201 Safeguard Duties and Quotas on Steel Products Effective March 20, 2002

March 19, 2002

Safeguard duties on steel products are effective with respect to certain steel articles entered or withdrawn from warehouse for consumption on or after 12:01 a.m., EST, on March 20, 2002.  The Customs Service will issue further instructions to the trade as to whether subject entries can be filed using ABI, and whether the HTS Chapter 99 tariff numbers are to be used.

President Bush's March 5^th Proclamation imposed the section 201 duties and/or tariff-rate quotas (TRQs) for up to three years, and called on Customs to implement a steel product licensing system for the close monitoring of steel imports.  There has been no statement yet as to how the licensing system will work or be administered.

To implement the proclamation, Treasury Decision T.D. 02-12 is slated for publication to the Federal Register on the very day the section 201 duties go into effect, March 20^th.  This T.D. is expected to provide for the deferral of Section 201 duty deposits until after April 19, 2002.  Our understanding is that the deferral is being implemented to accommodate that WTO negotiations that will take place within the first 30 days of the safeguard action.  The duty deferral is provided in the event that a modification to the order takes place as a result of the negotiations.  Importers will continue to incur liability for section 201 items imported in this March 20^th to April 19^th deferral period.

Exclusions for Steel Originating in Free-Trade Partners and Developing WTO Members

Steel products from Free-Trade Partners (e.g.: Canada, Mexico, Israel and Jordan) and WTO member developing countries that export only small amounts of steel to the U.S. will be excluded from the safeguard measures.  In order to qualify for the exclusion, steel products further manufactured in such exempt countries from steel of foreign origin must be transformed in accordance with the specific rules of origin. 

Customs will examine imports and may conduct verification exams of foreign manufacturers to confirm the origin of steel articles from such countries.  Importers should implement anti-transshipment procedures to verify the origin of steel imports and be able to document the country of origin for all steel imports.

Foreign Response to Bush's Trade Measures

Steel-producing countries around the world voiced disapproval of the U.S. decision to impose safeguards as a betrayal of years of work toward freer global trade.  The EU and other steel producing countries, such as Japan, South Korea, Australia, Hong Kong, and China, have all filed complaints with the World Trade Organization (WTO).  Retaliatory measures against U.S. products are possible if a solution is not reached. 

General Steel Articles

For the first year the following steel product categories will be subject to the measures listed below:

The Annex to the President's Proclamation provides detailed product descriptions for such products (including the HTS Chapter 72 or 73 numbers under which they are classifiable). 

The following is only a partial summary of specific points raised in the Proclamation:

Steel Slab Articles

Steel slab products have both duties and quotas that will attach. The Annex defines subject steel slab as semi-finished products of steel (other than stainless steel or tool steel), of rectangular cross section, having a width measuring two or more times the thickness. Such articles are provided for in HTS 7207.12.00, 7207.20.00, or 7224.90.00.

They are products of countries other than Canada, Israel, Jordan, Mexico, and any country exempted pursuant to paragraph (d) of new U.S. Note 11 (i.e., the exempted developing countries - see below), except for products of Brazil. 

In-quota TRQ amounts are provided for products originating from Australia, Brazil, the European Union (EU), Japan, Russia, Ukraine, and "All Other" (non-exempt) countries as follows:

Thus, steel slab which exceeds the TRQ quota will be assessed the over-quota duty rate at 30%.  (This over-quota TRQ duty rate is expected to be decreased during the second and third years.)

The quota amount for steel slab is expected to be increased during the second and third years, (thus allowing for a greater amount of in-quota imports).

Subject merchandise admitted into a U.S. foreign trade zone on or after March 20, 2002, must be admitted as "privileged foreign status" as defined in 19 CFR 146.41.  On entry such merchandise will be subject to the quota and tariffs.

Steel Slab Exclusions

Some steel slab articles are specifically excluded from TRQs pursuant to new U.S. Note 11(b) or Note 11(c):   (see below for details)

• HTS 9903.72.30

• HTS 9903.72.31

• HTS 9903.72.34

Other steel slab articles must be entered within the annual in-quota TRQ amount already provided for the exporting country.  These articles have no change in applicable duty rates:

• HTS 9903.72.38 (March 20, 2002 - March 19, 2003),

• HTS 9903.72.42 (March 20, 2003 - March 19, 2004), and

• HTS 9903.72.46 (March 20, 2004 - March 20, 2005)

Finally, some steel slab articles may be entered above the annual in-quota TRQ amount provided for by the exporting country, as follows:

Modification of Subchapter III of HTS Chapter 99 to Apply Duties

Proclamation 7529 includes an Annex that adds the following provisions to HTS Chapter 99, subchapter III to impose the increases in duty and a tariff rate quota on 110 new HTS Chapter 99 numbers (HTS 9903.72.30 - 9903.74.24). 

Modification of U.S. Note 11 to Apply Product Exclusions

The Annex also provides for a new U.S. Note 11.

U.S. Note 11(a)

Paragraph (a) lists articles excluded from all of the Proclamation's HTS Chapter 99 increased duties, TRQs, and reporting requirements. 

We note however, that such products may be subject to prior trade measures.  These excluded items are as follows:

• Steel wire rod described in HTS 9903.72.01 - 9903.72.15 (subject to TRQs pursuant to Proclamation 7273 of February 16, 2000);

• Circular welded carbon-quality line pipe described in HTS 9903.72.20 - 9903.72.25 (subject to TRQs pursuant to Proclamation 7274 of February 18, 2000);

• Flat-rolled products of ball bearing steel (as defined in HTS Chapter 72, Additional U.S. Note 1(h)) provided for in HTS 7225 or 7226; and

• Tubing of non-alloy steel, coated with zinc, of a diameter not exceeding 114.3 mm, internally coated or lined with a non-electrically insulating coating material, suitable for use as electrical conduit.

U.S. Note 11(b)

Paragraph (b) of new U.S. Note 11 lists 150 steel products to be excluded from the increased duties and TRQs.  However, on entry of such products the importer must report the appropriate HTS Chapter 99 number (as added by this proclamation) and the regular 10-digit tariff number of HTS Chapters 1-97.

U.S. Note 11(c)

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