USTR announces 232 tariff agreement with the United Kingdom, Reinstates some China Section 301 product exclusions

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EY Global

25 Mar 2022
Subject Tax Alert
Jurisdictions United States

Executive Summary

On 22 March 2022, the United States (US) and the United Kingdom (UK) issued a joint statement announcing the US will replace existing punitive tariffs under Section 232 of the Trade Expansion Act of 1962(Section 232) on UK origin steel and aluminum products with a tariff-rate quota (TRQ) effective 1 June 2022.2 The agreement also includes a special requirement for any UK steel producer owned by a Chinese entity to prove that it does not receive any subsidy provided by any Government-controlled or directed entity in China by 1 December 2022.3

Additionally, the US Trade Representative (USTR) announced on 23 March 2022 the retroactive reinstatement of 352 eligible exclusions for products of Chinese origin that were subject to punitive tariffs under Section 301 of the Trade Act of 1974 (Section 301).4

Detailed Discussion

Steel and aluminum

Effective 1 June 2022, the US will replace the existing 25% tariff rate on UK origin steel products under Section 232 with a TRQ system. The aggregate annual import volume under the TRQ is set at 0.5 million metric tons (MMT) under 54 product categories and allocated in line with the 2018/2019 historical period. The 54 eligible steel product categories appear in Annex 1 of the announcement.

In order to be eligible for duty-free treatment under the quota, steel imports must be “melted and poured” in the UK and have a UK country of origin. Steel imports which are melted and poured in the UK but further processed in the European Union (EU), conferring an EU country of origin, and subsequently imported into the US may be eligible for duty-free treatment under the quota. They will count against the UK TRQ volume, not to exceed 37.8 thousand metric tons (TMT) annually under 54 quota product categories and allocated in line with the 2021 historical period. The US also committed to develop a mechanism to allow entry of imports with an EU country of origin and which are melted and poured in the UK by the TRQ effective date.

The TRQ will be calculated for each year of the measure and administered on a quarterly basis. Any unused TRQ volume from the first quarter of the year, up to 4 percent of the allocated quota for that quarter, will roll over to the third quarter; any unused TRQ volume from the second quarter of the year, subject to the same limit, will roll over into the fourth quarter; and any unused TRQ volume from the third quarter, subject to the same limit, will roll over into the first quarter of the following year. The TRQ will be allocated on a first-come, first served basis for each product category. Imports of derivative articles of steel, as referenced in Presidential Proclamation 9980 from the UK will not be subject to Section 232 duties.

Additionally, steel from any UK steel producer that is owned or controlled by a company registered in China or a Chinese entity will be eligible for entry at the in-quota rate for 6 months from 1 June 2022 within which the UK will provide the first annual attestation. If the attestation is not provided by 1 December 2022 and then annually on 1 December thereafter, the US reserves the right to temporarily deny access for the UK steel producer to the in-quota rate for the applicable TRQ. Where at any time access has been denied, and where the UK submits an attestation, the US will restore the access of the affected producer to the in-quota rate within eight weeks. The attestation requires an independent third-party auditor to give an assessment of the steel producer’s and its (if any) UK parent company’s financial records, including any subsidy provided by any Government-controlled or directed entity in China.

The US will also replace the existing 10% tariff on UK aluminum products under Section 232 with a TRQ system. The aggregate annual import volume under the TRQ is set at 0.9 TMT for unwrought aluminum under two product categories and 11.4 TMT for semi-finished (wrought) aluminum, other than foil (7607), under 12 product categories. The eligible aluminum product categories appear in Annex 2 of the announcement.

The import volumes for these categories will be allocated in line with the 2018-19 historical period. For foil (HTS heading 7607) the annual import volume under the TRQ is set at 9.3 TMT under two product categories. The import volumes for foil (HTS heading 7607) will be allocated in line with the 2021 reference period.

An importer shall provide a Certificate of Analysis for each aluminum product entered into the US, as required by current US law and rules implementing this arrangement. In addition, the importer shall provide the Certificate of Analysis for the smelted (i.e., unalloyed) primary aluminum used in the manufacturing of the product entered into the US.

