Agreement to Eliminate the U.S. Section 232 Tariffs on Canadian Steel and Aluminum and Canada’s Retaliatory Countermeasures on U.S. Steel, Aluminum and Other Goods
On the afternoon of Friday 17th May 2019, the United States and Canada issued a joint statement to announce that the U.S. tariffs imposed on Canadian steel and aluminum products under section 232 of the Trade Expansion Act of 1962 (the “section 232 tariffs”) and the countermeasures imposed by Canada in the form of retaliatory tariffs on U.S. steel, aluminum and “other goods” will be eliminated over the weekend (i.e., within two days).
As part of the bilateral agreement, Canada will terminate its WTO claims against the United States regarding the section 232 tariffs (in US – Certain Measures on Steel and Aluminum Products, DS550), and the United States will do the same in its claims against Canada regarding the retaliatory tariffs (in Canada – Additional Duties on Certain Products from the United States, DS557).
Canada and the United States have also agreed to: (i) each strengthen their trade remedies measures against dumped and subsidized imports of steel and aluminum products from third countries; and (ii) work together to prevent steel and aluminum products originating in third countries from being transhipped from Canada to the United States and vice versa.
In addition, Canada and the United States have agreed to establish a process that will monitor for surges between them in steel and aluminum trade. In applying this process, “either country may treat products made with steel that is melted and poured in North America separately from products that are not”. This indicates that, for the purposes of identifying a “surge” in trade volumes, either or both countries may impose a higher standard for determining the origin of steel and aluminum products than the standards set out in the product-specific rules of origin that currently apply pursuant to the North American Free Trade Agreement (NAFTA).
Where imports of steel or aluminum products are found to be surging “meaningfully beyond historic volumes of trade over a period of time”, the importing country may impose duties on the “individual product categories” from the exporting country that are involved in the surge. The agreed rates are 25 percent for steel products and 10 percent for aluminum products. Such duties may only be imposed after the countries have held consultations on the matter, and the exporting country may retaliate “only in the affected sector” (i.e., steel and/or aluminum). In this regard, Canada has given up the right to impose countermeasures against “other goods” from the United States. This was arguably one of Canada’s most effective sources of leverage. In response to the United States’ section 232 tariffs, for example, Canada’s retaliatory tariffs covered not only U.S.-origin steel and aluminum products, but also a range of other goods, including processed foods, cosmetics, appliances, and furniture.
Tereposky & DeRose regularly provides advice on Canadian trade matters. Should you have any questions regarding this matter, we are at your disposal.