On April 30th, the President issued two proclamations extending country exemptions for certain U.S. allies on the steel and aluminum tariffs pursuant to Section 232(b) of the Trade Expansion Act of 1962.
The President extended temporary exemptions for Canada, Mexico, and the European Union, granted a permanent exemption on steel tariffs for South Korea, and is considering permanent exemptions for Australia, Argentina, and Brazil. Trump’s administration unveiled its decision to extend the country exemptions just prior to the May 1st deadline, leaving the countries unaware whether the tariffs would go into effect by midnight.
In addition, the proclamation creates new limitations by eliminating the ability of manufacturers to receive a refund on steel/aluminum duties when exporting from the United States. Specifically, the new proclamation eliminates drawback claims on steel and aluminum. The elimination of drawback claims follows the elimination of foreign trade zone benefits for steel/aluminum imports in the earlier revisions to the steel/aluminum proclamations.
The United States temporarily extended the country exemptions for Canada, Mexico, and the European Union until June 1st, 2018. Trump originally stated that a successful NAFTA renegotiation between the three countries would result in a permanent exemption for Canada and Mexico. However, Canada and Mexico said that there is no connection between the NAFTA renegotiations and the Section 232 tariffs.
The United States determined to permanently exempt South Korea after the two countries concluded discussions to reduce steel overcapacity. South Korea agreed to limit its exports of steel products to 70 percent of its current volume, or 2.86 million tons of steel, to the U.S. each year. However, South Korea is no longer exempted from the aluminum tariffs as of May 1, 2018.
The proclamations also indefinitely extended temporary exemptions for Australia, Argentina, and Brazil. Although the agreements with Australia, Argentina, and Brazil will be finalized shortly, the President threatened to re-impose the tariffs if the deals are not finalized quickly. “Because the United States has agreed in principle with these countries, in my judgment, it is unnecessary to set an expiration date for the exemptions. Nevertheless, if the satisfactory alternative means are not finalized shortly, I will consider re-imposing the tariff,” the President said in the steel and aluminum presidential proclamations.
China, India, and Turkey have requested WTO consultations with the United States over the Section 232 tariffs on imported steel and aluminum products. If the European Union does not receive a permanent exemption, then it is also likely that the EU will request WTO consultations with the U.S.
Countries argue that the tariffs violate the WTO’s Agreement on Safeguards and Article XXI’s National Security Exception pursuant to the 1994 GATT Agreement. If the U.S. successfully sets a precedent of Article XXI for national security reasons, then other members of the WTO could invoke the never-before-used Article to apply tariffs or sanctions as retaliation against U.S. exports.