Introduction
TRQ for steel products
TRQ for aluminium products
Comment
On 31 October 2021, the Department of Commerce and the Office of the US Trade Representative announced an agreement with the European Union to remove the 25% additional tariffs on steel and 10% additional tariffs on aluminium pursuant to section 232 of the Trade Expansion Act 1962, which have been in effect since June 2018.
Starting 1 January 2022, the United States will replace the existing section 232 tariffs with a tariff rate quota (TRQ) for both steel and aluminium products and eliminate the additional tariffs on derivative articles of steel and aluminium. In return, the European Union will cancel a planned increase in retaliatory tariffs planned for 1 December 2021, and remove the rebalancing measures entirely on 1 January 2022. Both parties will also suspend the World Trade Organization (WTO) disputes they have initiated against each other regarding the section 232 tariffs, referring the matters instead to arbitration under the WTO dispute settlement understanding.
This article provides additional details on the TRQs for steel and aluminium products, and the ongoing US-EU agreement more broadly.
Currently, imports of steel products from the European Union are subject to a 25% ad valorem tariff. However, beginning on 1 January 2022, the United States will replace the additional tariff with a TRQ of 3.3 million metric tons (MMT) in aggregate annual import volume. The TRQ, which covers 54 steel product categories, is limited to products that are "melted and poured" in the European Union, as supported by relevant documentation.
The permissible volume of imports under each steel product category will be allocated for each EU member state based on historically based volumes of imports during the 2015-2017 period. Within those limits, the TRQ will be allocated on a first-come-first-served basis and administered quarterly. Up to 4% of the unused volume will be permitted to roll over from the first quarter to the third quarter, from the second quarter to the fourth quarter, and from the third quarter to the first quarter of the following year.
Imports previously subject to the section 232 tariffs that are within the quota will enter free of any additional tariffs. However, products entering the above quota will continue to be subject to an additional duty of 25%, unless an exclusion applies. The existing process for requesting an exclusion from the section 232 tariffs will remain open, and imports of excluded steel products from the European Union will not count against the 3.3. MMT TRQ. Any section 232 exclusion granted and used in fiscal year 2021 will also be extended for a two-year period (ie, until 31 December 2023) without the need to reapply.
The volume of steel imports subject to the TRQ will be reviewed each year and adjusted based on changes to US demand reflected in World Steel Association data. For each increase or decrease of 6% in US steel demand, the TRQ volume will increase or decrease by 3%, respectively. Beginning 1 April 2022, the US will evaluate the utilisation and administration of the TRQ every three months and enter into consultations to address substantial underuse at the request of the European Union.
Imports of aluminium products from the European Union are currently subject to a 10% ad valorem tariff in the United States. Beginning 1 January 2022, however, EU imports of unwrought aluminium under two product categories will be subject to a TRQ of 8 thousand metric tons (TMT) per year, and imports of semi-finished (wrought) aluminium under 14 product categories will be subject to a TRQ of 366 TMT per year. Aluminium products within the quota will enter free of any additional tariffs, while products entering above quota will continue to be subject to an additional duty of 10%, unless an exclusion applies.
As with steel, the allocation of import volumes for each product category will be based on historical data, but the relevant period for aluminium imports is 2018-2019, rather than 2015-2017. For one product category – aluminium foil – the allocation will be based on annualised data for 2021. Unlike the TRQ applicable to steel, the TRQ for aluminium will be measured and administered on a semi-annual basis, with no more than 60% of the TRQ permitted to be filled in the first half of the year. While the exclusion process for aluminium products will remain open, in contrast to steel exclusions, aluminium exclusions will not be additive and will count against the permitted volumes under the TRQ until the TRQ has been filled.
There are no automatic review provisions included in the aluminium TRQ. However, the United States has emphasised that such mechanisms are not required for aluminium, given the annual TRQ volume that encompasses historical and current EU aluminium trade.
Imports of aluminium subject to the TRQ must be accompanied by a certificate of analysis (COA). The United States is expected to release additional details regarding the parameters of the COA, but has stated that the information required will be consistent with existing requirements. It is anticipated that the COA will be included with entry documentation when aluminium products are shipped from the European Union to the United States.
This negotiated agreement was the result of months-long dialogue between the United States and the European Union regarding challenges to trade in the steel and aluminium sector, including global overcapacity, carbon intensity and the prevalence of non-market principles. The aim was to establish a new, joint approach to address these concerns and to forge a path forward in the US-EU bilateral trade relationship. The United States has emphasised that this agreement allows a historic and sustainable volume of imports to enter the country from the European Union duty free, providing more predictability to downstream users.
The agreement also includes larger commitments to address long-term challenges in the steel and aluminium sector, and provides for ongoing cooperation in the areas of trade remedies, customs, monitoring and non-market excess capacity. It also includes provisions relating to carbon intensity, most notably the negotiation of "arrangements" to support lower carbon intensity and to invest in decarbonisation within two years. The United States envisions these commitments as part of a global dialogue that other like-minded economies could ultimately join.
For further information on this topic please contact Leah Scarpelli, John Gurley or Matthew Nolan at Arent Fox LLP by telephone (+1 202 857 6000) or email ([email protected], [email protected] or [email protected]). The Arent Fox LLP website can be accessed at www.arentfox.com.