In order for semi-finished (wrought) aluminum products to be eligible for duty-free treatment under the quota they must not contain primary aluminum from the People’s Republic of China, the Russian Federation or the Republic of Belarus.

Imports of derivative articles of aluminum, as referenced in Presidential Proclamation 9980 from the UK will not be subject to Section 232 duties.

Section 301 Exclusions

On 23 March 2022, the USTR announced the reinstatement of 352 of the 549 eligible product exclusions previously granted in the China Section 301 investigation.5 The scope of each exclusion is governed by the scope of the ten-digit Harmonized Tariff Schedule of the United States (HTSUS) subheadings and product descriptions in the Annex to the notice.

The reinstated exclusions will apply to goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on 12 October 2021, that are not liquidated or to entries that are liquidated, but within the period for protest described in Section 514 of the Tariff Act of 1930, as amended. The USTR has determined to extend the reinstated exclusions through 31 December 2022 and may consider further extensions as appropriate.

In the course of the China Section 301 investigation, the USTR imposed additional duties on products of China and the USTR subsequently established processes for approved exclusions to these duties. With the exception of exclusions related to the COVID-19 pandemic, all of these 549 exclusions expired as of 2021.6

Actions for Businesses

Importers should leverage data analytics to determine specific impacts of products in comparison to the 2018 to 2019 historical timeframe for the TRQ framework for planning purposes and to understand potential tariff exposure. Companies should also assess specific products for potential considerations as eligible for exclusions as such excluded products will not count toward the TRQ framework.

US distributors should be aware of the removal of Section 232 tariffs and its impact on transfer prices regarding the purchase of UK-origin steel and aluminum. Reporting any transfer pricing adjustments to US Customs, especially when duties are present for only a portion of the year, may require actions to be taken in advance of importations. As US Customs have very specific rules for reporting adjustments to prices made after importation, such as transfer pricing adjustments, these rules require that the importer take specific actions before importation of goods for which prices may be adjusted, including adding customs-specific language to transfer pricing policies.

Any company involved in US-China trade or the importation of Chinese origin product, is encouraged to identify which products they import could receive or may already have received an exclusion. Companies that have paid punitive duties on imports now excluded from the tariffs should consider developing a comprehensive process for filing for a refund from Customs, upon publication and implementation of approved procedures.

Close monitoring of the exclusion process is warranted, as companies will want to immediately identify products exempt from the duties on the initial list of products announced, as well as any subsequent approvals for products. Additionally, for companies impacted, monitoring of the USTR’s procedures for exclusion requests is recommended as submission timelines have been short. Based on the denials and approvals received previously, a well-articulated and substantiated argument meeting the exemption criteria will be necessary for success.

Immediate actions for such companies could include:

  • Isolating imports with approved or pending exclusions to maximize benefits under the current Customs regimes.

  • Identifying imports of products subject to the punitive duties through import and export data analytics for developing refund strategies on eligible products.

  • Mapping the complete, end-to-end supply chain to fully understand the extent of products impacted, potential costs, alternative sourcing options, and to assess any opportunities to mitigate impact such as tariff engineering.


For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), Global Trade
  • Michael Leightman, Houston

  • Lynlee Brown, San Diego

  • Michael Heldebrand, San Jose

  • Nathan Gollaher, Chicago

  • Justin Shafer, Cincinnati

  • Sergio Fontenelle, New York

  • Bill Methenitis, Dallas

  • Doug Bell, Washington DC

  • Armando Beteta, Dallas

  • Bryan Schillinger, Houston

  • Prentice Wells, San Jose

  • Anand Raghavendran, Irvine

  • Nesia Warner, Austin

  • Jay Bezek, Charlotte

  • Helen Xiao, Chicago

  • Sharon Martin, Chicago

  • Oleksii Manuilov, New York

  • Parag Agarwal, New York

  • James Lessard-Templin, Portland

  • Sundar Markandan, Irvine

  • Rodney Appling, Austin

  • Jack Harvey, Cincinnati

  • Justin Shields, San Diego

  • Alexa Reed, Cleveland


For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.