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U.S. suspends Section 232 tariff on Canadian aluminum

Author(s): Gajan Sathananthan, Riyaz Dattu

Sep 23, 2020

In our last international trade brief, we discussed the Canadian government’s consultation process on a proposed list of countermeasures to the United States’ 10% tariff on Canadian aluminum exports. In this international trade brief, we discuss the recent U.S. government announcement that it would cease the application of the tariff, but businesses should anticipate that these U.S. tariff measures could be re-imposed in November 2020.

On September 16, the U.S. announced that it would cease, for now, the application of a 10% tariff imposed as of August 16, 2020 on Canadian non-alloyed, unwrought aluminum exports to the U.S. and that this decision would be retroactive to September 1, 2020.

The announcement came just hours before Canada was set to release its final list of countermeasures, whereby it would apply a 10% surtax to certain aluminum goods originating from the U.S.

As discussed in our last international trade brief, on August 6, the U.S. announced the imposition of a 10% tariff as of August 16, 2020 on Canadian aluminum exports destined for the United States. The Trump administration claimed that Canadian exports of these goods had surged beyond historical levels which, pursuant to the Joint Statement signed by the U.S. and Canada in May 2019 after a year-long dispute on steel and aluminum, justified the imposition of the special tariffs.

Canadian officials had called the U.S. measures “absurd” and proposed a set of countermeasures that were intended to match the impact of the U.S. tariffs.

In its press release announcing the lifting of the Section 232 tariffs, the U.S. Trade Representative (the USTR) indicated that the import surges experienced earlier in the year had subsided and that  imports of aluminum from Canada for the remainder of 2020 would likely normalize. The USTR’s expectation is that imports into the U.S. of Canadian non-alloyed, unwrought aluminum will be no greater than the amounts indicated in Table 1 for the remaining months of 2020.

Table 1: Allowable Volume of Non-Alloyed, Unwrought Aluminum by USTR

Month

Estimated Volume (short tons)

Estimated Volume (metric tons or tonnes)

September

83,000

75,296

October

70,000

63,503

November

83,000

75,296

December

70,000

63,503

 

Notably, the USTR’s press release indicated that if the actual monthly volumes of Canadian imports exceeded the estimated volume for that month by more than 5%, the United States may reimpose the 10 % tariff retroactively on all shipments made in that month, and reinstate the 10% tariff going forward. The determination of whether the actual shipments exceeded the estimated volumes will occur six weeks after the end of the month in question, and so the September volumes will be reviewed in mid-November. Given the November 3 date for the U.S. elections, the first such determination in mid-November will occur after the election date.

The likelihood that the Section 232 tariffs will be re-imposed appears high based on the guidance issued by the USTR and recent export volumes. Table 2 below indicates the volume of Canadian exports of unwrought, non-alloyed aluminum to the U.S. from May to July 2020 according to Statistics Canada’s Canadian International Merchandise Trade Database (the CIMT).

Table 2: Canadian Exports of Non-Alloyed, Unwrought Aluminum

 

April 2020

May 2020

June 2020

July 2020

Exports of non-alloyed, unwrought aluminum (tonnes)

160,979

184,786

187,279

155,474

 

This table makes it clear that the estimated volumes from the USTR are well below past volumes. In fact, according to the data available from the CIMT, Canadian exports of non-alloyed, unwrought aluminum to the U.S. have not been at levels below the USTR’s estimated volumes since the Joint Statement was signed in May 2019. Therefore, the threat of U.S. tariffs on Canadian aluminum and Canada imposing countermeasures continues to be very real.

Though the USTR’s announcement provides a reprieve, it could be brief and possibly designed to avoid Canada’s countermeasures during the period leading up to the November 3, 2020 election. Businesses that may be impacted by these measures would be well served to use this time to hone their strategic plans by anticipating that these tariff measures and countermeasures could be re-imposed starting in November 2020.   

If you have any questions or need strategic advice, please reach out to Riyaz Dattu or Gajan Sathananthan