The U.S. Commerce Department has established a process allowing steel and aluminum producers from Canada and Mexico to request a lower Section 232 tariff in exchange for a binding commitment to build or expand production facilities in the United States. If the agency approves the request, applicants could reduce the current 50% tariff to 25%, according to a Federal Register document.
To qualify for the tariff adjustment, Canadian and Mexican companies must currently provide steel and aluminum, either directly or indirectly, to U.S. manufacturers of automobiles or medium- and heavy-duty vehicles. Additionally, their U.S.-bound exports must qualify for preferential treatment under the USMCA (United States-Mexico-Canada Agreement). Applicants must make a binding commitment to build or expand facilities that produce primary steel or primary aluminum for key products of auto and heavy-duty vehicle makers, not simply upgrade or reconfigure existing plants.
The tariff adjustment is limited to quantities equal to the projected annual output of the new U.S. plant and to a fixed time period determined by the Commerce Department. Companies applying for the lower tariff must submit a written document certified by a senior corporate officer, such as the CFO or general counsel. The document must explain why the company qualifies for the adjustment and include the location of its Canadian and Mexican plants, product types, and information about U.S. customers.
Applicants must also submit information on major raw material sources, including known or expected suppliers, and an overview of the planned U.S. facility, including its location, objectives, current status, and expected employment and workforce expansion. Companies must commit to specific project milestones, including the purchase of land, completion of facility design, completion of construction, and the start of production.
This tariff offer stems from the Trump administration's April revision to the calculation of Section 232 tariffs on steel and aluminum imports, based on a proclamation by President Donald Trump. The revised calculation imposed a 50% tariff on goods made almost entirely of aluminum and steel, including steel coils and aluminum sheets.
Key Takeaways:
1. US Commerce Department has launched a process allowing Canadian and Mexican steel-aluminum producers to reduce tariff from 50% to 25%.
2. Companies must make binding commitments to build new production facilities or expand existing ones in the United States.
3. Tariff reduction is available only to companies supplying auto and heavy-duty vehicle manufacturers under USMCA preferential treatment.
4. Applicants must submit detailed information including facility location, raw material sources, and project milestones.
5. Tariff adjustment is limited to projected annual output of new facility and subject to Commerce Department-determined timeframe.
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