The Trump administration recently adopted new measures to curtail steel imports from Brazil and Mexico, bolstering protections for U.S. steelmakers still suffering from the worst slump in more than a decade.
Quota Rollback for 2020
The Office of the U.S. Trade Representative announced on August 28 that pursuant to a Presidential Proclamation, it has reduced Brazil’s remaining 2020 quota for semi-finished steel imports into the United States to 60,000 metric tons from 350,000 tons “in light of recent deterioration in market conditions brought on by the COVID-19 pandemic affecting domestic steel producers.”
Brazil is the second-largest source of steel imports to the U.S. and the largest when it comes to semi-finished steel products. In May 2018, President Trump granted an exemption for Brazilian steel products from the additional 25% “national security” tariff imposed under Section 232 of the Trade Expansion Act of 1962. Through subsequent negotiations, certain steel-producing countries – including Brazil – agreed to accept quota restrictions in exchange for keeping the exemption going forward.
Citing Commerce figures indicating a 15% drop in steel shipments by domestic producers as of June compared to the same period last year and showing that U.S. steelmakers are currently operating at below 70% capacity, the proclamation notes that imports from Brazil have not decreased “in a manner commensurate with this contraction.” Increased restrictions on imports have therefore been deemed necessary “to address the threatened impairment to our national security.”
Limited Relief From Quota Restrictions
The proclamation provides relief from the quota “in certain limited circumstances” for blooms, billets and slabs, semi-finished, provided for in HTS subheadings 7207.11.00, 7207.12.00, 7207.19.00, 7207.20.00 or 7224.90.00 (except for statistic reporting number 7224.90.0015, 7224.90.0025 and 7224.90.0035).
In order to be eligible for this relief, the party requesting relief must have entered into a contract for the production of such Brazilian steel articles before August 28, 2020; must have an agreement that specifies the quantity of the steel and provides for a shipment date prior to December 31, 2020; must use the steel in the United States and the steel article cannot be procured from another supplier to meet necessary specifications and the delivery schedule; and must certify that the lack of relief from the quota limitation would significantly disrupt production activity in the United States.
The proclamation states that the volume of imports that will be granted relief may not exceed 60 million kilograms in the aggregate.
Consultations concerning Brazil’s 2021 quota will take place in December, “by which time we hope market conditions will have improved,” said the USTR.
New Export Monitoring Regime
Mexico has maintained its exemption from Section 232 tariffs by agreeing in consultations with USTR to establish a strict monitoring regime to address surges in steel pipe, mechanical steel tubing, and semi-finished steel exports to the United States.
While details of the program are still forthcoming, according to a Mexican government decree, the new export monitoring regime is aimed at preventing the transshipment of steel pipe, tubing and semi-finished steel from China and other countries through Mexico to the U.S. As a result, Mexican companies will now be required to obtain a government permit in advance to export these products.
Mexico’s Secretaría de Economía has advised that export monitoring for the affected goods will continue until June 1, 2021.
Could Canada Be Next?
These latest moves by the Trump administration to “Protect America’s Steel-Dependent National Security,” together with the recent controversy over Canadian aluminum exports has prompted concerns that Section 232 tariffs could be reimposed on Canadian steel exports.
As reported here, Catherine Cobden, president of the Canadian Steel Producers Association, brushed off the idea, noting that steel exports to the U.S. are down by as much as 40% since March, “so there’s no way anyone could assess what’s happening as being a surge.”
Even so, imports of steel as a percentage of total imports have risen this year from Canada, according to U.S. government data, so a case could be made for export restrictions if the administration was to find it advantageous to do so.
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If you have any questions or concerns about these new import restrictions, don’t hesitate to contact one of our trade experts today.