Leveraging Section 301 Tariffs to Combat Circumvention of Chinese Steel and Aluminum Exports

In light of significant government subsidies aiding low-cost Chinese steel and aluminum products, the U.S. steel and aluminum industries advocate for the extension of Section 301 tariffs beyond China to third-party countries. This strategic move aims to shield U.S. industries from the influx of cheap, subsidized materials. The Aluminum Association (AA) and the American Iron and Steel Institute (AISI) have both submitted statements to the U.S. Trade Representative (USTR), urging enhanced enforcement measures to prevent the circumvention of existing tariffs.

Industry Concerns and Actions

The AA emphasized the need to impose anti-dumping and countervailing duties on Chinese imports, which has effectively reduced China's direct exports to the U.S. However, the redirection of these exports to third-party countries has surged, threatening U.S. manufacturers who produce similar goods. Consequently, industry representatives are pushing for the expansion of Section 301 tariffs to encompass processed Chinese steel and aluminum products entering the U.S. via third countries.

The Biden administration, following a review of Section 301 tariffs applied from 2018 to 2022, announced an increase in tariffs on a series of products, including steel and aluminum, effective August 1. Despite this, U.S. industries call for broader application of these tariffs to include circumvention through third-party processing.

Detailed Proposals and Data

In their statement, AISI highlighted the necessity of reinforcing origin regulations for steel products processed in third countries using Chinese materials. The current determination of origin by the Customs and Border Protection (CBP) is based on the final substantial transformation location. AISI advocates for considering the melting and pouring locations to prevent unfair trade practices.

Data from the Department of Commerce’s Steel Import Monitoring and Analysis System (SIMA) indicate that approximately 1.7 million metric tons of Chinese-origin steel have entered the U.S. since January 1, 2022, with 17% processed in third countries. AISI suspects that actual figures may be higher due to underreported origin data.

Strategic Importance and Recommendations

Expanding Section 301 tariffs to cover Chinese steel and aluminum products processed in third countries would send a strong message of the administration's commitment to combating unfair trade practices and protecting American jobs. The AA further recommended extending these tariffs to aluminum-intensive products manufactured using Chinese aluminum in third countries, aligning with USTR Katherine Tai's goals of protecting U.S. workers and bolstering supply chain resilience.