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Melt and Pour Country Will Determine If Mexican Steel Avoids 25% Tariff

Tariff carve-outs for Mexican steel and aluminum in the Section 232 action will be curtailed, so that only steel that is melted and poured in North America can qualify, and so that aluminum that was smelted or cast in China, Russia, Belarus but worked again in Mexico will be taxed at higher rates.

While Mexico has been tracking where its steel was melted and poured, the country "lacks primary aluminum smelting capabilities, and the country of smelt or country of most recent cast is unknown for a significant volume of aluminum imports from Mexico," the White House said in an aluminum proclamation released July 10. So that tracing must be developed for CBP to be able to apply 200% tariffs to aluminum that was created in those other countries.

Steel imports from Mexico that were melted and poured in Japan, South Korea, Brazil or other countries will be subject to 25% tariffs. Biden administration officials told reporters that 13% of steel imports from Mexico were melted and poured in another country, according to The Associated Press.

A presidential proclamation on steel said the change would start July 10, but it also said "CBP shall implement the melt and pour information requirements as soon as practicable."

It said importers must provide the information to identify where the steel was made in steel articles and steel derivative articles.

The proclamation said the changes to steel tariffs were needed because domestic steel mills are still below the 80% utilization that the Section 232 action was meant to bring about. "In my judgment, these measures will provide an effective, long-term alternative means to address any contribution by Mexican steel articles imports to the threatened impairment of the national security by restraining steel articles imports to the United States from Mexico, limiting transshipment, and discouraging excess steel capacity and production," the proclamation said.

The Coalition for a Prosperous America, an advocacy group for domestic production, disagreed, saying that the tariff waiver was based on voluntary export restraints from Mexico, where it would maintain historic export levels. "The actions fail to address Mexico’s actual breach of the agreement and will not restrain Mexico’s surging steel export volumes. The White House should have imposed tariffs or quotas on conduit, rebar, and wire rod, as well as other steel products that Mexican companies have increasingly shipped tariff-free into the U.S. market at levels far above what they agreed to," CPA wrote.

CEO Michael Stumo said, "We appreciate [USTR] Ambassador [Katherine] Tai’s efforts to bring Mexico to the negotiating table, but it is clear the final negotiators at the White House failed to put the interests of American steel manufacturers and workers first. Now, Congress must act to impose tariffs on the Mexican steel and aluminum sectors.”

Aluminum Association CEO Charles Johnson said the aluminum proclamation "will help to safeguard North America as one of the best places in the world to make aluminum and aluminum products." He added that the association appreciates "the administration’s hard work on this issue and look forward to working with them on a robust implementation plan.”

Sen. Sherrod Brown, D-Ohio, one of the most vocal critics of Mexican steel imports and a vulnerable incumbent on the ballot in November, said: "This is a necessary and long-overdue first step to stop the alarming rise in Chinese steel and aluminum coming into the country through Mexico -- but it will only make a difference if it’s enforced."

Mexico and the U.S. issued a joint statement on the actions, which concluded: "In the coming weeks and months, Mexico and the United States will continue to work together to protect the North American steel and aluminum markets from unfair trade practices."