On Monday, August 28, 2023, the Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce issued a Proposed Rule that, if implemented, would make significant changes to the regulations governing exclusions from the duties and quotas on imports of aluminum and steel imposed pursuant to Section 232 of the Trade Expansion Act of 1962. Specifically, BIS proposes:
- A change in policy regarding General Approved Exclusions for steel and aluminum products;
- Institution of General Denied Exclusions for steel and aluminum products;
- Changes to the certification requirements for individual exclusion requests that would require parties to certify and submit supporting evidence that they attempted to source the product domestically or from certain countries with which the United States has reached “a satisfactory alternative means to address the threat to national security under Section 232”; and
- Introduction of a certification requirement for parties submitting objections to exclusion requests.
Parties wishing to comment on the Proposed Rule may do so by October 12, 2023. Members of the Husch Blackwell International Trade & Supply Chain team have significant experience with the Section 232 exclusions process and would be happy to talk with you about the Proposed Rule or any other aspect of the Section 232 measures.
The current Section 232 regulations allow parties to request exclusions where the steel or aluminum article for which the exclusion is requested is not “produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.” Domestic steel or aluminum producers may object, which historically has lessened the chances of BIS granting the request. In the normal course, Section 232 exclusions are specific to the party filing the request and expire one year after the date on which the exclusion was granted. Parties requesting an exclusion also must certify to BIS that they intend to use the full quantity for which the exclusion is sought.
Citing the need for improved fairness and efficiency in the exclusion process, BIS on December 14, 2020 issued an Interim Final Rule establishing General Approved Exclusions (“GAEs”) for 108 steel and 15 aluminum product categories. GAEs are available for any importer and may last indefinitely but are subject to review and potential revocation should circumstances change. BIS granted the 132 initial GAEs where it found a consistent pattern of meritorious exclusion requests that had received no objections. BIS did not distinguish between meritorious and non-meritorious objections.
BIS has not added to the list of GAEs since the initial list was issued in the December 14, 2020 Interim Final Rule. BIS on December 9, 2021 issued another Interim Final Rule suspending 26 GAEs for steel products and four GAEs for aluminum products. BIS suspended these GAEs after conducting a review and determining that prior product-specific exclusion requests for these products had, in fact, previously received objections for these products.
Proposed Changes to GAE Regime and GDE Proposal
BIS has proposed to amend its regulations to grant GAEs for products “with very low rates of successful objections.” BIS stated that its proposal was intended to avoid automatically disqualifying a product for GAEs where “any party opposed to GAEs could submit objections regardless of the merits of those objections,” which “undermines the effectiveness of the Section 232 exclusions process, creates unnecessary burdens on BIS and industry, and reduces the fairness and efficiency of the process.”
Ostensibly, the proposed change in policy represents a significant shift away from disqualifying any product for which an objection was received from a GAE, even if the objection lacked merit. However, the Proposed Rule does not provide much by way of specifics in terms of how it intends to determine what is a “very low rate” of successful objections, apparently leaving BIS with significant discretion to grant additional GAEs under the proposed policy change.
BIS also proposes to create General Denied Exclusions (“GDEs”) for steel and aluminum products where BIS finds “very high rates” of successful, substantiated objections to exclusion requests for a given product category. BIS provided very little detail in the Proposed Rule regarding how it would administer a GDE regime.
Proposed Changes to Certification Requirements
Currently, requestors must certify that they expect to consume, sell, or otherwise use the total volume of product for which an exclusion is requested within the next calendar year. Requestors also must demonstrate that the product for which they are requesting the exclusion is not available domestically. Presuming that the steel or aluminum product is not available domestically, the current rules do not express a preference for a given source country.
In the guise of an amendment to the certification requirements for requestors, BIS has now expressed a requirement for requestors to make “reasonable efforts to source their product from the United States and then, if unsuccessful in sourcing from the United States, that they have made reasonable efforts to source their product from a country with which the United States has arrived at a satisfactory means to address the threat to the national Security under Section 232.” Countries with which the United States has reached a qualifying arrangement currently include Argentina, Australia, Brazil, Canada, the European Union, Japan, Mexico, South Korea, and the United Kingdom. If the proposal is adopted, BIS would require parties to submit “evidence of the certified sourcing attempts.”
Finally, BIS proposes requiring certifications from objectors attesting that they can supply comparable quality and quantity steel or aluminum and make it immediately available to requestors in line with the standards set forth in BIS’s regulations. BIS also proposes requiring objectors to file, simultaneously with their objection submission, evidence that it has commercially sold the same product as that which is being requested within the last 12 months, or evidence that it has engaged in sales discussions with the requesting company or another company requesting the same product within the last 12 months. This proposal is in response to repeated criticism from requestors that domestic parties were filing unsubstantiated objections.