US-EU Announce a New Path for Steel and Aluminum Trade

Starting January 1, 2022, the United States will replace the existing Section 232 tariffs with a Tariff Rate Quota (TRQ) for both steel and aluminum products and eliminate the additional tariffs on derivative articles of steel and aluminum. In return, the EU will cancel a planned increase in retaliatory tariffs planned for December 1, 2021, and will remove the “rebalancing measures” entirely on January 1, 2022. Both parties will also suspend the World Trade Organization (WTO) disputes they have initiated against each other regarding the Section 232 tariffs, referring the matters instead to arbitration under the WTO Dispute Settlement Understanding.

Additional details on the TRQs for steel and aluminum products, and the ongoing US-EU agreement more broadly, are provided below.

TRQ for Steel Products 

Currently, imports of steel products from the EU are subject to a 25% ad valorem tariff. However, beginning on January 1, 2022, the US will replace the additional tariff with a TRQ of 3.3 MMT in aggregate annual import volume. The TRQ, which covers 54 steel product categories, is limited to products that are “melted and poured” in the EU, as supported by relevant documentation.

The permissible volume of imports under each steel product category will be allocated for each EU member state based on historically-based volumes of imports during the 2015-2017 period. Within those limits, the TRQ will be allocated on a “first come, first served” basis and administered on a quarterly basis. Up to 4% of the unused volume will be permitted to roll over from the first quarter to the third quarter, from the second quarter to the fourth quarter, and from the third quarter to the first quarter of the following year.

Imports previously subject to the Section 232 tariffs that are within the quota will enter free of any additional tariffs. However, products entering the above quota will continue to be subject to an additional duty of 25%, unless an exclusion applies. The existing process for requesting an exclusion from the Section 232 tariffs will remain open, and imports of excluded steel products from the EU will not count against the 3.3. MMT TRQ. Any Section 232 exclusion granted and used in fiscal year 2021 will also be extended for a two-year period (i.e., until December 31, 2023) without the need to reapply.

The volume of steel imports subject to the TRQ will be reviewed each year and adjusted based on changes to U.S. demand reflected in World Steel Association data. For each increase or decrease of 6% in U.S. steel demand, the TRQ volume will increase or decrease by 3%, respectively. Beginning April 1, 2022, the U.S. will evaluate utilization and administration of the TRQ every three months and enter into consultations to address substantial under-use at the request of the EU.

TRQ for Aluminum Products 

Imports of aluminum products from the EU are currently subject to a 10% ad valorem tariff. Beginning January 1, 2022, however, EU imports of unwrought aluminum under two product categories will be subject to a TRQ of 8 TMT per year, and imports of semi-finished (wrought) aluminum under 14 product categories will be subject to a TRQ of 366 TMT per year. Aluminum products within the quota will enter free of any additional tariffs, while products entering above quota will continue to be subject to an additional duty of 10%, unless an exclusion applies.

As with steel, the allocation of import volumes for each product category will be based on historical data, but the relevant period for aluminum imports is 2018-2019, rather than 2015-2017. For one product category – aluminum foil – the allocation will be based on annualized data for 2021. Unlike the TRQ applicable to steel, the TRQ for aluminum will be measured and administered on a semi-annual basis, with no more than 60 percent of the TRQ permitted to be filled in the first half of the year. While the exclusion process for aluminum products will remain open, in contrast to steel exclusions, aluminum exclusions will not be additive and will count against the permitted volumes under the TRQ until the TRQ has been filled.

There are no automatic review provisions included in the aluminum TRQ. However, the U.S. has emphasized that such mechanisms are not required for aluminum, given the annual TRQ volume that encompasses historical and current EU aluminum trade.  

Imports of aluminum subject to the TRQ must be accompanied by a Certificate of Analysis (COA). The U.S. is expected to release additional details regarding the parameters of the COA, but has stated that the information required will be consistent with existing requirements. It is anticipated that the COA will be included with entry documentation when aluminum products are shipped from the EU to the U.S.   

Big Picture 

This negotiated agreement was the result of months-long dialogue between the US and the EU regarding challenges to trade in the steel and aluminum sector, including global overcapacity, carbon intensity, and the prevalence of non-market principles. The aim was to establish a new, joint approach to address these concerns and to forge a path forward in the US-EU bilateral trade relationship. The US has emphasized that this agreement allows a historic and sustainable volume of imports to enter the country from the EU duty free, providing more predictability to downstream users.

The agreement also includes larger commitments to address long-term challenges in the steel and aluminum sector, and provides for ongoing cooperation in the areas of trade remedies, customs, monitoring, and non-market excess capacity. It also includes provisions related to carbon intensity, most notably the negotiation of “arrangements” to support lower carbon intensity and to invest in decarbonization within two years. The US envisions these commitments as part of a global dialogue that other likeminded economies could ultimately join.  

Next Steps 

Arent Fox’s International Trade and Investment team is experienced both in counseling companies trading with the EU and in mitigating the effects of Section 232 tariffs. The implementation of TRQs will result in duty savings opportunities for importers of steel and aluminum products from the EU. Arent Fox has developed a program to assist importers in identifying these products, monitoring TRQs, and, where possible, recovering duties paid. If you would like more information, please contact any Arent Fox trade group member listed below