.

In directing the trade negotiations, the proclamation specifically mentions the European Union, Japan and “any other country the Trade Representative deems appropriate.” The President highlighted the potential benefits of the renegotiated United States-Korea agreement and the new United States-Mexico-Canada Agreement (USMCA) in addressing the national security threat.

Under the statute, a decision was required by the President within 90 days of receiving the Department of Commerce report. The decision to enter into trade negotiations was one option. Alternatively, in concurring with the Department’s findings, the President could have announced more immediate action to adjust imports (e.g., tariffs or quotas), or could have asked for additional analysis or review.

If agreements are not reached by November 13, 2019, the President will determine whether and what further action needs to be taken to address the national security threat.

The dispute was brought by Ukraine in September 2016 after Russia imposed various restrictions preventing Ukraine from using Russian road and rail transit to trade goods destined for Kazakhstan, the Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan. In defense, Russia claimed that its actions were not subject to WTO review because they constituted actions necessary to protect Russia’s “essential security interests” during an “emergency in international relations” between Russia and Ukraine. Actions taken by a WTO Member during a war or an emergency in international relations are excepted from WTO review pursuant to Article XXI of the General Agreements on Tariff and Trade 1994 (GATT). The Trump Administration has cited Article XXI as exempting from WTO jurisdiction its decision to impose duties on imports of steel and aluminum products pursuant to Section 232 of the Trade Expansion Act of 1962 (Section 232).

Article XXI is the so-called “security exemption” from certain WTO obligations. Article XXI(b)(iii) provides, among other things, that a party may take any action that it considers necessary to protect its essential security interests taken “in a time of war or other emergency in international relations.” According to Russia, Article XXI is a “self-judging” provision, meaning that a WTO Member may itself determine whether it has taken action to protect its essential security interests during an emergency in international relations, and a WTO panel may not second-guess or review that decision. In other words, Russia claimed that once it cited Article XXI as a basis for its actions, the WTO could no longer examine the challenge.

The panel held otherwise. First, the panel found that it possessed jurisdiction to review Ukraine’s challenges and Russia’s invocation of a defense pursuant to GATT Article XXI. It then examined what had transpired between Russian and Ukraine since 2014 to determine whether it constituted an “emergency in international relations.” The panel concluded that there was an emergency in international relations between the two countries because relations had deteriorated so badly that they were a concern to the international community, the situation was recognized by the UN General Assembly as an armed conflict, and a number of countries imposed sanctions against Russia in connection with the situation. Thus, after finding that the Article XXI security exemption was satisfied, the panel did not make any additional findings regarding Ukraine’s challenges. It made no recommendations for any further actions.

This decision has implications for the United States, as several foreign governments have challenged at the WTO the U.S.’s imposition of tariffs under Section 232. In response, the U.S. government has cited Article XXI, arguing that its Section 232 actions are unreviewable by the WTO. While WTO panel decisions are not supposed to be binding precedent, Friday’s panel decision in the Russia-Ukraine dispute is highly likely to be cited in the WTO disputes involving U.S. steel and aluminum Section 232 tariffs.

While Ukraine is quite likely to appeal the panel’s decision to the WTO’s Appellate Body, it is unclear whether such an appeal would result in timely resolution of the dispute. By the end of 2019, and unless new Members are appointed, the Appellate Body will not have enough Members to render decisions.

On November 26, 2018, a bipartisan group of U.S. Senators sent a letter to the GAO requesting the agency to conduct a formal review of Commerce’s exclusion request process. Specifically, they noted that “Members of Congress and U.S. businesses have repeatedly raised concerns about the pace, transparency, and fairness of the section 232 steel and aluminum exclusion process.” The letter, which was signed by Senators Tom Carper (D-Del.), Doug Jones (D-Ala.), and Pat Toomey (R-Pa.), urged the GAO to examine several questions, including how Commerce has incorporated feedback from petitioners, members of Congress, and other stakeholders to develop and improve the process; what criteria is used to approve or deny an exclusion request; what steps have been taken to timely process exclusion requests; how it trains staff to evaluate exclusion requests; the average amount of time Commerce takes to issue a decision on a request; whether it ensures transparency and adequate communication with petitioners; and what degree of technical support is provided to assist petitioners, especially small businesses. A copy of the letter is available here. The GAO is set to begin its review of the exclusion process by March 2019.

On another note, the President’s authority to impose tariffs under Section 232 is currently on appeal before the U.S. Court of International Trade. The case, which is led by the American Institute for International Steel (“AIIS”), claims that Section 232 of the Trade Expansion Act of 1962 violates the U.S. Constitution because it wrongly transfers authority over trade policy from Congress to the executive branch. Oral argument was held earlier this week and at least one judge of the three-judge panel appeared to be sympathetic to the AIIS’s claims. As published by Law360, Judge Claire Kelly was quoted as stating “{m}y concern is that at some point, is there any limit on what kind of power you can give away?” “Without judicial review, it seems Congress has given away a whole lot, and maybe you shouldn’t be allowed to do that?”

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.

Mexico is also facing potential Section 232 tariffs and export quotas imposed by the U.S. regarding certain Mexican-origin autos and auto parts. The U.S. is currently investigating whether it will impose such tariffs, and results are expected in the coming months. If such duties are imposed, a side-letter to the USMCA states that Mexico and Canada will be subject to a 2.6 million annual passenger vehicle quota each, while also being subject to auto parts quotas of $108 billion and $32.4 billion annually, respectively.

