CBP has “adjudicated” a ruling that will allow manufacturers in foreign-trade zones to avoid Section 232 tariffs on aluminum and steel, as well as planned Section 301 tariffs on products from China, a CBP official said on the agency’s biweekly ACE conference call held June 21. FTZ manufacturing operations have up to now been required by Census Bureau and Commerce Department guidance to enter goods manufactured in FTZs as originating in the country that provided the goods’ highest value in inputs, even if those inputs are worth relatively little and for CBP purposes the country of origin should be the United States. While it hasn’t been an issue before, now that Section 232 duties are in place and Section 301 tariffs are coming it can result in those manufacturers being required to declare a good as subject to the extra tariffs even when the good is of U.S. origin. A ruling is coming that says to use “U.S.” as country of origin for such merchandise on entry documentation, the CBP official said. A search on CBP’s CROSS database indicates the ruling has not been published as of press time.
Section 232 Tariffs
The United States currently maintains a 25% tariff on steel imports and 10% on tariff on aluminum imports under Section 232 of the Trade Expansion Act of 1962. In 2018, the Trump administration imposed Section 232 Tariffs on steel and aluminum imports into the United States, citing national security concerns. The U.S. agreed to lift tariffs on Canada and Mexico after the signing of the United States-Mexico-Canada Agreement (USMCA), and reached deals with the European Union, Japan and other countries to replace the tariffs with quotas for steel and aluminum imports into the U.S.
On the same day that European tariffs went into effect in retaliation for U.S. steel and aluminum tariffs, President Donald Trump tweeted that if the European Union doesn't drop those tariffs and other trade barriers soon, "we will be placing a 20% Tariff on all of their cars coming into the U.S. Build them here!" The Commerce Department is conducting an investigation into whether auto and auto parts exports are a threat to national security. While speaking to reporters at a convention on June 21, Commerce Secretary Wilbur Ross said the investigation should be complete in late July or in August.
An attempt to rein in the president on Section 232 tariffs has been reintroduced as a free-standing bill. Sen. Michael Bennet, D-Colo., introduced a bill June 21 that would end the steel and aluminum tariffs on the European Union, Canada and Mexico. It would also require that the administration consult with Congress before imposing any tariffs on the grounds of national security. Another bill introduced earlier this month by Sen. Bob Corker, R-Tenn., sought to require a vote from Congress before Section 232 tariff action could be taken. Corker's bill has stalled because revenue bills must start in the House of Representatives (see 1806130012).
Among the companies allowed exclusions to the Section 232 tariffs on steel and aluminum are the Connecticut company that makes Schick razors, which will be allowed to import steel blades from Japan, and U.S. Leakless, an Alabama company that imports Japanese rubber-coated gaskets used in auto transmissions. The Commerce Department accepted 42 steel product exclusion requests from seven companies, it announced on June 20.
The European Union adopted the proposed list of new tariffs on $3.2 billion worth of U.S. goods, the EU said in a June 20 news release. The list is the same as the one it submitted to the World Trade Organization (see 1806010022), and the new tariffs will take effect on June 22, the EU said. Additional tariffs will be added "at a later stage -- in three years' time or after a positive finding in WTO dispute settlement if that should come sooner," it said.
Republicans and Democrats on the Senate Finance Committee criticized Commerce Secretary Wilbur Ross on June 20 over the steel and aluminum tariffs and the implementation of granting exclusions for certain imports subject to those tariffs. Democrat Sen. Claire McCaskill, who described a nail maker in her home state of Missouri who is laying off more than half its 500-person workforce as its inputs' cost increases, told him: "it appears to me a chaotic and, frankly, incompetent manner you're picking winners and losers." Only Sen. Sherrod Brown, D-Ohio, asked supportive questions during the hearing on tariffs.
China will implement retaliatory 25 percent tariffs on 545 tariff lines, largely agricultural and auto targets, but also "aquatic products," on July 6, it said in a statement. Like the U.S., it is saving an additional $16 billion in targets in reserve. For China, those will be chemicals, energy imports and medical equipment. For the U.S., semiconductors, plastics, railcars, tractors, cranes and new industrial machinery lines could be in the second phase. China's tariffs are in response to the Section 301 tariffs on imports into the U.S. set to begin July 6 (see 1806150003)
The entire congressional delegation from Washington state sent a letter to the U.S. trade representative, asking him to negotiate a solution with countries facing Section 232 steel and aluminum tariffs, because retaliatory tariffs on apples, cherries, pears and potatoes will cost the state's farmers tens of millions of dollars. The letter talks about cherry sales in China, apple sales in India, China and Mexico, and notes, "With cherry harvest beginning in the Pacific Northwest, time is of the essence for our growers."
An amendment that would stop the deal to lift an export ban on Chinese telecom equipment maker ZTE is expected to pass the Senate June 18 as part of the defense authorization bill. Since the House of Representatives did not include such an amendment in its version, passed in May, conference committee members would have to agree to include it in the final version. House Speaker Paul Ryan, who will not serve on the committee, said he doesn't know what position the House negotiators will take. "I'm going to leave it to our conferees," he said at a press conference at the Capitol June 14.
The Senate Finance Committee will question Commerce Secretary Wilbur Ross on June 20 about the effects of Section 232 aluminum and steel tariffs and the investigation into auto and auto part imports, which President Donald Trump says are a threat to national security. In announcing the hearing, Chairman Orrin Hatch, R-Utah, said, “While we share a common goal of pursuing a pro-growth, pro-America agenda, I have made no secret my concerns with the administration’s use of 232 tariffs." He said the cost to manufacturers undermines the positive effects of tax reform. "I remain committed to working with this administration to push trade policies that open up markets for American goods and increase U.S. competitiveness,” he said.