More Steel and Aluminum Derivatives May Get Flagged for Section 232 Duties, Flexport Says

“Generally speaking, there are three windows of opportunity where businesses can submit requests for products to be included in the tariffs. The first one occurred in May this year, and then subsequently, the next one is September and then next year … So, businesses should expect that the list of covered products will continue to expand based on domestic industry comments,” Zajac said.

If importers are seeking to delay the payment of duties until they are sure that the goods will be sold in the U.S., the two options available are using a foreign-trade zone or a bonded warehouse, Zajac said. Importers also must provide manufacturing documents for the country of cast and smelt for aluminum, or the country of melt and pour for steel.

Zajac reminded webinar attendees that if the value of the steel or aluminum content cannot be determined at the time of entry, the tariffs will apply to the full product value. She also encouraged importers to work with suppliers to collect information about material origins, since an importer shouldn’t assume that the steel or aluminum content is coming from the country where the derivative product is sourced.

“Expect CBP scrutiny on country of origin and value declarations. … It’s really important to do that upfront due diligence care,” Zajac said.

Said Zajac later in the webinar: "When you start to get into country of origin, [CBP is] looking for total supply chain traceability. When you think about the probability or potential for aluminum to come from Russia, they're going to ask for production records. We had to produce timecards and payment records to show that you are actually getting paid what you say they are, and this is the cost."

She continued, "I would expect an end-to-end verification and create a process map of what that would look like to make sure that you understand what's required."

Marcus Eeman, senior customs manager at Flexport, also told webinar attendees to be mindful of how entries are stacked as the order has been switched around on when Section 232 gets applied versus when the International Emergency Economic Powers Act tariffs are applied. “What do I look at first in order to apply the exemptions from one to the other? There's an exemption from IEEPA reciprocal duties if you're paying 232 duties, so, how do I know when I apply it? Well, Customs clarifies that actually the 10% applies to the line that's not paying 232 duties,” Eeman said.

For instance, if an exercise bicycle from Thailand gets imported, “even though the reciprocal tariff applies to the full value of the bicycle, we only apply the Section 232 to the aluminum portion,” Eeman said. “But then, with the weekend news here, now the same [Harmonized Tariff Schedule] HTS code, this 9506 code, is also now on the steel list. So, that steel content that, before, we ignored, now gets its own entry summary line.”

He continued, “This is what makes things, I think, pretty difficult. To wrap your mind around it, to try to know, not only is my product affected, [but] what is my total rate and what is the interplay between all of these -- there’s so many exclusions and exemptions.”

There may also be some wiggle room on how to stack the reciprocal tariffs against the Section 232 tariffs based on the value, Eeman said. However, the IEEPA fentanyl tariff for Chinese imports "applies no matter what .... That applies on the full value, full stop," he said.

Eeman reminded webinar participants that they should expect heightened trade enforcement, especially since USMCA claims have become so valuable. For instance, quoting a Fitch Ratings report, Eeman pointed out how 56% of imports from Canada were claimed under USMCA in May, but in June, 81% of imports from Canada were claimed under USMCA.

Proving the claim means “it’s what you can show. Can you back it up? Not just, do I have a certificate filled out, but can I actually show Customs that, yes, this was produced here,” Eeman said.

As importers and brokers seek to be compliant with the tariff changes, there are still some outstanding questions, according to the webinar’s questions-and-answers section.

For instance, questions linger over how to report the raw value of steel in an item as a percentage of the finished good, when the steel has been transformed and had value added to it. This is pertinent in situations when an importer is trying to figure out the steel percentage, including whether it is the percentage of the steel value of the item at import or if it’s the cost that the manufacturer pays its steel supplier in some other country.

In response to that question, Zajac replied, “so just under valuation methods, it’s, strictly speaking, the value of the steel. And I worked with a number of companies on this specific issue, and I can tell you, no rulings exist yet on this topic, but our understanding too [is that it is the] raw material cost, if you can get it.”