With tariffs squarely in the international spotlight, decision makers know the repercussions that tariff changes can have on business. However, it can be difficult to monitor changes that can affect the top and bottom line. Tariff fluctuations can not only influence strategic decision-making, but the analysis, review and practical application of changes can drain resources at the operational level.

Companies require smart trade data solutions to gauge the potential impact on business. Market leaders need methods to demonstrate reasonable care, discover what tariff adjustments affect which products, under what circumstances, if exceptions apply and when. Beyond this, it is critical to stream accurate, fully vetted trade data into existing Enterprise Resource Planning (ERP) platforms and other systems.

The aluminum and steel tariffs are excellent illustrative examples of the scope of policy changes on business. Not only could the substantial tariffs reach a wide range of sectors, both are complex with numerous components and exceptions. This means that the tariffs may be challenging for companies to absorb and apply.

A Quick Digest: Aluminum and Steel Import Tariffs

At its core, two proclamations were issued imposing tariffs on aluminum and steel imports to the U.S.—a 10% ad valorem tariff for aluminum and a 25% duty on steel. Imports from Canada and Mexico are currently exempt. (Update: Tariffs on these goods from Argentina, Australia, Brazil, the European Union, and South Korea are on hold).  Both proclamations also promise a procedure to apply for exclusions of articles not available in sufficient quantity or quality from U.S. producers. Section 232 of the Trade Expansion Act of 1962 was cited as the authority for their issuance.


Update

Steel - As of June 1, 2018, All countries of origin except Argentina, Australia, Brazil, and South Korea are impacted by the steel tariff with Argentina, Brazil, and South Korea facing quotas.

Aluminum - As of June 1, 2018, All countries of origin except Argentina and Australia are impacted by the aluminum tariff with Argentina facing quotas.


 

What HS codes are affected?

The steel products subject to the new tariff are covered by the following 6-digit Harmonized System (HS) codes:

  • 7206.10 through 7216.50
  • 7216.99 through 7301.10
  • 7302.10, 7302.40 through 7302.90
  • 7304.10 through 7306.90

The aluminum products affected include:

  • 7601
  • 7604 through 7609
  • 7616.99.51.60
  • 7616.99.51.70

The changes will be posted to Chapter 99 of the U.S. Harmonized Tariff Schedule 9H.

 

Setting a Baseline of Current Trade Ahead of the Tariff Changes

As illustrated in the below charts distilled from Descartes Datamyne™, as expected, NAFTA partner Canada is the leading source for U.S. imports of the aluminum HS codes subject to the new tariffs. In 2017, Canada shipped $7.043 billion in aluminum products across its southern border, accounting for 40.5% of the total value of U.S. imports in this product category. Note that Mexico just makes the top 10 sources for aluminum, accounting for 1.5% by value of total imports. Overall, U.S. aluminum imports increased over the last five years, finishing the period with a 32.9% year-over-year jump in 2017. With that said, industry watchers are keeping a close eye on how the tariff will impact U.S. aluminum imports from China, Russia, the UAE and other major sourcing locations.

The data on U.S. steel imports also shows a big bump up in value in 2017. But the year’s 31.43% gain followed two years of declines – 20.2% in 2015 and 27.2% in 2016 – and did not restore imports to their 2014 peak. During these years, the U.S. imposed Anti-dumping and Countervailing Duties (AD/CVDs) on a range of steel products, including corrosion-resistant steel, cold-rolled and hot-roll steel from a range of countries—but, especially, China.

descartes datamyne aluminum imports 2013-2017

descartes datamyne steel imports 2013-2017

What Does This Mean?

From car manufacturers to construction to soup producers, companies are eager to see how the tariffs will affect their operations and the industry at large. Since the tariffs are applied uniformly to non-NAFTA countries, some nations are reevaluating sourcing these materials from the U.S. For example, Sweden-based Electrolux has already acted, halting a $250 million plant expansion in Tennessee. This is a clear illustration that executives grasp the far-reaching impact of the tariff changes on business and are taking measures to change operations.

Trade policy changes are now serious business for strategic decision makers. Those businesses that can stay on top of evolving duties, tariffs and taxes are better equipped to evaluate risk, analyze profitability and assess how to adapt operations and enable success.

About Descartes Global Trade Content Solutions

Descartes helps maximize the value of trade data by helping organizations work smarter. As businesses prepare for the tariff, tapping solutions such as Descartes Datamyne™ is critical to set a baseline of recent trade patterns, consider new sourcing options and evaluate the competitive landscape. Descartes CustomsInfo™ offers a broad array of options to keep pace with tariff changes; manage item compliance down to the SKU, part or item level; fuel ERP and Global Trade Management (GTM) systems with trade content and more.

Ask us how Descartes Global Trade Content solutions can help you keep pace with change.

Written by Joely Callaway

Independent Consultant