Product Exclusions Now Available From Section 232 Quota Countries

Until these proclamations, product exclusions were only available on aluminum and steel products subject to tariffs. The quotas were administered by categories, not just by countries, so some kinds of pipes from South Korea had already met the quota before the year was half over (see 1806060041). The quotas were put in place as part of agreements with South Korea and Brazil to avoid the 25 percent tariff on steel, and with Argentina to avoid that tariff as well as the 10 percent tariff on aluminum.

Brazil is the second-largest steel exporter for the U.S., and South Korea is third, according to Commerce data on the year to date up to June. About 80 percent of Brazil's steel exports to the U.S. are semi-finished, and those are capped at 100 percent of the last three years' average. But for finished steel, there's a 30 percent reduction, and some individual products face much sharper reductions. South Korea accepted a quota equal to 70 percent of its three-year average.

Companies granted the exclusions would file under new Harmonized Tariff Schedule subheadings 9903.80.60 for steel and 9903.85.11 for aluminum. Excluded products would not be subject to the Section 232 tariffs. A spokesman for the Commerce Department said he could not say whether already denied requests for countries under quota would need to be resubmitted, or whether they would be automatically reconsidered. The proclamations direct Commerce to issue procedures for requests for the quota exclusions. Quota exclusions will take effect on the date requests are granted.

A separate quota exemption process applies for steel ordered before the tariffs were announced March 8 that are meant for construction of facilities for which the quotas have held up construction. Several conditions apply, including that the steel can't make up more than 10 percent of the facility cost. Steel entered under the new subheading for the facility exclusion, 9903.80.61, will be subject to a 25 percent duty. No equivalent exemption was created for aluminum.

The steel and aluminum proclamations also each provide for CBP to adopt export certification requirements for goods subject to quota. Where a foreign government of a country eligible for quotas notifies the U.S. “that it has established a mechanism for the certification of exports to the United States of products covered by the quantitative limitations applicable to these subheadings, and where such mechanism meets the operational requirements for participation in an export certification system administered by the United States,” CBP may require filing of the certifications as a condition of entry following an announcement in the Federal Register.

Meanwhile, a clause in each proclamation amends the initial proclamations implementing the Section 232 tariffs to specifically provide for an effective date for exclusions. Earlier proclamations implementing tariffs on steel and aluminum are amended so that, for entries on which liquidation is not final, the exclusion "shall be retroactive to the date the request for relief was accepted by the Department of Commerce." A clause from the previous proclamations -- which these latest proclamations eliminate -- had said the exclusions were to be effective on the date requests for public comment. A Commerce Department release did not mention this change, and Commerce did not immediately comment on it.

The change to effective dates is "great news and maybe, just maybe, an encouraging sign of things to come in the rule," said an email purportedly from the office of Rep. Jackie Walorski, R-In., posted by the American Institute for International Steel. "Extending retroactive relief back to the date of filing, as opposed to the date of posting on regulations.gov," was Walorski's "ask #1," it said. The change "surprised" Walorski's office, which "had not seen or heard anything to indicate they were sympathetic to this idea – quite the opposite," said the email, according to AIIS.

House Ways and Means Committee Chairman Kevin Brady, R-Texas, praised the changes, and said, "I hope that these expansions to Commerce’s authority to issue product exclusions will make a real difference to the hundreds of U.S. companies in Texas and throughout the country that await a decision on their product exclusion requests. Now that these very helpful improvements are in place, I am confident that Commerce will continue to expedite and streamline the process using its existing authority to make relief broadly available and extend it where there are no objections." Ways and Means Trade Subcommittee Chairman Dave Reichert, R-Wash., urged "the timely consideration of the remaining applications."

In general, the exclusion process continues to progress slowly. More than 40 exclusions that were granted were published Aug. 29. More than 30 exclusions that were denied were also published that day. Some of the requests dated back to May 25, and others from mid-June. Several companies received exclusions on some products and denials on others, including TN Americas, which sells into the auto industry; Voestalpine High Performance Metals, whose steel is used to make tool and dies; and Indiana Auto Fasteners. In all those cases, the accepted and rejected material was imported from the same factories.