Government Watchdog Says Some Section 232 Duties Were Not Paid

As MSCI members are well aware, in March 2018 President Donald Trump placed Section 232 tariffs of 25 percent on some steel imported into the United States and 10 percent duties on some imported aluminum products.

At that time, the U.S. Department Commerce established a process to provide relief, or exclusion, from the tariffs. Requesters had to apply to Bureau of Industry and Security (BIS) for tariff exclusions. If BIS approved, that requester may import specific products without paying those tariffs.

The Government Accountability Office (GAO), one of the federal’s government watchdog agencies, was asked to review how Section 232 exclusions have been administered. Specifically, the GAO looked at:

• BIS’s measures to ensure Section 232 exclusion requests were needed;
• The extent to which BIS and the U.S. Bureau of Customs and Border Protection (CBP) have maintained consistent data in order to administer the exclusions; and
• The extent to which importers invalidly used exclusions. For its study, GAO defined invalid use as the claiming of an exclusion in a way that did not comport with BIS’s parameters.)

Among the GAO’s findings are that, while importers generally used tariff exclusions in ways that were consistent with BIS’s approved parameters, there were an estimated $32 million in unpaid duties resulting from invalid exclusion use. CBP officials said when they programmed the Section 232 functionality, they did not have the time or resources to program automatic deactivation once the importer reached the approved quantity.

Instead, CBP has been manually deactivating exclusions, and lag time between when importers reach approved quantities and CBP’s manual deactivation has allowed importers to overclaim exclusions and not pay duties on the overage. Until CBP implements more effective controls to prevent overclaiming and to recover duties owed, the U.S. government is at risk of losing millions of dollars in revenue, the GAO said.

The watchdog recommended ways to reform the system and will continue to monitor this situation. Read the full report here.

As a reminder, when it comes to Section 232 tariffs, Connecting the Dots is reporting this development for members’ information only.

MSCI consistently has argued that global overcapacity and other unfair trading practices, particularly by China, have harmed the U.S. steel and aluminum markets. To address this circumvention, MSCI has advised federal officials to provide relief for producers up and down the supply chain and to consider the consequences of any new trade policy, including: the economic impact of global overcapacity on the entire domestic metals supply chain; transition times and implementation rules to any new policy; availability of domestic metals to meet U.S. national security needs, as well as general industrial and consumer demand; and trade flows under current free trade agreements, including the United States Mexico Canada Agreement (USMCA). MSCI also asked that Canada and Mexico be excluded from any trade penalties.

Click here to review all of MSCI’s advocacy on Section 232 tariffs.