Swift Implementation of New Steel and Aluminum Derivatives Tariffs Sends the Trade Scrambling

Actions to slap an effective date of March 12 for Section 232 tariffs on steel and aluminum derivatives outside of Chapters 73 and 76 -- and to give the trade community less than three hours to get their systems in place so that they can comply with this new effective date -- sent brokers and importers into a tailspin.

Trade members were notified of the effective date of 12:01 a.m. EDT on March 12 via two cargo systems messages published after 9 p.m. EDT on March 11.

The March 12 effective date is in line with the other Section 232 duty increases announced in February, including an end to all country-specific quotas and exclusions and an increase in aluminum tariffs to 25%. The tariffs on the derivatives outside of Chapters 73 and 76 -- which only apply to a good’s steel or aluminum content, respectively -- had been on hold until the commerce secretary certified that tariff collection systems were ready late in the afternoon on March 11.

"We are all reeling over the very short notice for this implementation. Our ABI software is not updated properly, and we are getting reject messages that we cannot explain. I'm sure CBP is doing all they can to fix things quickly, but it sure is chaotic right now," Amy Magnus, A.N. Deringer director of customs affairs and compliance, told International Trade Today.

In trying to accommodate this quick turnaround, brokers found that their systems and CBP's systems were not yet ready to handle the changes. One person told ITT that there have been issues when testing in the ACE Certification and Production environments; the person wished for more time for CBP and the trade to prepare their software, applications and businesses for the new tariff regulation changes.

A CSMS message March 12 seemed to reflect that lack of readiness, although it was unclear what the actual causes of the issues were. One CSMS message said there were issues with entry summaries with Section 232 tariffs rejecting with Error 775 - TRFF Adjustment HTS Not Allowed, although CBP later said that the issue was resolved, as of 2:16 p.m. EDT.

In addition to brokers facing hurdles, importers also could have issues with the tariff implementation on the new steel and aluminum derivatives, others said. This is because "the big issue -- apart from the 3-hour implementation notice -- is how to determine the value for the aluminum or steel content for affected derivative products," said Richard Mojica, practice leader for customs and import trade at Miller & Chevalier. This affects importers because they are the ones with access to bill of materials and production records, he said.

In a March 12 blog post, the international trade team for law firm Husch Blackwell noted that CBP had not yet provided any guidance on the specific method to be used to declare a value for the aluminum or steel content for affected derivative products.

Nithya Nagarajan, a partner at Husch Blackwell, told ITT that "because no definitive guidance was issued by Customs on the methodology to calculate the steel or aluminum content for the derivatives, we are indicating that there may be some additional guidance that is forthcoming and therefore we are monitoring those updates."

CBP didn't immediately respond to a request for comment on the possibility of providing additional guidance.

However, despite the quick implementation timeline, one looming uncertainty is whether federal regulators will decide to pull back, according to Magnus.

"We are doing our best to assist [with] the many questions from our clients, but how long this will last, or will this be rescinded in a few days and questions about the future actions are just impossible for us to guess. We can only go with the official notices we receive," Magnus said.