On October 31, 2021, the United States (“US”) and the European Union (“EU”) announced an agreement to ease US tariffs on steel and aluminum. The agreement will go into effect on January 1, 2022.
Prior to the deal, in 2018, the US imposed a 25 percent tariff on steel imported from the EU and a 10 percent tariff on aluminum imported from the EU, using Section 232 of the Trade Expansion Act of 1962. (For more on these tariffs, see our Legal Update released after the imposition of the tariffs.) This strained bilateral relations between the US and EU, and the EU responded by imposing a reciprocal 25 percent tariff on sensitive US goods such as whiskey, orange juice and motorcycles. The parties agreed to end these tariffs, though the end date will be set through European Commission regulation.
The centerpiece of the agreement is a tariff-rate quota (“TRQ”). All imports of steel or aluminum below the TRQ will not be subject to the relevant Section 232 tariffs, but any import of steel or aluminum above the TRQ will be subject to tariffs. The TRQ for steel is set at 3.3 million metric tons, and the TRQ for aluminum is set at 18 thousand metric tons for unwrought aluminum products and 366 thousand metric tons for semi-finished “wrought” aluminum.1 Derivative articles of steel and aluminum, as defined in Proclamation 9980, will not be subject to Section 232 duties, and items excluded under the Section 232 exclusion process will not count toward the TRQ. In addition, in order for steel imports to be eligible for duty-free treatment under the TRQ, they need to be “melted and poured” in the EU.
The US and EU also released a joint statement shortly after announcing the details of the deal. The two promised to expand cooperation in both trade remedies and customs matters. Given that the deal was announced shortly before the beginning of the COP26 summit in Glasgow, Scotland, the US and EU also announced new negotiations to reduce excess capacity in steel and aluminum manufacturing and encourage reduction in carbon intensity in both manufacturing processes. The US and EU will “seek to conclude” these negotiations within two years. Finally, the joint statement announced that the US and EU will suspend all ongoing World Trade Organization (“WTO”) disputes related to the Section 232 tariffs by November 5, 2021, and instead the parties will pursue arbitration to resolve the disputes.
More climate-related steel and aluminum negotiations may be coming, as well. On October 31, 2021, the US Commerce Department released a statement saying that it is “consulting closely” with Japan and the United Kingdom on issues related to the steel and aluminum trade, with a particular focus on the overcapacity of the global steel and aluminum markets and the potential climate impact of the sectors.
1 For the full list of the steel and aluminum goods subject to the TRQ, including the impacted Harmonized Tariff Schedule codes, please refer to the Announcement, at U.S. Dept. of Commerce, Announcement of Actions on EU Imports Under Section 232, Oct. 31, 2021, https://www.commerce.gov/sites/default/files/2021-10/US-232-EU-Statement.pdf.