November 2023 Volume 5

WASHINGTON UPDATE

This is why we do not expect the U.S. to fully lift tariffs on Chinese imports, whether on steel and aluminum or on forgings from China. Quite the opposite, President Biden is seeking to coordinate efforts more closely with allies to address subsidized and dumped imports from China. It is the continued efforts of FIA and others lobbying the White House to retain the tariffs on Chinese imports regardless of talks with the EU. As the two sides continue to work on their differences on a carbon tariff, the U.S. is asking the EU to impose a 25 percent tariff on excess steel and 10 percent on excess aluminum from nonmarket economies (NMEs). Among those eleven countries listed as NMEs is, of course, China. Were the EU to agree to such rates, they would match those still in effect in the U.S. on Chinese imports of steel and aluminum. It is unclear at this time whether such an agreement would fully replace the Section 232 tariffs and also include aluminum forgings as part of the excess capacity program, which the Tariff Rate Quota system currently includes. FIA and The Franklin Partnership met with the U.S. International Trade Commission this summer to discuss how that federal agency could assign a “cost” to carbon emitted while manufacturing an aluminum forging, which the Section 232 action covers. FIA held the meeting as part of the Biden administration’s investigation into the carbon footprint of manufacturing steel, aluminum, and select related products in the U.S. that could serve as a baseline for a tariff on imports. Even if the U.S. and EU do not agree to a carbon-based tariff system, sources in Washington, D.C. indicate that the Biden administration might accept the EU imposing market access restrictions related to imports that exceed a set carbon level, including possibly a ban on imports. Whether such a program could withstand WTO scrutiny is unclear, as is whether the Biden administration would give much consideration to objections from other members of that trade body. Aside from the U.S. election considerations from both sides of the Atlantic, neither party wants to see billions in retaliatory tariffs reinstated on U.S. exports to the EU or for Washington to terminate the quota rate system, resulting in tariffs on imported steel and aluminum. The other sense of urgency is the EU’s Carbon Border Adjustment Mechanism (CBAM), for which the reporting requirements just began on October 1. The U.S. does not have a similar system that requires companies to calculate their carbon footprint and purchase credits or certificates as the EU starting in 2026. American companies and other importers of cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen to the EU must file reports on their product’s carbon footprint starting January 31, 2024. Sources indicate that the EU could expand the CBAM to goods beyond this initial scope by 2030. There are bipartisan efforts in the U.S. Senate to begin considering an American version of a carbon-based order adjustment mechanism tariffs, though that remains a long way off. In the interim, the White House pledged to not reinstate tariffs on EU steel and aluminum as the two sides continue discussions through the rest of the year on

both, a tariff on excess steel and aluminum and a more permanent carbon-based system. The status quo is untenable from the EU standpoint and the Biden administration pledged to environmental groups, unions, and the steel industry that they would move on a new tariff regime. Thus far, however, every time they report progress in talks, a setback arises. The FIA will continue to work with policymakers to maintain and expand tariffs on forgings and other Chinese imports, including carbon-based, regardless of how many steps they take forward, or back.

Omar S. Nashashibi is a founding partner at The Franklin Partnership, LLC, a Washington-D.C. based lobbying firm representing the Forging Industry Association before the federal government. Phone: 202-715-1264 Email: omar@franklinpartnership

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FIA MAGAZINE | NOVEMBER 2023 7