TWN Info Service on WTO and Trade Issues (Jun18/09)
14 June 2018
Third World Network
  
Mexico, Canada initiate disputes over US tariffs on steel, aluminium
Published in SUNS #8698 dated 11 June 2018

Geneva, 8 Jun (Kanaga Raja) - Both Mexico and Canada have this week initiated separate disputes at the World Trade Organisation (WTO) over the additional duties imposed by the United States under Section 232 of its trade law on imports of steel and aluminium products from both these countries.

In the same week, the European Union had also initiated a dispute against the US measures imposed purportedly on grounds of national security (see SUNS #8694 dated 5 June 2018).

In initiating the disputes, all three WTO members have sought consultations with the United States, the first step in the dispute settlement process at the WTO.

Mexico's request for consultations with the US was circulated to WTO Members on 7 June, while the EU and Canadian requests for consultations were circulated to WTO Members on 6 June.

If the consultations fail to settle a dispute within 60 days after the date of receipt of the request for consultations, the complaining party may request the establishment of a panel.

The establishment of a panel may also be requested by a complaining party during the 60-day period if the consulting parties jointly consider that the consultations have failed to settle the dispute.

DISPUTE INITIATED BY MEXICO

According to a Mexican communication (WT/DS551/1), circulated to WTO Members on 7 June, Mexico said its request for consultations with the Unite d States is with respect to certain measures by the United States to adjust imports of steel and aluminium, including but not limited to applying an additional ad valorem customs duty on imports of certain aluminium products and exempting certain selected Members of the World Trade Organization (WTO) from the measures.

On 8 March 2018, the President of the United States of America issued Presidential Proclamations 9704 and 9705, imposing an additional import tariff of 25% on certain steel products and an additional import tariff of 10% on certain aluminium products from all countries except Canada, Mexico, Australia, Argentina, South Korea, Brazil and the European Union.

This measure came into effect as from 23 March 2018. Subsequently, on 30 April 2018, the President of the United States issued a new Proclamation excluding exports from South Korea, Argentina, Australia and Brazil from the additional import duties.

The United States also extended the exemption from the additional import ta riffs on steel and aluminium products from Canada, Mexico and the European Union until 31 May 2018.

The exemption expired on 31 May, and this resulted in the imposition of additional tariffs on the Members concerned, including Mexico.

As from 1 June 2018, the United States is imposing an additional customs duty of 25% on imports of certain steel products, as well as an additional customs duty of 10% on imports of aluminium products, originating from Mexico.

The measures point to the possibility of being modified by way of additional customs duties or quotas. Clearly, the establishment of an additional import tax is intended to protect the United States industry from the economic effects of imports, said Mexico.

At the same time, Mexico noted, these measures are not administered in a uniform manner since, in the case of steel, Argentina, Australia, Brazil and South Korea are exempt, and in the case of aluminium, Argentina and Australia are exempt.

Moreover, quotas have been established for Argentina, Brazil and South Korea in the case of steel imports, and for Argentina in the case of aluminium imports.

According to Mexico, the measures at issue in its request include, but are not limited to:

* "Proclamation 9705 of March 8, 2018 Adjusting Imports of Steel Into the United States", 83 Fed. Reg. 11625 (15 March 2018), including the Annex thereto;

* "Proclamation 9704 of March 8, 2018 Adjusting Imports of Aluminum Into the United States", 83 Fed. Reg. 11619 (15 March 2018), including the Annex thereto;

* "Proclamation 9711 of March 22, 2018 Adjusting Imports of Steel Into the United States", 83 Fed. Reg. 13361 (15 March 2018);

* "Proclamation 9710 of March 22, 2018 Adjusting Imports of Aluminum Into the United States", 83 Fed. Reg. 13355 (28 March 2018);

* "Proclamation 9740 of April 30, 2018 Adjusting Imports of Steel Into the United States", 83 Fed. Reg. 20683 (7 May 2018), including the Annex thereto;

* "Proclamation 9739 of April 30, 2018 Adjusting Imports of Aluminum Into the United States", 83 Fed. Reg. 20677 (7 May 2018), including the Annex thereto;

* "Proclamation 9758 of May 31, 2018 Adjusting Imports of Aluminum Into the United States", 83 Fed. Reg. 25849 (5 June 2018), including the Annex there to;

* "Proclamation 9759 of May 31, 2018 Adjusting Imports of Steel Into the United States", 83 Fed. Reg. 25857 (5 June 2018), including the Annex thereto;

