Earlier this summer, the US steel and aluminum industries urged the Office of the US Trade Representative ("USTR") to use Section 301 tariffs to target alleged transshipments of Chinese exports, while labor groups urged the USTR to include certain farm equipment in the proposed increase of Section 301 tariffs. The request came in response to USTR's request for public comment on its proposed increase of tariffs imposed under Section 301 of the Trade Act of 1974. USTR accepted comments on its proposal from May 29, 2024 until June 28, 2024.
The Aluminum Association, which represents the domestic aluminum industry, commented that US steel and aluminum producers have "successfully pursued a number of trade enforcement actions under the US antidumping ("AD'") and countervailing duty ("CVD") laws to address unfairly-traded aluminum imports that injured domestic producers." While these efforts have resulted in "substantial reductions in the volume of Chinese exports" of certain aluminum products, the Aluminum Association asserts that "the volume of Chinese exports to third countries has grown substantially," which in turn has 1) "reduced opportunities for US producers of aluminum products to sell their products to customers in third-countries, as low-priced and unfairly-traded Chinese products surge into those markets;" and 2) "created incentives for producers of aluminum-intensive downstream articles in third countries to rely on low-priced aluminum products from China to manufacture products that are exported to the United States." The Aluminum Association states that the latter threatens the domestic producers of identical or similar products who are customers of the Aluminum Association member companies. To address this threat, the Aluminum Association asks USTR to "seriously consider the application of Section 301 tariffs to aluminum-intensive products imported into the United States from third countries that incorporate Chinese-origin aluminum." The Aluminum Association acknowledges in its comments that such a measure would be "new and novel," but it emphasizes that such action is necessary to address the detrimental effect of the US imports of aluminum-intensive products incorporating Chinese-origin aluminum or aluminum products.
The American Iron and Steel Institute ("AISI"), which "serves as the voice of the American steel industry in the public policy arena," also submitted comments on the proposed hike of Section 301 tariffs. AISI alleges that Chinese steel global exports increased by 40 percent from 2022 to 2023. While US AD and CVD measures as well as Section 232 tariffs on steel from China have limited the amount of steel imported directly from China into the US, like the Aluminum Association "AISI believes that a significant amount of Chinese steel exported to third countries is further processed and then re-exported to the United States." Given this reality, AISA urges USTR to issue instructions not to apply the traditional "substantial transformation" rule of origin under US customs law, when determining whether a product made with raw steel from China is subject to the Section 301 tariffs. Specifically, AISI requested that USTR apply Section 301 tariffs on "all steel products where the original raw steel was melted and poured in China, regardless of the country of final processing." AISI asserts that this "revised rule of origin for Section 301 tariffs on steel products will more accurately reflect the impact China is having on the global steel market{.}"
The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW"), one of the largest unions in North America, also submitted comments to USTR's proposed increase of tariffs urging USTR to expand Section 301 tariff increases to protect US jobs. Specifically, the UAW asked the USTR to reconsider proposed temporary exemptions of farm equipment from the proposed increased Section 301 tariffs. The UAW explains that "tens of thousands" of its members "build agricultural implements, construction, and mining machinery & equipment" at several US companies. However, the UAW asserts that these machines "are increasingly being threatened by unfair trade from China," as reflected by "recent reports of layoffs in [the] agricultural machinery manufacturing" industry. The UAW emphasizes that the USTR's 301 investigations identified agricultural machinery and equipment as "one of the ten strategic manufacturing industries targeted for promotion under the [Chinese government's] Made in China 2025 Notice," and that the agricultural machinery manufacturing sector has experienced a "trade deficit in the past decade." The UAW claims that a "significant contributor" to this trade deficit "has been the growth of the trade deficit with China." The UAW also cautions that, should farm equipment remain exempt from the increased Section 301 tariffs, retaliatory action by China that targets the agricultural machinery manufacturing sector could threaten union jobs.
As of July 30, USTR reported that it was continuing to review comments to its proposed modification to the Section 301 tariffs. USTR expects that it will issue its final determination in August (which may be delayed), and that modifications will take effect around two weeks following the publication of its final determination. Interested parties should continue to monitor USTR's announcements and review their supply chain to prepare for potential effects of increase Section 301 tariff rates.
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