April 20, 2016

Section 201 Safeguard Petition Filed Against Primary Aluminum Could Impact Sourcing

By Douglas J. Heffner and Richard P. Ferrin

On April 18, the United Steelworkers union filed a Section 201 “safeguards” petition regarding primary, unwrought aluminum. This case could impact purchasers of primary, unwrought aluminum (such as billets, hollow billets, ingots, sows, and tees) from non-U.S. sources by increasing the prices of these products, decreasing availability, or both. Purchasers are welcome to provide their views as to whether injury exists and whether any remedy can be imposed. With significant experience representing foreign producers and purchasers in section 201 proceedings, our team can help.

The following is additional information concerning 201 proceedings.

I. Background on Section 201 Action

Section 201 provides a mechanism for the president to impose special tariffs, quotas, or tariff-rate quotas designed to provide temporary protection to a domestic industry so that it can make a “positive adjustment” to import competition. This is frequently called a “safeguard” action. Unlike antidumping and countervailing duty (AD/CVD) actions, a safeguard action is not country-specific, but rather is designed to provide protection from imports from all countries of a particular product. Unlike AD/CVD actions, the safeguard procedure does not require an allegation of dumping, illegal subsidization, or any other unfair trade practice. The investigation is conducted entirely by the U.S. International Trade Commission (ITC), although the final decision is made by the president, in conjunction with advice from the U.S. Trade Representative (USTR). The ITC must make an injury determination within 120 days after the petition is filed—in this case, by August 16, 2016.

II. Standard of Proof:  Serious Injury

The standard of proof is higher in a safeguard procedure than in an AD/CVD injury investigation at the ITC. First, whereas in an AD/CVD injury investigation, the ITC must determine only whether subject imports are “a” cause of injury to the domestic industry, in a safeguard action the ITC must determine whether imports are a “substantial” cause of injury. Second, in an AD/CVD investigation, the level of injury only needs to be “material,” in a safeguard investigation the injury must be “serious.”

III. Remedy Phase

If the ITC makes an affirmative injury determination, it then proceeds to consider what the remedy should be. The relief is usually in the form of either quotas, special fixed tariffs, or tariff-rate quotas over a four-year period, although the time period can be extended for an additional four years under certain circumstances. The ITC has an additional 60 days after its injury determination to determine the appropriate remedy. The ITC then presents its injury determination, and remedy, to the president. The president, with the advice of the U.S. Trade Representative, makes the final decision. The president must make a decision within 60 days after receiving a report from the ITC. In general, the relief the president grants can be in effect for no more than four years, although under certain circumstances the president can extend the relief for a second four-year period.

IV. Aluminum Products Covered by the Petition

The petition filed yesterday focuses only on primary unwrought aluminum, whether alloyed or unalloyed, regardless of alloying element, regardless of alloy source, and regardless of shape. The petition defines this product as “aluminum metal that is in liquid form or has been formed by casting and has not yet been processed into finished customer-specific shapes, such as sheet or foil….” The petition includes product in various shapes, including billets, hollow billets, ingots, sows, and tees, but NOT product that has been finished. In addition, this petition covers only “primary” unwrought aluminum, obtained by smelting alumina. The petition does NOT cover “secondary” or “recycled” unwrought aluminum, obtained by melting scrap. However, the petition does cover imports of primary unwrought aluminum that may have had “some amount” of scrap added in the liquid state to create an alloy.

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