New section 232 tariffs on steel and aluminum products originating in Mexico

Executive summary

Effective July 10, the U.S. implemented new Section 232 tariffs on steel and aluminum products processed in Mexico. This effort closes a loophole where companies could use the Mexican market and the United States-Mexico-Canada Free Trade Agreement (USMCA) as a backdoor to avoid punitive tariffs on Chinese origin materials. 

Changes to U.S. Section 232 Steel and Aluminum Tariffs

The Biden administration recently announced new policies aimed at combatting the circumvention of U.S. Section 232 tariffs on steel and aluminum through processing in Mexico. These tariffs can drive customs duties as high as 25% of the value of the goods, over and above any normal duty, may negatively impact many companies’ margins and overall competitiveness.

The additional requirements – created in cooperation with the Mexican government – mark further efforts to protect the competitiveness of U.S. domestic producers. U.S. officials have expressed concern about China’s increasing use of the Mexican market and the United States-Mexico-Canada Free Trade Agreement (USCMA) as a “backdoor” to avoid these punitive tariffs. These updates take effect immediately and force importers of Mexican steel and aluminum to meet a higher threshold for exemption from the Section 232 duties. Under the new policies, Mexican steel must be “melted and poured” in Canada, Mexico or the U.S. to avoid the 25% tariff. Further, Mexican aluminum imported to the U.S. will carry a 10% tariff if it contains any metal that was “cast or smelted” in China, Belarus, Iran or Russia. The Biden administration believes these changes will close loopholes that allow Chinese metals to be routed through Mexico to avoid U.S. tariffs.

U.S. importers of steel and aluminum will now be required to provide a certificate of analysis to U.S. Customs and Border Protection (CBP) verifying that the materials meet the additional requirements for exclusion from the Section 232 tariffs. Considering the complexity of global supply chains, importers may find it difficult and administratively burdensome to validate the upstream processing locations of their imported steel and aluminum. However, proactive due diligence will put companies in the best possible position to support the declaration that these additional tariffs do not apply to their imported goods.

Recommended next steps

RSM US LLP recommends that importers of these materials take immediate steps to review their supply chains to assess the financial exposure. Among others, this analysis should include the following:

• Map out each stage of the supply chain going back to the initial processing locations of the imported metals.
• Coordinate with supply-chain partners and other relevant stakeholders on a regular basis to ensure they are providing the necessary information to certify that the materials meet the exclusion criteria.
• Develop or refine formal written procedures to standardize the internal process for importing these metals.
• Collaborate with customs brokers and other logistics service providers to ensure the correct documentation is included with each shipment.
• Perform an audit of prior and current Mexican sourced products containing any steel and aluminum items sourced from China or other specifically named countries and take appropriate corrective action.

RSM’s Trade Advisory experts have proven industry experience with tariff rules and customs regulations from their many years as corporate leaders and consultants. Our tenured team can tailor solutions to reduce costs and maximize supply chain efficiencies.