New Articles

Commerce to Investigate Expansion of Section 232 Tariffs on Steel to Include Imports of Electrical Transformer Steel

section 232

Commerce to Investigate Expansion of Section 232 Tariffs on Steel to Include Imports of Electrical Transformer Steel

On Monday May 4, 2020, the Department of Commerce issued a news release announcing the start of a Section 232 investigation on imports of “Laminations and Wound Cores for Incorporation Into Transformers, Electrical Transformers, and Transformer Regulators.” This investigation is effectively an examination of whether or not to expand the current Section 232 tariffs on steel to include these products.

The announcement indicates that imports of the steel incorporated into the specifically identified transformers “are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.” According to Commerce, it had received “inquiries and requests from multiple members of Congress as well as industry stakeholders,” to start this investigation. Similar to other 232 investigations, the Bureau of Industry and Security will conduct the investigation and request comments in a Federal Register notice that will likely be published soon.

Quoting Commerce’s press release – “transformers are part of the U.S. energy infrastructure,” and “laminations and cores made of grain-oriented electrical steel are critical transformer components. Electrical steel is necessary for power distribution transformers for all types of energy—including solar, nuclear, wind, coal, and natural gas—across the country. An assured domestic supply of these products enables the United States to respond to large power disruptions affecting civilian populations, critical infrastructure, and U.S. defense industrial production capabilities.” It is also important to note that grain-oriented electrical steel (“GOES”) was subject to antidumping duties and countervailing duty orders for several years but there are no current antidumping and countervailing duty orders on GOES.

Based upon the proposed schedule, the secretary of Commerce will notify the secretary of Defense of the investigation, as required by statute. In addition, it stated that the “Department of Commerce will conduct a thorough, fair, and transparent review to determine the effects on the national security from imports of laminations for stacked cores for incorporation into transformers, stacked and wound cores for incorporation into transformers, electrical transformers, and transformer regulators.”

In January 2020, Commerce expanded the scope of the Section 232 tariffs on Steel and Aluminum to include certain other derivative products on products such as nails and thumbtacks without conducting an investigation such as the one now seemingly being proposed. The trade remedies team at Husch Blackwell LLP represents clients now challenging that expansion in the U.S. Court of International Trade. In initiating this new investigation, it appears that Commerce has recognized that it may be on shaky ground for its earlier expansion of section 232 tariffs on steel and aluminum and may be willing to provide a fuller procedure for comments and input from interested parties.

Regardless of the procedures, however, if affected U.S. companies cannot locate the steel they need domestically, and the tariffs make importation of steel to manufacture downstream products, then the only option is to source from other countries. Thus, we expect that numerous companies will file comments on this new round of expansion of national security tariffs.

__________________________________________________________________

Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

Jeffrey Neeley is a Washington-based partner with the law firm Husch Blackwell LLP. He leads the firm’s International Trade Remedies team.

aluminum

Commerce Department Proposes New Aluminum Import Licensing System

On April 29, 2020, the Commerce Department (“Commerce”) published a notice in Federal Register announcing that it is proposing new regulations that would establish an Aluminum Import Monitoring and Analysis System. The program appears to be modeled after the Steel Import Monitoring and Analysis (“SIMA”) System, which has been in place since 2005. Under the new monitoring system, importers of aluminum products or their customs brokers will be required to submit information via Commerce’s online portal to obtain an auto-generated license after which the license number must accompany the entry documentation. Commerce is requesting comments from interested parties regarding this new scheme by May 29, 2020.

Commerce has indicated this new system is intended to allow the Department to monitor aluminum import levels and this data would be made available to the public. This new monitoring approach goes hand in hand with the Department’s continued multi-prong approach on tackling trade issues. An important aspect of the new program is that Commerce is permitted to review imports as part of the exemptions from Section 232 aluminum tariffs for Canada and Mexico. As part of the Section 232 exemption process, the U.S. may monitor for import surges and limit imports to historic quantities “without meaningful increases,” according to Commerce. Furthermore, the new system will “facilitate the monitoring of imports of aluminum articles, including monitoring for import surges,” according to Commerce.

Commerce plans for the proposed aluminum licensing and monitoring system to “operate in a similar way as the existing SIMA system and will be codified under 19 CFR 361.” The program will apply to all “basic aluminum products,” including “all-aluminum products currently subject to Section 232 tariff.” After registering, importers or their Customs brokers will be asked to provide for the following data elements for each shipment prior to filing the entry summary:

-Filer company name and address

-Filer contact name, phone number, fax number and email address

-Entry type (i.e., Consumption, Foreign Trade Zone)

-Importer name

-Exporter name

-Manufacturer name (filer may state “unknown”)

-Country of origin

-Country of exportation

-Expected date of export

-Expected date of import

-Expected port of entry

-Current HTS number (from Chapters 76)

-Country where aluminum was smelted and poured

-Quantity (in kilograms)

-Customs value (in U.S. $ amount).

Once submitted, the system will likely automatically generate an aluminum import license number. This number will have to accompany every entry for aluminum products covered by the licensing requirement. A single license can cover multiple products provided that certain pertinent information is the same for the entire shipment. If certain key information is deemed to not be sufficiently similar then separate licenses may be required for a single shipment. Commerce has already posted a sample copy of the proposed aluminum import license on its website.

Exemptions. There is also an exemption or modified reporting requirements for low-value entries. As of the drafting of this update, no import licenses would be required on informal entries of aluminum products which are normally entries under $2500. In addition, for those shipments containing less than $5,000 in aluminum, importers or brokers would be able to apply for a “Low-Value License”. This “Low-Value License” would be reusable and could be used in place of a single-entry license, according to Commerce.

FTZ Entries. There are no exceptions from license requirements under the aluminum licensing program. Even though FTZ entries are not considered a full CBP entry, Commerce would still require a license for aluminum shipped into a foreign-trade zone under this program. “Because a CBP entry number would not be available for shipments entering the FTZ, the license required for entry into the zone will not require the CBP entry number. As with steel, a separate license will not be required upon withdrawal from the FTZ.”

Validity: Aluminum import licenses can be applied for up to 60 days before the anticipated date of importation up to the date of filing of the entry summary and would be valid for 75 days. Commerce’s announcement clarifies that “The aluminum import license is valid for up to 75 days; however, import licenses that were valid on the date of importation but expired prior to the filing of entry summary data will be accepted”

Record Maintenance: The proposed rule indicates that “[t]here is no requirement to present physical copies of the license forms at the time of entry summary; however, copies must be maintained in accordance with CBP’s normal requirements.”

Non-Confidential Data: At this juncture, Commerce is soliciting comments on how to make available to the public the data it collects. Currently, it plans to only share “certain aggregate information” collected from license applications on its “aluminum import surge monitoring website,” including data on country of origin, country of smelt and pour, and import quantity and value. In addition, Commerce is going to consider all “other information including copies of the licenses and the names of importers, exporters, and manufacturers will be considered business proprietary information and will not be released to the public.” This would be consistent with the treatment of data under the steel monitoring program and in general with the treatment as business proprietary, all information collected as part of the entry summaries filed by importers.

Husch Blackwell recommends that companies that are engaged in the business of importing aluminum products categorized as “basic aluminum” or if the products are subject to section 232 duties that such companies analyze those imports and consider submitting comments. The time period to submit comments is extremely short, only 30 days, and therefore time is of the essence to ensure that comments can be prepared and filed on behalf of any interested party.

___________________________________________________________________

Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team

Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.