* US Department of Commerce, "Requirements for Submissions Requesting Exclusions From the Remedies Instituted in Presidential Proclamations Adjusting Imports of Steel Into the United States and Adjusting Imports of Aluminum Into the United States; and the Filing of Objections to Submitted Exclusion Requests for Steel and Aluminum" (Interim Final Rule), 83 Fed. Reg. 12106 (19 March 2018);

* US Customs and Border Protection, "Cargo Systems Messaging Service #18 000372: Additional Duty on Imports of Steel and Aluminum Articles under Section 232 of the Trade Expansion Act of 1962", issued on 31 May 2018;

* "Section 232 of Trade Expansion Act of 1962", codified in Title 19, United States Code =A7 1862;

* US Department of Commerce, "The Effect of Imports of Steel on the National Security" (11 January 2018);

* US Department of Commerce, "The Effect of Imports of Aluminum on the National Security" (17 January 2018);

* Code of Federal Regulations, Title 15, Section 705, "Effect of Imported Articles on the National Security".

According to Mexico, the measures at issue, separately or together, appear to be inconsistent with the United States' obligations under the following provisions:

1. Inasmuch as the measures at issue, in fact and in substance, constitute safeguard measures, they are in breach of Articles XIX:1(a) and XIX:2 of the GATT 199 4, and Articles 2.1, 2.2, 3.1, 4.1, 4.2, 5.1, 7, 11.1(a), 12.1, 12.2, 12.3 and 12.5 of the Agreement on Safeguards. The United States has failed to meet the substantive requirements for the imposition of safeguard measures, which include, inter alia, a recent and adequate explanation of "unforeseen developments" and of the effect of the obligations incurred; of the increase in imports in absolute or relative terms, the existence of serious injury or threat thereof to the domestic industry of the United States, and the causal link between the two.

Likewise, the United States has failed to meet the procedural requirements for applying a measure of this nature in terms of the investigation, the notification procedure, the opportunity provided for consultations in order to maintain an equivalent level of concessions or to agree on compensation, the duration and progressive liberalization of its measures, the application of the measures for the period of time necessary to facilitate adjustment; or for ensuring that the measures applied are in conformity with its obligations under the Agreement on Safeguards.

2. Article 9 of the Agreement on Safeguards, given that the United States applies its measures to products from developing country Members whose share of imports does not exceed 3%, whereas developing country Members with less than 3% import share collectively account for not more than 9% of total imports of the product.

3. Article 11.1(b) of the Agreement on Safeguards, to the extent that the United States, through the application of the measures at issue, seeks any voluntary export restraints, orderly marketing arrangements or any other similar measures on the export or the import side, in violation of the provisions of the Agreement on Safeguards.

4. Article II:1(a) and (b) of the GATT 1994, inasmuch as the United States affords treatment less favourable than that provided for in its Schedule of Concessions, and given that it has imposed import duties on certain steel and aluminium products in excess of the duties set forth in Part I of the United States' Schedule of Concessions and Commitments annexed to the GATT 1994.

5. Article I:1 of the GATT 1994, since the United States grants an advantage, favour, privilege or immunity to imports of steel and aluminium products from other WTO Members, which is not accorded immediately and unconditionally to like imports originating in Mexico. These advantages consist in exemption f rom the measures applied, and the application of alternative measures.

6. Article XI:1 of the GATT 1994, since through these measures the United States implicitly introduces restrictions in the form of quotas, by reducing or limiting imports of steel and aluminium products from the trade levels that existed prior to these measures, or inhibits their potential for growth. In this way, by using these measures, the United States establishes effective restrictions on the import of steel and aluminium products. The foregoing is evident since the United States maintains certain alternative measures with other Members, i.e. quantitative restrictions in the form of quotas or equivalent measures which limit imports.

7. Article X:3(a) of the GATT 1994, since the United States has failed to administer its laws, regulations, decisions and rulings in relation to the measures at issue in a uniform, impartial and reasonable manner.

8. Article XVI:4 of the WTO Agreement, since the United States has failed to ensure the conformity of its laws, regulations and administrative procedure s with its obligations as provided in the annexed Agreements.

In addition, Mexico considers that Section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. =A7 1862), including its regulations, could be inconsistent, as such, with the provisions cited above.

This measure constitutes a general rule of prospective application and is likely to continue being applied in the future in a manner inconsistent with the United States' obligations under the WTO covered agreements.

