US puts additional import tariffs on downstream aluminum, steel products

The administration of US President Donald Trump is raising the Section 232 import tariffs on some steel-containing and aluminum-containing articles entering the US, saying it was "necessary and appropriate in light of our national security interests" in view of recent increased import levels and comparatively low domestic capacity working levels.

All imports of specified derivative aluminum articles will be subject to an additional 10% ad valorem rate of duty, and all imports of specified derivative steel articles will be subject to an additional 25% ad valorem rate, with respect to goods imported, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern standard time on February 8, 2020, a White House proclamation said.

Europe-based steel sources did not however consider that the new measures would have much additional impact on trade levels, which had already been hit by the original Section 232 measures imposed in March 2018.

"It seems more a political move rather than something based on economics," a Swiss-based international trader said.

European Steelmakers' Association Eurofer was slightly more guarded in its perception. "These additional tariffs on certain manufactured steel (and aluminium) articles could, indeed, have a knock-on effect on European steel producers if EU steel-using sectors that export these components to the US have to curtail production. However, the extent of the effect will have to be measured before we can judge the impact," a Eurofer spokesman said.

The White House proclamation describes a "derivative" article as one where aluminum or steel represents, on average, two-thirds or more of the total cost of its materials.

The new import tariffs are in addition to 10% import tariffs imposed on aluminum and 25% import tariffs imposed on steel from most countries under the Section 232 measures, effective March 23, 2018.

The new tariffs will not apply to aluminum derivative articles from Argentina, Australia, Canada, and Mexico and to steel derivative articles from Argentina, Australia, Brazil, Canada, Mexico, and South Korea.

In addition, manufacturers may request exclusions for any specific derivative article (steel or aluminum) determined not to be produced in the US in a sufficient quantity or reasonable quality, or if importing such material is proven critical in preserving national security interests.

RISING IMPORTS AND 'CIRCUMVENTION'

The proclamation noted that from June 2018 to May 2019, import volumes of steel nails, tacks, drawing pins, corrugated nails, staples, and similar derivative articles increased by 33%, compared to June 2017 to May 2018, and by 29%, compared to June 2016 to May 2017.

Similarly, from June 2018 to May 2019, import volumes of aluminum stranded wire, cables, plaited bands, slings and similar articles increased by 152%, compared to June 2017 to May 2018, and by 52%, compared to June 2016 to May 2017.

"It is the Secretary (of Commerce)'s assessment that foreign producers of these derivative articles have increased shipments of such articles to the United States to circumvent the duties on aluminum articles and steel articles imposed in Proclamation 9704 and Proclamation 9705 (the previous Section 232 notices), and that imports of these derivative articles threaten to undermine the actions taken to address the risk to the national security of the United States found in Proclamation 9704 and Proclamation 9705," the White House statement said.

The government will continue to monitor imports of steel and aluminum derivative products, according to the announcement.

"Lower imports of some downstream products could at the margin benefit upstream domestic steel and aluminum demand and pricing," analysts at Cowen Equity Research said in a January 26 note, saying that they would look for more specifics on targeted materials when the proclamation is published in the Federal Register this week.