The United States and the European Union announced over the weekend that they had reached an agreement regarding the contentious “national security” (Section 232) tariffs on steel and aluminum imports from the EU that were implemented by the Trump administration in 2018.
Under the agreement, the U.S. will replace the current Section 232 duties with tariff-rate quotas (TRQs) for covered EU products effective January 1, 2022, while the EU will suspend related retaliatory tariffs on U.S. products. Additionally, the two sides have agreed to suspend their dueling World Trade Organization disputes over the tariffs.
Commerce Secretary Gina Raimondo said the deal “will protect American jobs; avoid retaliatory tariffs on iconic American brands like Harley Davidson and the Kentucky bourbon industry; reduce inflationary pressures on products like cars, trucks, appliances and canned goods; and alleviate a major supply chain crunch by supporting increased steel and aluminum capacity in the U.S.”
Looking ahead, U.S. Trade Representative Katherine Tai stated that with the EU dispute settled, the U.S. was now in “a stronger position to address global overcapacity from China with an enhanced enforcement mechanism to prevent leakage of Chinese steel and aluminum into the U.S. market.”
The bilateral agreement has received widespread support from business, labor, and environmental groups. “This new arrangement, which will maintain but modify Section 232 measures on steel and aluminum from the EU, will create a framework that will ensure U.S. domestic industries remain competitive and able to meet our security and infrastructure needs,” said the United Steelworkers in a statement backing the deal.
According to the agreement’s framework, historically-based volumes of EU steel products will enter the U.S. market without the application of Section 232 tariffs as follows:
- The aggregate annual import volume under the TRQ is set at 3.3 MMT for 54 product categories and allocated on an EU member state basis in line with the 2015-2017 historical period.
- Section 232 steel products from the EU that are within the quota will enter free of any Section 232 duty, while those products entering above the quota will continue to be subject to a tariff of 25%.
- Imports of derivative articles of steel will not be subject to Section 232 duties.
- In order to be eligible for Section 232 duty-free treatment under the quota, steel imports must be “melted and poured” in the EU according to current U.S. requirements.
- The U.S. will maintain its steel product exclusion process.
For aluminum, historically-based volumes of EU aluminum products will enter the U.S. market without the application of Section 232 tariffs as follows:
- The aggregate annual import volume under the TRQ is set at 18,000 metric tons (TMT) for unwrought aluminum under two product categories and at 366 TMT for semi-finished (wrought) aluminum under 14 product categories. The import volumes will be allocated on an EU member state basis in line with the 2018-19 historical period, with the exception of foil (7607), where 2021 annualized data will be utilized.
- Section 232 aluminum products from the EU that are within the quota will enter free of any Section 232 duty, while those products entering above the quota will continue to be subject to a tariff of 10%.
- Imports of derivative articles of aluminum will not be subject to Section 232 duties.
- An importer must provide a Certificate of Analysis for each aluminum product entered into the U.S.
- The U.S. will maintain its aluminum product exclusion process.
Additional details regarding the application of these TRQs and the 54 steel product categories and 14 aluminum product categories are available here.
The EU has also agreed to ensure market-oriented conditions in its market through the application of safeguards and other appropriate measures. In particular, the EU will enhance its enforcement mechanisms “to prevent leakage of Chinese steel and aluminum into the U.S. market.”