Mexico also considers that the measures at issue cannot be justified under Article XXI(b) of the GATT 1994, since, among other things, they require the United States to take account of economic welfare and other factors not necessary for the protection of its essential security interests.

In addition to, and independently of, the multiple violations of the WTO obligations identified above, Mexico considers that the benefits accruing to Mexico directly and indirectly under the GATT 1994 are being nullified or impaired as a result of the application of the measures identified above within the meaning of Article XXIII:1(b) of the GATT 1994.

DISPUTE INITIATED BY CANADA

In its communication (WT/DS550/1, circulated on 6 June), Canada said that i ts request for consultations with the United States is with respect to certain measures by the United States to adjust imports of steel and aluminium into the United States, including imposing additional ad valorem rates of duty on imports of certain steel and aluminum products and exempting certain selected WTO members from the measures.

With regards to the "as applied" measures, Canada said that on 8 March 2018 , the United States imposed a 25 per cent additional import duty on certain steel products and a 10 per cent additional import duty on certain aluminum products from all countries exempting Canada, Mexico, Australia, Argentina, South Korea, Brazil and the European Union, which took effect on 23 March 2018.

On 30 April 2018 a proclamation was issued by the President of the United States exempting imports from South Korea, Argentina, Australia and Brazil from the additional import duties.

The United States also extended the exemption from the additional import duties for Canada, Mexico and the European Union until 31 May 2018.

The exemption expired on 31 May resulting in the imposition of the additional import duties on these Members including Canada.

The measures also indicated possible further adjustments to the measure, in the form of additional import duties or implementation of a quota.

According to the Canadian communication, the measures at issue in its request include:

1. Adjusting Imports of Steel Into the United States, including the Annex, To Modify Chapter 99 of the Harmonized Tariff Schedule of the United States (Presidential Proclamation 9705, issued on March 8, 2018).

2. Adjusting Imports of Aluminum Into the United States, including the Annex, To Modify Chapter 99 of the Harmonized Tariff Schedule of the United States (Presidential Proclamation 9704, issued on March 8, 2018).

3. Adjusting Imports of Steel into the United States, including the Annex, To Modify Chapter 99 of the Harmonized Tariff Schedule of the United States (Presidential Proclamation 9711, issued on March 22, 2018).

4. Adjusting Imports of Aluminum into the United States, including the Annex, To Modify Chapter 99 of the Harmonized Tariff Schedule of the United States (Presidential Proclamation 9710, issued on March 22, 2018).

5. Requirements for Submissions Requesting Exclusions From the Remedies Instituted in Presidential Proclamations Adjusting Imports of Steel Into the United States and Adjusting Imports of Aluminum Into the United States; and the Filing of Objections to Submitted Exclusion Requests for Steel and Aluminum (US Department of Commerce).

6. Section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. =A71862), cited in the Presidential Proclamations above for vesting authorities in the President of the United States to take the actions therein.

7. The Effect of Imports of Steel On the National Security, An Investigation Conducted Under Section 232 of the Trade Expansion Act of 1962, As Amended (US Department of Commerce, January 11, 2018).

8. The Effect of Imports of Aluminum On the National Security, An Investigation Conducted Under Section 232 of the Trade Expansion Act of 1962, As Amended (US Department of Commerce, January 17, 2018).

9. Section 705 Code of Federal Regulations, Effect of Imported Articles on the National Security (15 CFR 705).

10. Adjusting Imports of Steel into the United States, including the Annex, To Modify Chapter 99 of the Harmonized Tariff Schedule of the United States (Presidential Proclamation 9740, issued on April 30, 2018).

11. Adjusting Imports of Aluminum into the United States, including the Annex, To Modify Chapter 99 of the Harmonized Tariff Schedule of the United States (Presidential Proclamation 9739, issued on April 30, 2018).

12. Adjusting Imports of Steel into the United States, including any annexes (Presidential Proclamation, issued on May 31, 2018).

13. Adjusting Imports of Aluminum into the United States, including any annexes (Presidential Proclamation, issued on May 31, 2018).

Canada maintained that the measures at issue, operating separately or together, appear to be inconsistent with the United States' obligations under:

1. Article II:1(a) and (b) of the GATT 1994, because the United States has imposed import duties on certain steel and aluminum products in excess of the duties set forth and provided in the United States' Schedule of Concessions and Commitments annexed to the GATT 1994, and has failed to exempt products of Canada subject to the measures at issue from ordinary customs duties in excess of those set forth and provided in the United States' Schedule of Concessions and Commitments annexed to the GATT 1994 and from all other duties or charges in excess of those imposed on the date of the GATT 1994 or those directly and mandatorily required to be imposed thereafter by legislation in force in the United States on that date.

