US lifts Section 232 tariffs on steel and aluminum from the UK effective June 1, 2022

On March 22, 2022, the United States and the United Kingdom announced that they had reached an agreement to lift some of the US tariffs on steel and aluminum from the UK.[1]  These tariffs, which were set at 25 percent for steel products and 10 percent for aluminum products, had been imposed in 2018 under Section 232 of the Trade Expansion Act of 1962.

The US-UK agreement will become effective on June 1, 2022.  On and after that date, qualifying US imports of steel and aluminum from the UK  will be subject to tariff-rate quotas (TRQ), allowing a yearly set volume of imports in 54 categories of steel products and 16 categories of aluminum products to enter the United States tariff-free.  The agreement also establishes that UK-origin imports of derivative articles of steel and aluminum will not be subject to Section 232 tariffs.[2]

The agreement with the UK is similar in many respects to the recently announced US-EU and US-Japan agreements, previously discussed here and here.  However, the US-UK agreement includes new and novel requirements that deserve special attention. 

Specifically, under the US-UK agreement, US importers will have to provide additional documentation to substantiate the eligibility of UK-origin aluminum products for tariff-free treatment under the TRQ.  In addition, the agreement requires that any UK entity owned or controlled by a Chinese company or entity must submit to audits of their financial records to assess whether there is evidence of Chinese market-distorting practices in their production and sale of relevant products, as explained in detail below.

Steel

• “Melted and poured” requirement

To qualify for tariff-free treatment under the TRQ, steel imports must be “melted and poured” in the UK – ie, produced in the UK in an electric arc furnace, basic oxygen furnace, or similar production method.  Steel “melted and poured” in the UK and further processed in the EU, conferring an EU country of origin, will also be eligible for tariff-free treatment.  To this end, the US will develop a new mechanism by June 1, 2022, allowing steel imports with an EU country of origin that were “melted and poured” in the UK to count against the TRQ volume.  US importers will have to provide relevant documentation such as steel mill certificates demonstrating that the imports meet the “melted and poured” requirements.  Failure to provide adequate evidence when the merchandise enters the United States could result in the imposition of tariffs, penalties, or both.

• The TRQ volumes and administration

Under the agreed TRQ, the quantity of UK-origin steel eligible for tariff-free treatment is limited to 500,000 metric tons per year, allocated on a quarterly basis over 54 separate categories based on the level of such imports in the 2018-2019 period.  A breakdown of the 54 product categories can be found here.  For imports of EU-origin steel products “melted and poured” in the UK, the TRQ volume is set at 37,800 metric tons annually, which will be subject to 2021 annualized data.  The US will publish the breakdown of the 54 EU-origin product categories before June 1.  Imports exceeding the quarterly quota will remain subject to the 25 percent tariff unless the importer has obtained a separate exclusion.

The quota volume will be allocated to importers on a first-come, first-served basis for each product category.  The US will publish information on the use of the quota for each product category, including information on any rollover volumes.  These rollover volumes would amount to up to four percent of the unused quota from a preceding quarter if the total volume of imports did not exceed the allocated TRQ volume for that quarter.  For example, up to four percent of any unused volume from the first quarter of each year may roll over to the third quarter of the same year.

• Annual adjustments to quota levels are possible

The US will also conduct annual reviews of the quota levels and make adjustments based on changes in US apparent consumption of steel on a yearly basis.  Such adjustments are capped at a maximum of three percent of the prior year’s quota and are only triggered if the increase or decrease in US apparent consumption of steel exceeds six percent on a year-over-year basis.

• Audits of certain UK steel producers

 The US and UK also agreed to require UK steel producers owned by a company registered in China or a Chinese entity to undertake an audit of their financial records to assess whether there is evidence of Chinese market-distorting practices.  The audit must include an assessment of the UK steel producer and its UK parent company’s financial records.  The UK must then submit an “attestation” based on the audit findings of the UK steel producers coupled with the audit results to the US. 

Steel from any UK steel producer owned or controlled by a company registered in China or a Chinese entity will be eligible for tariff-free treatment under the TRQ for six months from June 1, 2022.  If the UK does not provide the required attestation by December 1, 2022, and then annually on December 1 of the following years, the US reserves the right to temporarily deny the UK steel producer access to the in-quota rate for the steel TRQ.  The US will restore access within eight weeks after the UK submits an attestation.

Aluminum

• Origin requirements

 To be eligible for tariff-free treatment under the TRQ, aluminum products must originate in the UK.  In addition, semi-finished wrought aluminum products must not contain primary aluminum from China, Russia, or Belarus.  Upon entry of the merchandise, US importers will have to provide “Certificates of Analysis” for (1) each aluminum product imported into the US; and (2) the smelted primary aluminum used in the manufacturing of the aluminum product imported into the US.  Failure to provide such certificates could result in the imposition of tariffs, penalties, or both.

• The TRQ volumes and administration

Tariff-free imports will be subject to a TRQ.  The TRQ annual import volumes are set at: (1) 0.9 thousand metric tons for unwrought aluminum under two product categories; (2) 11.4 thousand metric tons for semi-finished (wrought) aluminum other than foil under twelve product categories; and (3) 9.3 thousand metric tons for foil under two product categories.  A list of the product categories can be found here.  The quota import volumes will be allocated in line with the 2018-19 historical period, except for aluminum foil, which will be subject to 2021 annualized data.  Any imports that exceed the quota will be subject to the 10 percent tariff.

The quota volume will be allocated to US importers on a first-come, first-served basis for each product category.

In addition, the TRQ will be administered on a semi-annual basis.  The US will publish updated information on the use of the semi-annual quota for each product category.

The Section 232 exclusion process continues to be available for US importers

Similar to the US agreements with the EU and Japan, the US-UK agreement will continue to maintain the existing Section 232 exclusion process for UK-origin steel and aluminum products.  The exclusion process will also be available for steel products from UK steel companies that have been denied access to the TRQ’s tariff-free treatment.  Thus, Section 232 exclusions will continue to be an avenue to US importers for importing UK origin-steel and aluminum products without Section 232 tariffs, without having to worry about quota eligibility.   

Going forward

To take advantage of the tariff-free treatment under the TRQ, US importers of steel and aluminum from the UK and other entities with businesses involving these products should prepare for the agreement’s implementation on June 1.  Companies may wish to review whether their steel and aluminum imports are within the TRQ product categories and plan accordingly to obtain the required documentation and comply with the quota levels.  In addition, for imports of UK-origin semi-finished wrought aluminum, companies may want to confirm that the products do not contain primary aluminum originating from China, Belarus, or Russia.  Companies should also consider using the Section 232 exclusion process to provide stable access to certain aluminum and steel from the UK.

If you have any questions or would like to discuss your company’s situation, please contact any of the authors or your regular DLA Piper contacts.