Brazilian, Argentinian Quotas to Shift to Tariffs, Trump Says
After a surprise tweet from President Donald Trump that he would implement tariffs on Brazilian steel and on Argentinian steel and aluminum (see 1912020002), the agency in charge of Section 232 actions declined to say when a Federal Register notice would follow to put the tweet into action. The department also declined to say if importers can bring in products in sectors where the quotas are already full while waiting for the Federal Register notice. Commerce also didn't say if importers can apply for exclusions for the items. Currently, exclusions against quotas are allowed, but they are not allowed to be taken until this quarter, even though the quotas fill up quarter-by-quarter.
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Trump called the quota system “a big break on tariffs” in comments to the White House press corps after the tweet. He said Brazilian officials had “devalued their currency very substantially, by 10 percent.... it's very unfair to our manufacturers, and very unfair to our farmers. Our steel companies will be very happy and our farmers will be very happy as well.”
Brazil has taken agricultural market share away from U.S. producers in China, because of the China trade war.
It is likely some steel companies will not be happy at all, such as California Steel Industries, which imports about 4,900 tons of Brazilian semi-finished slab to produce its structural steel. California Steel is seeking an exclusion because it cannot get all the slab it wishes with the current quota system, and only one U.S. steelmaker sells slab to other mills. The company said it also imports from Mexico, but mills there don't have enough capacity. AK Steel, one of the companies that California Steel said would not sell to outside mills, disputes that, and says it could sell in this quantity, and has offered to sell slabs to California Steel.
Reuters quoted Brazilian President Jair Bolsonaro, saying on a Brazilian radio show Dec. 2, “I’m going to call him so that he doesn’t penalize us ... Our economy basically comes from commodities, it’s what we’ve got. I hope that he understands and that he doesn’t penalize us with this, and I’m almost certain he’ll listen to us.”
Commerce Secretary Wilbur Ross, speaking on Fox on Dec. 2, said of the change in policy toward the Latin American countries, “Even our friends must live by the rules.” He did not say what rules Brazil had broken in complying with the quota system, but said the president is concerned about the deteriorating Brazilian currency.
The Court of International Trade recently said it was the administration that might not be following the rules when it increased the tariff rate on Turkey from 25 percent to 50 percent outside the timeline laid out by the law that includes the Section 232 authority to impose tariffs or quotas to protect national security (see 1911180013). Some trade lawyers are saying this shift would be illegal for the same reason. However, the CIT ruling was only a motion to dismiss, not a final ruling in the case.