2. Articles XIX:1 and XIX:2 of the GATT 1994 and Articles 2.1, 2.2, 3.1, 4. 1, 4.2, 5.1, 7, 8.1, 11.1(a), 12.1, 12.2, 12.3, and 12.5 of the Agreement on Safeguards because the measures at issue appear to constitute or amount to emergency actions or safeguard measures adopted and implemented in a manner inconsistent with the substantive and procedural obligations of the Agreement on Safeguards and the GATT 1994.

3. Article 11.1(b) of the Agreement on Safeguards to the extent that the United States seeks any voluntary export restraints, orderly marketing arrangements, or any other similar measures on the export or the import side through the measures at issue.

4. Article I:1 of the GATT 1994, because the selective application by the United States of the additional import duties on certain steel and aluminum products originating in different Members, including providing exemptions to certain countries or applying alternative means, has failed to extend immediately and unconditionally to Canada any "advantage, favor, privilege or immunity" granted by the United States "[w]ith respect to customs duties and charges of any kind imposed on or in connection with" the importation of products originating in the territory of other Members, as well as with respect to "the method of levying such duties and charges" and the "rules and formalities in connection with importation".

5. Article XI:1 of the GATT 1994, because the measures operate as a quantitative restriction on imports of steel and aluminum products into the United States by exempting certain Members from the additional import duties on the basis of alternative measures, such as quotas, that restrict the quantity of imports of steel and aluminum products into the United States.

6. Article X:3(a) of the GATT 1994 as the United States has failed to administer its laws, regulations, decisions and rulings in relation to the measures at issue in a uniform, impartial and reasonable manner.

With regards to "as such" and ongoing conduct measures, Canada said that in addition, Section 232 of the Trade Expansion Act of 1962 and its associated regulations appear to be "as such" inconsistent with Articles I:1 and II:1 of the GATT 1994 and does not appear to be justifiable under Article XXI:(b) of the GATT 1994 because they require the United States to account for economic welfare and other factors that are not necessary for the protection of its essential security interests, in a manner that is inconsistent with Article XVI:4 of the WTO Agreement.

[In a post on the IELP blog, Prof. Simon Lester, a US trade law academic, referring to Canada's "as such" complaint against Section 232, noted Canada as saying that Section 232 "requires" the United States "to account for economic welfare and other factors that are not necessary for the protection of its essential security interests."

[In examining the relevant statute, Prof. Lester said: "I think Canada is right about what the Section 232 statute requires ("shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries"). But is that unjustifiable under Article XXI:(b)? Perhaps it depends on how the Commerce Department and the President use their discretion under the statute. If the statute were applied only to products that were closely related to nati onal security (e.g., fighter jets and hand grenades), then the economic welfare language might make sense.

["I can understand why governments would want to make sure that domestic industries supplying crucial military goods existed. Arguably, then, the Commerce Department and the President have the discretion under the statute to apply it in a way that is consistent with GATT Article XXI, simply by focusing on goods that closely relate to security. While there is a strong argument that the recent application of Section 232 has not been consistent with Article XXI, the discretion to apply it consistently is still there," said Prof. Lester. See: http://worldtradelaw.typepad.com/ielpblog/2018/06/canadas-as-such-complaint -against-section-232.html]

According to the Canadian communication, in the alternative, the United States has applied Section 232 of the Trade Expansion Act of 1962 and its associated regulations for reasons related to economic welfare and other factors that are not necessary for the protection of its essential security interests.

This measure is inconsistent with Articles I:1 and II:1 of the GATT 1994 an d does not appear to be justifiable under Article XXI:(b) of the GATT 1994.

This measure is evidenced, inter alia, by the measures at issue identified above, and by prior Section 232 investigations done on the basis of economic considerations, including the recently initiated investigation on the effect of imports of automobiles, including SUVs, vans and light trucks, and automotive parts on the national security, said Canada.

This measure is attributable to the United States, consists of the content identified and described above, and is presently occurring and likely to be continued in the future in a manner inconsistent with Articles I:1 and II:1 of the GATT 1994 and not justifiable under Article XXI:(b) of the GATT 1994.

Alternatively, it constitutes ongoing conduct or a rule or norm of general and prospective application that are inconsistent with the United States' WTO obligations, said Canada.