Section 232 Protections Modified for Europeans

Nov. 1, 2021
By: David G. Forgue

On Saturday, October 30 the Biden Administration announced that the Section 232 protections for the United States steel industry were being modified as they apply to members of the European Union. Rather than duties of 25% on steel imports and 10% on aluminum imports, EU imports will face a tariff-rate quota. This is likely to be similar to the system that has been in place for South Korea, Argentina, and Brazil for steel.

What is not yet clear is how the tariff-rate quota amounts will be set. The Administration has indicated that the quotas will reflect “sustainable” historic levels, taking into account various market distortions. Depending on the baseline year from which the quota is calculated, EU exporters could face a squeeze trying to fulfill contracts under the quota.

The Administration has indicated that existing exemptions will be honored under the agreement with the EU. It is not yet clear whether such exemption will be eligible to be renewed at expiration, or whether the amounts will be counted against the new quotas. We will post updates as more details become available.

It is important to understand that this agreement is intended to give competitive advantage to relatively low-carbon steel and aluminum production, while penalizing “dirty” steel and aluminum production. It is also intended to create a framework for global steel capacity talks. In both cases this agreement should be understood to be targeting Chinese steel and aluminum while leaving the door open to non-EU countries to join the agreement. Switzerland, the United Kingdom, and Japan are all likely candidates to participate in the tariff-rate quota program eventually.

In furtherance of the tariff-rate quota system and steps intended to reward clean steel and aluminum production, the agreement with the EU is reported to have a “melt and pour” requirement for steel origin. This will likely mean that Chinese steel or aluminum used to produce articles in the EU will remain subject to 232 duties, rather than being under the quota system.

The facts and details of the agreement continue to emerge. If you have any questions about European steel or aluminum imports please feel free to contact any Barnes, Richardson & Colburn, LLP attorney.