On 24 January 2020, the United States (U.S.) adopted new tariffs under Section 232 of the Trade Expansion Act of 1962 on imports of certain derivative steel and aluminium products, effective from 8 February 2020 and with an unlimited duration.
In response, on 7 April 2020, the European Union (EU) adopted Commission Implementing Regulation (EU) 2020/502 to impose additional rebalancing duties on selected U.S. products. As with the retaliatory duties adopted in 2018, the imposition of these new duties will take place in two stages. As of 8 May 2020, the EU will impose ad valorem duties of 20 per cent and 7 per cent on imports of certain cigarette lighters and fittings for furniture.
At the second stage, the EU will impose ad valorem duties of 4.4 per cent on imports of the certain playing cards, (i) from 8 February 2023 or (ii) when the World Trade Organisation (WTO) Dispute Settlement Body adopts a ruling that the U.S. Section 232 measures are inconsistent with WTO rules.
Background: U.S. and EU tariffs wars in 2018
On 8 March 2018, the United States (U.S.) imposed tariffs on certain steel and aluminium under Section 232 of the Trade Expansion Act of 1962 (Section 232). These duties took effect on 23 March 2018, and continue to apply today to imports from the European Union (EU) and other countries. The U.S. characterised these measures as national security measures, but the EU considered them to be illegal safeguard measures.
In response, on 16 May 2018, the EU adopted Commission Implementing Regulation (EU) 2018/7241 (Regulation 2018/724) to impose retaliation measures in the form of “rebalancing” duties aimed at restoring the balance in trade upset by the illegal safeguard measures of the U.S. Those rebalancing duties were adopted under the EU’s Trade Enforcement Regulation of 2014 (Regulation (EU) No 654/2014)2 and target a long list of U.S. products, including steel and aluminium products; agricultural goods; apparel, textile and footwear products; and various industrial goods, in accordance with Regulation 2018/724. These duties are estimated at EUR 6.4 billion in total.
The EU adopted a phased, two-stage approach, to comply with its obligation under the WTO and in line with the requirements of Regulation 2018/724. The EU only collects the first stage of duties against the U.S. at the moment. The second stage of duties are not yet imposed. At the first stage, the EU imposed ad valorem duties of a maximum rate of 10 per cent and 25 per cent on imports of U.S. products listed in Annex I of Regulation 2018/724 from 22 June 2018. These duties are valued at EUR 2.8 billion.
At the second stage, the EU will impose ad valorem duties of a maximum rate of 10 percent, 25 percent, 35 percent or 50 percent on imports of U.S. products listed in Annex II of Regulation 2018/724 (i) from 23 March 2021 or (ii) when the World Trade Organisation (WTO) Dispute Settlement Body adopts a ruling that the U.S. Section 232 measures are inconsistent with WTO rules. These remaining duties are valued at EUR 3.6 billion.
After the adoption of Regulation (EU) 2018/724 in May 2018, the EU notified WTO Members of its additional duties. Absent disapproval by the WTO’s Council for Trade in Goods within 30 days after the EU’s notification of its additional duties, the EU imposed these additional duties on imports of the above-mentioned U.S. products by subsequently adopting Commission Implementing Regulation (EU) 2018/886,3 which took effect from 22 June 2018.
Expansion of U.S. Section 232 tariffs on aluminium and steel
On 24 January 2020, the U.S. announced that the existing Section 232 tariffs on imports of aluminium and steel products will apply to certain derivative products of aluminium and steel, such as wire, nails, staples and motor vehicle and tractor stampings, as described in Annex I and Annex II of Presidential Proclamation 9980.
The U.S. extended Section 232 tariffs to derivative products of aluminium and steel, because foreign producers of these derivative articles have increased shipments to the U.S. to circumvent the duties on aluminium articles and steel articles. The expanded U.S. Section 232 tariffs became effective on 8 February 2020.
The original steel and aluminium tariffs apply to all countries, except Argentina, Australia, Brazil, Canada, Mexico and South Korea.4 Likewise, the expanded 25 per cent tariff on steel derivative products applies to imports from all counties except Argentina, Australia, Brazil, Canada, Mexico and South Korea. The steel derivatives tariffs are expected to affect imports with a total annual value of U.S.$ 800 million. The additional 10 per cent tariff on aluminium derivative goods applies to imports from all countries except Argentina, Australia, Canada and Mexico. The aluminium derivatives tariffs are expected to affect imports with total annual value of U.S.$ 20 million.
Accordingly, steel and aluminium, as well as the steel and aluminium derivative products imported from the EU face tariffs when exported to the U.S.