By Paul Fudacz, Partner, Braumiller Law Group
On February 10, 2025, the President issued Presidential Proclamations Under Section 232 of the U.S. Code adjusting imports of steel and aluminum into the United States. These Proclamations provided an expanded listing of steel and aluminum derivative articles but also instructed the Secretary of Commerce (Secretary) to establish a process for including additional derivative aluminum and steel articles within the scope of the ad valorem duties.
The Secretary, through BIS, established the Section 232 Inclusions Process effective April 30, 2025, and began accepting inclusion requests under the first submission cycle May 1, 2025.
The criteria set forth in the Inclusions Process were as follows:
• Clear identification of the applicant (i.e., individual, company, or trade association);
• A precise definition of the derivative article;
• The eight or ten-digit HTSUS classification requested to be included in the scope of the ad valorem tariffs;
• An explanation of why the article is a steel or aluminum derivative article, including, to the extent practicable, information on the total value of the article’s steel and/or aluminum content as a share of the derivative article’s total value;
• Pertinent information on the domestic industry affected;
• Statistics on imports and domestic production;
• A description of how and to what extent imports of the derivative article threaten to impair national security or otherwise undermine the objectives set forth in the 2018 Steel and Aluminum Section 232 investigation reports or related Inclusions Proclamations.
The clear criteria set forth above would appear to require individualized treatment of a specific article submitted for inclusion, however certain requests included submittals with dozens, and sometimes hundreds of products, sometimes with minimal or generalized supporting information for certain included items.
Also many of the products did not meet the original definition of a derivative article set forth when the first derivative products were introduced in 2020 that provided an article is ‘derivative’ of an aluminum article or steel article if all of the following conditions are present: (a) the aluminum article or steel article represents, on average, two-thirds or more of the total cost of materials of the derivative article.”
Despite best efforts in the way of preparation and submittal of well-reasoned rebuttal comments by importers of the affected articles, there were zero inclusion requests denied by BIS based on the strength of the rebuttal arguments, rather, the only inclusion requests that were denied were based on the applicability of other investigations to the particular products such as Section 301 or the Section 232 investigations of autos and heavy trucks.
At the time of this writing the second round of steel and aluminum derivative products inclusion requests are being considered by the U.S. Bureau of Industry ad Security, however if the results of the first round are repeated there is likely 100% chance that all new derivative product HTS codes submitted for inclusion that are not subject to other investigations will be added to the already lengthy list of derivative products found in Chapter 99 of the HTS under subheading HTS 9903.81 for steel and 9903.85 for aluminum.
While the stated purpose of the Section 232 steel / aluminum tariffs is to strengthen the US steel and aluminum industries, it is clear that the inclusion process is being adopted by a multitude of US industries (other than the steel and aluminum industries) not for security reasons, but to gain an advantage over competitors, possibly at the very expense of national security. This is because today many impacted US Industries cannot fully serve the entire market needs of certain sectors such as transportation, electronics or machinery, and expanded application of Section 232 tariffs on critical products would serve to harm certain companies and on an overall basis hinder national security, rather than enhancing it.
The current inclusion process with its almost automatic approval of new derivative articles, some clearly with dubious relevance to enhancing national security, is arguably morphing the scope of the Section 232 tariffs in a way not contemplated under the original steel / aluminum investigations. This departure from the actions reasonably related to the initial and subsequent investigations and corresponding attenuation from the legal basis of the subject Section 232 actions could undermine the legal underpinnings of the actions and open the door to legal challenges in the future, especially with the anticipated unrelenting addition of new derivative products in future rounds to come.
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Paul Fudacz – https://www.braumillerlaw.com/author/paulfudacz/