Overview
Overview
On February 10, 2025, President Trump issued a pair of proclamations adjusting the tariffs on imports of steel and aluminum into the United States (Proclamations). These Proclamations represented the latest step in the Trump administration's plan to radically transform US trade policy.
The net effect of these Proclamations is to eliminate the exceptions and carve-outs to the tariffs that grew out of the first Trump administration's investigation under Section 232 of the Trade Expansion Act of 1962 (Section 232), and to replace that arrangement with across-the-board 25 percent duties on steel and aluminum imports, including "derivative" products, from all sources. As explained below, these Proclamations:
- Eliminate all existing alternative arrangements, such as complete exemptions, hard quotas, or tariff rate quotas (TRQs), with trading partners on imports of steel and aluminum products;
- Eliminate the system for exclusions, under which thousands of products were allowed to enter the United States free of these additional duties; and
- Create a process by which additional "derivative" products are added to the scope of the tariffs.
The majority of these changes took effect as of March 12, 2025.
Background on the Steel and Aluminum Tariffs
Early in his first administration, President Trump imposed 25 percent ad valorem tariffs on imports of steel and 10 percent ad valorem tariffs on imports of aluminum from most countries. President Trump took this action pursuant to Section 232, which allows the President, after an appropriate investigation by the US Department of Commerce (DOC), to take action – including the imposition of tariffs – to address imports that threaten to impair US national security.
After these tariffs were initially imposed, the United States entered into negotiations with certain trading partners that resulted in exemptions from these tariffs, either in part or in whole, that allowed a certain quantity of product to enter the United States free of Section 232 duties.
The initial Proclamations also authorized the Secretary of Commerce to grant exclusions from the duties if the Secretary determined the steel or aluminum article is not "produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality" or should be excluded "based upon specific national security considerations." As a result, the DOC granted thousands of exclusions to the Section 232 tariffs at the request of interested parties.
In 2020, President Trump expanded this relief to impose a 25 percent ad valorem tariff on all imports of "derivative" steel articles and a 10 percent ad valorem tariff on all imports of "derivative" aluminum articles. The term "derivative" was defined as, among other things, an article in which steel or aluminum account for, on average, at least two-thirds of the product’s total material cost.
The Effect of the Proclamations
With the latest pair of Proclamations, and under the authority from the initial 2018 investigation, President Trump revamped the tariffs imposed on steel and aluminum products under Section 232 as follows:
- Eliminate all previously alternative arrangements on steel and aluminum tariffs.
All alternative arrangements for both steel and aluminum tariffs terminated as of March 12, 2025. This affects imports of steel and aluminum and derivative articles from Argentina, Australia, Brazil, Canada, the EU, Japan, Mexico, South Korea, the United Kingdom, and Ukraine – all of which had previously benefited from some type of alternative agreements, and all of which will now be subject to these additional tariffs.
- Increase tariffs on aluminum imports from 10 percent to 25 percent ad valorem.
As of March 12, 2025, imports of aluminum articles and derivative aluminum articles were subject to an additional 25 percent ad valorem duty, which represents an increase from the previous 10 percent duty rate. All imports of aluminum or aluminum derivative articles from Russia continue to be subject to 200 percent ad valorem tariffs, pursuant to Proclamation 10522.
- Terminate the exclusion process for steel and aluminum imports.
The Proclamations conclude that the exclusions issued under the existing product exclusion process threaten to impair national security. Therefore, the Proclamations direct the Secretary not to issue any new product exclusions, or renew any product exclusions, in effect as of the date of the Proclamation, i.e., February 10, 2025. Granted product exclusions shall remain effective until their expiration date or until the excluded product volume is imported, whichever occurs first. All existing general exclusions – which covered products consistently found not to be produced in the United States – have terminated as of March 12, 2025.
- Create a mechanism for the imposition of a 25 percent tariffs on additional derivative steel and aluminum articles.
In response to "significantly increasing imports of certain derivative articles," the Proclamations extend the 25 ad valorem tariffs to additional derivative articles. These additional articles are set forth in Annex I to the Proclamations, and were subject to the 25 percent duty as of March 12, 2025.
As before, the Proclamations exempt derivative steel articles processed in another country from steel articles that were melted and poured in the United States, as well as derivative aluminum articles processed in another country from aluminum articles that were smelted and cast in the United States. Additionally, the Proclamations provide that for any derivative steel or aluminum articles identified in Annex I that are not in Chapter 73 or Chapter 76 of the US Harmonized Tariff Schedule, respectively, the additional ad valorem duty shall apply only to the steel or aluminum content of the derivative article.
The Proclamations then direct the Secretary to establish a process for including additional derivative steel and aluminum articles within the scope of the duties within 90 days of the Proclamation. This process will allow a domestic producer of a steel or aluminum article or derivative article, or an industry association representing one or more such producers, to request the inclusion of additional derivative articles upon a showing that imports of a derivative article have increased in a manner that threatens to impair the national security. Once the Secretary receives a request, he must issue a determination regarding whether or not to include the derivative article or articles within 60 days. This determination will then take immediate effect.
Next Steps and Implications
Most companies have just begun to assess the impact of these additional tariffs on their businesses, but the broad coverage of these duties will make it difficult for companies simply to modify their supply chains to avoid the threat of additional duties.
Individual companies or trade associations may also be considering the possibility of a legal challenge to the Proclamations. When initially imposed, the Section 232 tariffs on steel and aluminum and modifications to these tariffs were extensively challenged, and the President's authority to impose and subsequently modify these tariffs was broadly upheld. While the circumstances under which these Proclamations were issued may be different, parties mounting any judicial challenge will have an uphill battle.
Finally, possibility that this coverage of "derivative" products could be extended suggests that duties could be imposed in a relatively short period of time on any finished product that is produced with non-US steel and aluminum. Importers of such products will need to monitor this process very carefully. Companies importing steel and aluminum derivative products should carefully consider HTS classification and valuation of the imported merchandise.
