Labor Union Requests 50 Percent Safeguard Duty on Unwrought Aluminum

According to the petition, the U.S. primary aluminum industry is collapsing due to global overcapacity. “The industry is unable to survive in a market where primary aluminum prices have plummeted far below full costs of production and imports have grown rapidly,” said the petition. “Domestic producers have been forced to close or idle nine of fourteen smelter facilities since 2011, with a tenth to be idled at the end of June 2016, and with two of the other remaining operating smelter facilities utilizing only 50 percent or less of their capacity.” USW claims that, “without temporary relief, there will likely be no domestic primary aluminum industry standing within a short period of time.”

Duties Start at 50 Percent, Capped at ‘Final Price’

The petition requests four years of safeguard duties, starting in the first year at an additional duty of 50 percent on top of existing tariffs, and falling to 45 percent in year two, 40 percent in year three and 35 percent in year four. Assessment of duties would be capped at a “final price,” including customs value, tariffs and safeguard duties, that varies based on product grade. The final price would be set at level that allows domestic producers “to obtain an adequate return on their sales.” As such, if prices remain low, the full safeguard duty would be imposed, but as prices of unwrought aluminum rise, causing the total amount of customs value plus tariffs and safeguard duties to rise, any safeguard duties in excess of the cap would be not collected.

Proposed Scope of Safeguard Duties

Unwrought aluminum covered by the proposed safeguard duty is defined in the petition as follows:

The name of the imported article against which this petition is filed is primary unwrought aluminum. Primary unwrought aluminum is aluminum metal that has been produced by smelting alumina into unwrought aluminum. This petition covers primary unwrought aluminum whether alloyed or unalloyed, regardless of alloying element, regardless of alloy source, and regardless of shape.

Primary unwrought aluminum is aluminum metal that is in liquid form or has been obtained by casting and has not yet been processed into finished customer-specific shapes, such as sheet or foil (i.e., wrought aluminum). Wrought aluminum may be produced through a variety of mill processes, including rolling, extruding, and forging. Aluminum may also be further worked through subsequent re-casting into final machined form, which is distinct from the initial casting into unwrought form. Additional U.S. Note 1 to Section XV of the HTSUS defines "unwrought" to refer to metal in a wide variety of manufactured primary forms, but states that the term "does not cover rolled, forged, drawn or extruded products, tubular products or cast or sintered forms which have been machined or processed otherwise than by simple trimming, scalping or descaling." Customs has ruled that unwrought aluminum includes any aluminum that "has not been worked into a finished condition and which may be for use in a manufacturing process." Primary unwrought aluminum may be available in a wide variety of shapes, including, but not limited to, billets, hollow billets, ingots, sows, and tees.

There are two forms of unwrought aluminum: (1) primary unwrought aluminum, obtained by smelting alumina; and (2) secondary or recycled unwrought aluminum, obtained by melting scrap. This petition does not cover imports of secondary or recycled unwrought aluminum, though it does cover imports of primary unwrought aluminum that may have had some amount of scrap added in the liquid state to create an alloy.

Once molten aluminum is produced through the smelting of alumina, it may be blended with alloying elements in holding furnaces. Individual alloying elements may be added to the blend, and, in some cases, some amount of melted aluminum scrap may be added to achieve the desired alloy content. The resulting molten blend is then cast at the smelter's on-site casting house or transported a short distance to be cast at neighboring casting houses. All unwrought product produced from primary smelted aluminum is covered by this petition, regardless of the alloy content, type of alloy, or source of alloying elements that have been added.

For customs purposes, primary unwrought aluminum is classified in the four-digit HTSUS heading 7601.15 The heading covers all unwrought aluminum, both primary and secondary, though two ten-digit statistical breakouts appear to solely or primarily cover secondary, as opposed to primary, unwrought aluminum:

• 7601.20.90.60 covers "Unwrought aluminum, aluminum alloys, other, other, other, other, containing 0.03 percent or more by weight of lead (secondary aluminum)"; and
• 7601.20.90.75 covers "Unwrought aluminum, aluminum alloys, other, other, other, other, other, remelt scrap ingot."

Imports under each of the other ten-digit statistical breakouts within heading 7601 appear to consist primarily if not exclusively of primary unwrought aluminum. The eight countries that account for about 94 percent of U.S. imports in these categories primarily produce primary, not secondary, aluminum, and key exporters all appear to solely produce primary aluminum. The covered ten-digit statistical breakouts within heading 7601 are: 7601.10.30.00, 7601.10.60.00, 7601.20.30.00, 7601.20.60.00, 7601.20.90.30, 7601.20.90.45, and 7601.20.90.90.17 The current general rate of duty for imports of primary unwrought aluminum under 7601.10.30.00 and 7601.20.30.00 is 2.6 percent, for imports under 7601.20.60.00 it is 2.1 percent, and for imports under the remaining four ten-digit categories it is duty-free.

Provisional Determination Due Mid-July

Normally, the International Trade Commission has 120 days from the date a safeguard petition is submitted to complete its report, and the president must decide whether to impose safeguard duties within 60 days after the report is filed. However, under the petition’s request for provisional duties, the ITC would have to submit its report within 60 days (i.e., by June 17), and the president must decide whether to impose safeguard duties by 30 days after (i.e., by around July 17). The petition requests provisional duties at 50 percent, subject to the price cap. The ITC’s full 120 day investigation would begin after it completes its 60-day provisional investigation, according to a 2014 ITC report (here).

Email ITTNews@warren-news.com for a copy of the petition.