On April 18, the United Steelworkers Union (USW) petitioned the U.S. International Trade Commission (ITC or Commission) for relief pursuant to Section 201 of the Trade Act of 1974, a safeguard provision of the U.S. trade laws. Under Section 201, a domestic industry can request temporary relief from imports to facilitate the adjustment of the industry to import competition. Citing the sharp decline in the health of the U.S. aluminum industry, the USW has requested four years of relief for the primary aluminum industry, including a request for provisional relief in the form of a 50% duty to be imposed by mid-summer. Key elements of the USW’s petition are described below.
The Product: The product in question is “primary unwrought aluminum,” aluminum metal produced by smelting alumina but not yet processed into specific shapes. The petition covers both alloyed and unalloyed primary unwrought aluminum; it does not cover secondary or recycled aluminum obtained by melting scrap.
Basic Relief Sought: The USW is seeking two forms of relief: (1) four years of protective import tariffs, starting at 50% in the first year and declining incrementally to 35% in the fourth year; and (2) bilateral and multilateral negotiations by the U.S. government to reduce excess global capacity to produce primary aluminum.
Provisional Relief: The USW argues that the health of the U.S. aluminum industry is so threatened that critical circumstances justify provisional relief in the form of a 50% duty to be imposed within 90 days, i.e., by mid-July.
Procedures and Legal Standard: The ITC is the agency charged with responding to the USW’s allegations and will conduct a detailed investigation of the facts and arguments contained in the petition. In a related development, the Commission recently initiated a fact-finding investigation of the global competitiveness of the U.S. aluminum industry in response to a request from the House Committee on Ways and Means.
In order to prevail in the Section 201 investigation, the USW needs to obtain two separate findings. First, the ITC must determine that aluminum imports from all countries collectively are the “substantial cause” of serious injury or threatened injury to the domestic industry and recommend a form of relief to the President. Second, the President must decide that temporary import relief is in the national interest and select a form of relief to impose, which does not have to be the same relief recommended by the Commission.
Commentary: The timing of the petition reflects an effort to put pressure on President Obama prior to the election and during Congressional consideration of the Trans-Pacific Partnership. The first challenge for the USW will be to convince the ITC that the statutory threshold for relief has been met, and, in this regard, there are several items worth noting. First, much of the global overcapacity complained of in the petition is a result of Chinese production, which has generally not been exported to the United States because China levies an export tax on primary aluminum. Accordingly, the USW will have to prove that imports from all sources have injured or threaten to injure the domestic primary aluminum industry notwithstanding that there have not been substantial quantities of Chinese primary aluminum being imported into the United States.
Second, Section 201 cases have a higher threshold for proving injury in comparison with other forms of trade relief, such as antidumping and countervailing duty remedies. Indeed, in some notable Section 201 cases in the past, a domestic industry failed to convince the Commission that the statutory standard for an affirmative finding of injury had been met.
Parties that produce, use or trade aluminum will all be affected by this proceeding, which is likely to increase uncertainty in the market for the balance of the year. U.S. aluminum producers could benefit from import relief, while foreign producers are threatened with foreclosure from the U.S. market if relief is granted. Large domestic users of aluminum may find that foreign sources will become unavailable or significantly more costly, and aluminum traders will enjoy additional opportunities arising from market volatility.