This policy brief examines the evolution of the Section 232 steel and aluminum tariff exclusion program by focusing on the formulation of the process and its implementation up to the December 2020 interim rule changes. The exclusion process underwent four distinct evolutionary periods, delineated by major changes to the rules and the administration of the tariff relief program. Though the Trump administration exercised prudence and political acuity when it decided to establish a relief program, the resulting exclusion process has been too convoluted to mitigate the harmful effects of the Section 232 tariffs.
As the Biden administration begins its term, a review of these tariffs and the accompanying exclusion process is a matter of some urgency. The US Department of Commerce should review how the steel and aluminum tariffs have affected domestic industrial supply chains and formulate policies that help make domestic manufacturing more competitive and export oriented, not less. This policy brief contributes to such a review and offers several recommendations for administration and congressional trade policymakers.
The Evolution of the Section 232 Steel and Aluminum Tariff Exclusion Process
In March 2018, President Donald J. Trump imposed ad valorem tariffs on imported steel and aluminum products to protect domestic producers. President Trump established these tariffs, 25 percent for steel and 10 percent for aluminum, under the presidential authority granted to him by Section 232 of the Trade Expansion Act of 1962. The groundwork for this action was laid starting in April 2017, when, under Section 232 authority, the Department of Commerce began investigating steel and aluminum imports to determine whether specific imports harm US national security. Based on the results of that investigation, the Department of Commerce’s Bureau of Industry and Security (BIS) recommended in January 2018 that the president implement quotas and tariffs to protect US steel and aluminum producers from imports for national security reasons. Two months later, in his proclamations establishing the steel and aluminum tariffs, the president posited that imports “weaken our internal economy” and “impair the national security.”
The tariffs did have some support in Congress. In October 2017, both Democratic and Republican members of the Congressional Steel Caucus were calling for tariffs. However, administration officials were concerned that the political benefits to be reaped from tariffs might be neutralized by the economic costs of tariffs on downstream manufacturing firms and employees. These concerns led to a deal to simultaneously erect the Section 232 tariffs on steel and aluminum imports, negotiate annual quotas with the governments of select exporting nations, and establish a tariff exclusion process for domestic steel- and aluminum-consuming industries.
The administration’s decision to quickly launch an exclusion process was prudent but haphazardly prepared. The proclamations that established the Section 232 tariffs on steel and aluminum also authorized relief for importing industries and directed the Department of Commerce to determine whether an import was also produced in the United States “in a sufficient and reasonably available amount or of a satisfactory quality.” The president also instructed Secretary of Commerce Wilbur Ross to “issue procedures for the requests for exclusion” within 10 days, thereby rushing both the collection of tariffs and the implementation of a complex exclusion process.
The exclusion process has unfolded through four distinct evolutionary periods associated with major changes to its rules and administration (see figure 1). The rollout encompassed the preparation and initial administration of the exclusion process. The second period began with the September 11, 2018, interim rule changes that added rebuttal and surrebuttal submissions in contested cases. The third period was initiated in June 2019, after the introduction of an exclusive web-based portal for submitting requests, objections, rebuttals, surrebuttals, and accompanying documentation, including confidential business information. This period also featured the administration’s February 8, 2020, decision to expand the Section 232 steel and aluminum tariffs to derivative products. The fourth period commenced with the December 2020 rule changes that established General Approved Exclusions (GAEs).langevin_-_policy_brief_-_troubling_relief_the_evolution_of_the_section_232_steel_and_aluminum_tariff_exclusion_process_-_v1
To read the full Policy Brief by the Mercatus Center, please click here.