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March 19, 2018 | by    

U.S. Commerce Department Outlines Exclusion Process Before Steel And Aluminum Tariffs Go Into Effect On March 23

President Donald Trump’s steel and aluminum tariffs go into effect on Wednesday, March 23 and companies—and countries—are still scrambling to figure out to which products the penalties will apply. A contributor to IndustryWeek recommended that companies undertake “a systematic supply-chain review” to determine where their inventory is sourced. The contributor said, “To know exactly what will be taxed, executives should review Harmonized Tariff Schedule codes —10-digit identifiers that specify the precise type of steel and aluminum being taxed.”

As a reminder, the president’s orders say:

  • Covered “steel articles” are those defined in the Harmonized Tariff Schedule (HTS) 6‑digit level as: 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90, including any subsequent revisions to these HTS classifications.
  • Covered “aluminum articles” are defined in the HTS as: (a) unwrought aluminum (HTS 7601); (b) aluminum bars, rods, and profiles (HTS 7604); (c) aluminum wire (HTS 7605); (d) aluminum plate, sheet, strip, and foil (flat rolled products) (HTS 7606 and 7607); (e) aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and (f) aluminum castings and forgings (HTS 7616.99.51.60 and 7616.99.51.70), including any subsequent revisions to these HTS classifications.

According to MSCI’s partners at the U.S. Chamber of Commerce, U.S. businesses seeking to avoid the tariffs are expected to face resistance under rules developed by the Commerce Department. Indeed, The Wall Street Journal reported the Commerce Department “will grant exclusions only sparingly and based on national-security concerns.”

That became clear as the department outlined the process for seeking exclusions last Saturday. Bloomberg explains a company may only ask for an exemption if the product “is not produced in the United States in a sufficient and reasonably available amount” or is not of “satisfactory quality.” Companies also can make arguments on national security grounds. There is no time limit to apply for an exclusion and the Commerce Department’s Bureau of Industry and Security, which will review the petitions, has promised to do so in 90 days or less. However, as Bloomberg also notes, “Tariff supporters will have a chance to argue against proposed exemptions but will have to submit their objections within 30 days of an application. By contrast, there is no time limit on applications for exclusion.”

To find out how to apply for exclusion, MSCI members should read the full Federal Register notice, which can be found here.

The process for requesting exclusions is now open.

As one news outlet explained, even if a company wins an exclusion, it “could be forced to pay higher costs due to tariffs on their imported products for up to three months” since U.S. Customs and Border Protection will begin collecting the 25 percent tariffs on March 23. There is no guarantee that, even if exclusion is eventually granted, that companies will be reimbursed.

U.S. Trade Representative Robert Lighthizer, meanwhile, has been negotiating country exemptions with foreign governments. According to the U.S. Chamber of Commerce, Lighthizer might propose voluntary export restraints in lieu of the blanket tariffs to allied countries or a tariff-rate quota equivalent to the quantity of steel or aluminum exported to the United States last year. In the past 10 days, Lighthizer has met with European Union Trade Commission Cecilia Malmström, Japanese Minister of Economy Hiroshige Seko, and United Kingdom International Trade Secretary Liam Fox. Malmström later said there was “no immediate clarity on the exact U.S. procedure for exemption, so discussions will continue next week.”

Lighthizer is expected to address the tariffs and exemptions when he testifies on Capitol Hill this week. Lighthizer will go before the U.S. House Ways and Means Committee on March 21 and the Senate Finance Committee on March 22. U.S. Commerce Secretary Wilbur Ross will join the Ways and Means Committee on March 22. Click here for information about how to watch the House discussions and here for information about the Senate Finance Committee hearing.

MSCI members should reach out to Ann D’Orazio at 847-485-3019 or adorazio@msci.org, if they have questions.

While Canadian imports into the United States are exempt from the U.S. tariffs, that does not mean the industry there could not be affected. Last week, Prime Minister Justin Trudeau said Canada might “use tariffs to fight any ‘increased pressure’ of steel dumping into Canada aimed at circumventing new U.S. restrictions.” Click here to read more about the prime minister’s comments.