Many Section 232 Expansion Questions Remain

Importers and domestic producers are waiting to find out which steel and aluminum finished products will be hit with 25 percent and 10 percent tariffs, respectively (see 2001250003), because the administration said tariffs on the raw materials that make those products have not benefited domestic producers enough.

In the proclamation, President Donald Trump said, “The [Commerce] Secretary has informed me that domestic steel producers' capacity utilization has not stabilized for an extended period of time at or above the 80 percent capacity utilization level identified in his report as necessary to remove the threatened impairment of the national security. Stabilizing at that level is important to provide the industry with a reasonable expectation that market conditions will prevail long enough to justify the investment necessary to ramp up production to a sustainable and profitable level. Capacity utilization in the aluminum industry has improved, but it is still below the target capacity utilization that the Secretary recommended in his report.”

The American Iron and Steel Institute, which supports the Section 232 action on steel, said that data from Dec. 28, 2019, showed that capacity was 80.2 percent year to date. The previous year, it was 78.2 percent. This month, weekly capacity utilization was 82.7 percent the week ended Jan. 18 and 82.5 percent the week ended Jan. 11, AISI said.

The trade group spokeswoman said monthly reports are more accurate than weekly reports, and those showed that capacity was above 80 percent for the first half of 2019 and below 80 percent the second half.

Whether or not the data supports the argument that capacity utilization has not stabilized above 80 percent “for an extended period of time,” Council of Foreign Relations senior fellow Jennifer Hillman, a former panelist at the World Trade Organization, argued on Twitter, “Trump has no authority to expand coverage beyond orig determination.”

She tweeted that the report said that carbon and alloy flat, long and tubular products, and stainless products were the steel articles that threatened national security, and there is no authority “to expand to more articles not found in orig 232 investigation.” Moreover, she noted that the Court of International Trade said that modifications months or years after the original action are not allowed within the law (see 1911180013).

The steel derivatives tariffs will apply to goods from all countries except for Argentina, Australia, Brazil, Canada, Mexico and South Korea, it said. The aluminum derivatives tariffs affect goods from all countries except Argentina, Australia, Canada and Mexico.

The products that will face the tariffs -- some currently are tariff-free and some have low tariffs -- have to have a recent history of increased imports, past the overall 4 percent import increase of all products. The metals also have to account for at least two-thirds of the product's cost, the proclamation says. Examples of targeted products include steel nails, tacks and corrugated nails and aluminum automobile stampings, aluminum wire and cables.

Aluminum smelter capacity was 43 percent in 2018, before the tariffs were imposed, and the Commerce Department said a global 7.7 percent tariff would allow the industry to reach 80 percent capacity. The Aluminum Association says that primary aluminum production in the U.S. for 2019 was about 63 percent.

A spokesman for the association said, “The Aluminum Association is aware of the president’s decision to adjust Section 232 imports on derivative aluminum products. We look forward to reviewing the specific products included under the new tariffs to better understand the possible impact of this decision on the U.S. aluminum industry.”