Next Steps

Mexican officials indicate that an agreement on export quotas for steel should be reached in the next few weeks. Separately, the finalized USMCA is expected to be signed at the end of November 2018. Pursuant to the Congressional trade agreement authority, the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 or Trade Promotion Authority, a list of required changes to the U.S. law is due to Congress within 60 days of signing. In addition, the U.S. Department of Commerce is expected to release its recommendations regarding Section 232 automobiles and auto parts imports in mid-February 2019.

The seven classes include wire rod; stainless steel wire; hot-rolled sheet; heavy plate; energy tubular; pre-painted steel; and concrete reinforcing bar.

These “safeguard measures” were reportedly prompted by complaints from Canada’s steel industry that U.S. Section 232 tariffs on steel and aluminum have resulted in shipments of cheap steel to be diverted to Canada from the U.S., and follows the country’s countermeasures imposed on July 1^st applying tariffs on over $12 billion worth of U.S. goods in response to those tariffs.

Notably, the safeguards do not apply to goods originating in and imported from the U.S., Chile and Israel. However imports of energy tubular and wire rod from Mexico “are within the scope of the Tribunal’s inquiry.”

These safeguard measures are provisional, remaining in place for 200 days pending the safeguards inquiry conducted by the Canadian International Trade Tribunal (CITT). By April 2019, the CITT must provide recommendations on whether the safeguard should be continued for the longer term. While parties can participate in the CITT inquiry, they are “directed not to make submissions to the Tribunal on classes of goods or to request exclusions from safeguard measures for specific products, producers, exporters, regions, etc., as these matters are outside the scope of the inquiry.”

According to the petitioners, a domestic supply of uranium is essential to national defense, as uranium is critical to military applications and a significant portion of electricity for the U.S. power grid. Petitioners assert that they have struggled financially to compete with uranium imports from countries like Russia, Kazakhstan, Uzbekistan, and China that have targeted the U.S. market. The petition states that imports have grown dramatically to capture almost 80% of domestic uranium demand, while U.S. producers have been forced to idle production and lay off workers. Petitioners note that six U.S. nuclear reactors – required to enrich uranium for defense purposes – have closed since 2013 and another eight are scheduled to close between 2018 and 2025. In a statement made regarding initiation of the investigation, Secretary of Commerce Wilbur Ross cited the fact that “U.S. uranium production had been 49 percent of U.S. requirements in 1987. Today, U.S. uranium production has dropped to only five percent of U.S. requirements.”

Commerce has 270 days to submit a report to President Trump as to whether uranium imports threaten to impair U.S. national security. If Commerce reaches an affirmative conclusion, the president is authorized to take actions deemed “necessary to adjust the imports of such article” to address the harm, including by imposing tariffs or other import restrictions, or through indirect action such as domestic industry assistance. The two petitioning companies have called for a quota on uranium imports that would reserve 25% of the U.S. nuclear market for domestic production, and domestic procurement rules that would require the government to purchase U.S.-sourced uranium.

In 1989, Commerce conducted a Section 232 investigation into uranium imports at the request of the Secretary of Energy, but concluded that imports did not pose a risk to national security and no action was taken at that time.

Commerce is also currently examining automobiles and automotive parts imports under Section 232, an investigation that was initiated on May 23, 2018 at the request of President Trump. Most recently, in January 2018, Commerce concluded two Section 232 investigations into imports of steel and aluminum, respectively, finding that imports of these products threaten to impair national security. Beginning March 23, 2018, tariffs of 25 percent were imposed on steel and aluminum imports from most countries. The Administration’s use of Section 232 as a broad instrument of trade policy has generated controversy within the United States and with U.S. trading partners. The actions taken on steel and aluminum imports under Section 232 have led to law suits, challenges by other countries at the World Trade Organization, and retaliatory tariffs against U.S. exports.

As it did during its recent 232 investigations concerning U.S. imports of steel and aluminum, the Commerce Department is seeking participation from the public in the form of written comments and public testimony. The following are the key dates for interested parties who would like to participate in the investigation:

• June 22, 2018 – Deadline to submit affirmative comments, request to appear at the public hearing, and submit a summary of expected testimony
• July 6, 2018 – Deadline to submit rebuttal comments
• July 19-20, 2018 – Public hearings held at 8:30 a.m. to 5:00 p.m. ET

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.

1. A tariff of at least 7.7% on all aluminum exports from all countries, or
2. A tariff of 23.6% on all products from China, Hong Kong, Russia, Venezuela and Vietnam. All the other countries would be subject to quotas equal to 100% of their 2017 exports to the United States, or
3. A quota on all imports from all countries equal to a maximum of 86.7% of their 2017 exports to the United States.

The Commerce Department’s reports also recommend that a process be set up to allow Secretary Ross to grant requests by U.S. companies to exclude certain products from whatever remedy President Trump ultimately imposes.

The Kelley Drye International Trade team is closely reviewing these reports and monitoring any further developments.

Neither the White House nor the Commerce Department has announced the contents of the report and whether the Commerce Department concluded that steel imports (or a particular subset of steel imports) pose a threat to national security. The Commerce Department issued a press release stating that the Secretary reported the Department's findings to the President. After the President has announced a decision, the Department intends to publish the public findings of the investigation.

Witness testimony covered several topics including the negative effects of China’s aluminum overcapacity, the coverage and breadth of any remedies imposed as a result of the investigation, including that aluminum imports from Canada and Europe should be exempt.

The deadline for written comments was Friday, June 23, 2017. With the record closed, and, given the urgent nature of the investigation, Secretary Ross is expected to issue his report to President Trump in the near future.

Please contact Kelley Drye’s International Trade team for additional information concerning the Section 232 investigation on aluminum imports and the potential remedies that may be imposed.