U.S.-U.K. Dispute Over Steel and Aluminum Tariffs Resolved

Faegre Drinker Biddle & Reath LLP

On March 22, 2022, the United States and the United Kingdom announced a bilateral deal to resolve a three-year dispute over steel and aluminum tariffs.  

The announcement follows another bilateral deal reached in October 2021 between the European Union and the U.S. that eases U.S. steel and aluminum tariffs in exchange for the EU’s suspension of retaliatory tariffs directed at certain U.S.-origin goods.

Background

On March 8, 2018, then-President Trump issued two presidential proclamations imposing global tariffs of 25% on steel imports and 10% on aluminum imports in connection with investigations initiated by the Department of Commerce pursuant to Section 232 of the Trade Expansion Act of 1962. 

In response, the EU — which, at that time, included the U.K. — passed an implementing regulation imposing ad valorem duties of 10% or 25% on $3.2 billion worth of U.S. goods, including: 

  • Iron and steel products
  • Apparel
  • Water vessels
  • Cosmetics
  • Food items
  • Whiskey and tobacco products

Following the U.K.’s separation from the EU on January 31, 2020, the U.K. independently adopted (or “rolled over”) the retaliatory tariffs imposed by the EU.

To help facilitate a potential resolution, the U.K. announced in May 2021 that it was suspending a “second stage” of ad valorem duties ranging from 10% to 50% on U.S.-origin goods that was slated to go into effect on June 1, 2021. 

Since January 2022, the U.S. and U.K. Governments have been discussing how to end the long running dispute. These discussions were led by U.K. Minister for International Trade Anne-Marie Trevelyan, U.S. Secretary of Commerce Gina Raimondo and U.S. Trade Representative Katherine Tai, and were a part of a broader focus on “global steel and aluminum excess capacity.”  

Terms of the Deal 

Per the agreement, beginning June 1, 2022, the U.S. will implement tariff-rate quotas (TRQs) that will permit the UK to export, duty-free, certain amounts of steel and aluminum products in exchange, in part, for the U.K.’s suspension of existing retaliatory tariffs on U.S. goods.  

  • Steel TRQ: Per the announcement, the U.K. will be permitted to export, duty-free, up to 500,000 metric tons of steel each year, so long as the eligible steel is “melted and poured” in the U.K. and has a U.K. country of origin. The TRQ will be administered quarterly and under 54 product categories; and for any U.K. steel that exceeds the TRQ, the U.S. will apply a 10% ad valorem tariff. Of note, an exception is made for steel that is “melted and poured” and further processed in the EU (thus conferring an EU country of origin). Those products are eligible for duty-free treatment under the TRQ but may not exceed 37,800 metric tons annually.

    Although the terms are similar to those in the U.S.-EU agreement, there are several notable differences, including: 

  1. In contrast to the U.S.-EU deal — which provides that product allocations will be in line with the 2015-17 historical period — the U.S.-U.K. deal will allocate based on the 2018-19 historical period. As a practical matter, because steel exports to the United States sharply declined following the 2018 implementation of the Section 232 steel tariffs, the 2018-19-based metrics will likely result in a lower TRQ (as compared to 2015-17 period). 
  2. To address non-market excess capacity, the agreement also imposes an “attestation” requirement, whereby the U.K. must certify, in the case of any U.K. steel producer that is “owned or controlled by a company registered in China or a Chinese entity” and is exporting steel under the applicable TRQ, that there is no evidence (based on the findings of an independent, third-party audit) that such producer is engaging in “market distorting practices” that will “contribute to non-market excess capacity of steel.” According to U.S. Secretary of Commerce Gina Raimondo, this requirement was “critical” to sealing the deal since it will, according to Secretary Raimondo, help “crack down on unfair Chinese subsidy and trade practices that have for a long time undercut U.K. and U.S. steel industries.”  This is a unique provision that could be included in any similar agreements with other countries.
  3. Lastly, unlike the U.S.-EU deal — which explicitly states that imported products subject to a Section 232 exclusion will not count against the TRQ (if eligible) — no such language is included in the U.S.-U.K. agreement.  
  • Aluminum TRQ: As to aluminum, the U.K. will be permitted to export, duty-free, up to 900  metric tons for unwrought aluminum (under 2 product categories), 11,400 metric tons for semi-finished (wrought) aluminum, other than foil (under 12 product categories), and 9,300 metric tons for foil (under 2 product categories). Here, too, the TRQ product allocations will be in line with the 2018-19 historical period. Notably, the deal provides that for semi-finished (wrought) aluminum products to be eligible for duty-free treatment under the TRQ, they must not contain primary aluminum from Belarus, China or Russia.   

Additionally, like the U.S.-EU deal, the agreement provides that imports of derivative articles of steel and aluminum, as referenced in Presidential Proclamation 9980 (Jan. 24, 2020), will not be subject to Section 232 duties. 

Similar Bilateral Resolutions on Section 232

The U.S.-U.K. deal is the latest in a line of bilateral deals revolving around the Section 232 tariffs. Following the announcement of the U.S.-EU deal in October 2021, the U.S. announced in January 2021 an agreement with Japan addressing steel imports (aluminum products were not addressed). As part of that agreement, beginning April 1, 2022, Japan will be permitted to export, duty-free, up to 1.25 million metric tons of steel each year; and the 25% ad valorem tariff will be applied to any Japanese steel that exceeds that quota.  

Additionally, Australia, Canada and Mexico are now entirely exempted from the tariffs; while Argentina, Brazil and South Korea have all agreed to quotas for their steel and aluminum exports. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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