On February 10, 2025, the President of the United States of America issued two proclamations under Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862) (“Section 232”): (i) “Proclamation 10895”, “Adjusting Imports of Aluminum into the United States”; and (ii) “Proclamation 10896”, “Adjusting Imports of Steel into the United States” (jointly, the “Proclamations”). Beginning 12:01 a.m. eastern time on March 12, 2025, the Proclamations will:
- impose a 25% ad valorem duty on imports of steel articles and derivative products with no exemptions or exclusions;
- increase the ad valorem tariff rate on imports of aluminum articles and derivative products from 10% to 25% with no exemptions or exclusions;
- revoke all previously negotiated steel tariff quotas and exemptions for Argentina, Australia, Brazil, Canada, Mexico, South Korea, EU Member States, Japan, Ukraine, and the United Kingdom (the “Formerly Exempted Countries”);
- remove duty drawback for the duties imposed under the Proclamations; and
- require that any covered item, except for those eligible for admission under “domestic status” as defined in 19 C.F.R. 146.43, that is subject to the tariffs and that is admitted into a U.S. foreign trade zone be admitted under “privileged foreign status” and be subject to tariffs upon entry for consumption.
The Commerce Department will issue a Federal Register notice that specifies which steel and aluminum derivative products will have the tariffs applied against the total value of the products and which will have the tariffs applied against the value of the steel or aluminum content of such products. The tariffs will not apply to any steel or aluminum derivative products processed in another country (excluding Russia), that are “melted and poured” for steel or “smelted and cast” for aluminum in the United States.
Within 90 days of the Proclamations (on or around May 12, 2025), the Commerce Department will provide for a process to allow domestic producers and industry groups to request that other steel and aluminum derivative products be added to the list of covered products.
Under the Proclamations, the Commerce Secretary is barred from considering new product exclusion requests or renewing existing ones. Granted product exclusions remain effective until their expiration date or until excluded product volume is imported, whichever is first. General Approved Exclusions will be terminated as of March 12, 2025.
The Proclamations will have effects on supply chains
In the short term, the Proclamations may significantly impact the supply chains of companies with operations in the US that either import steel and aluminum products or rely on such imports. Proclamation 10896 states that steel imports from Formerly Exempted Countries comprised 82% of all steel imports in 2024. This amounts to approximately 24.6% of the total steel consumption in the US (i.e., 82% of the 30% of total steel consumption that corresponds to imports). Likewise, the Department of Commerce reports that, in 2024, aluminum and derivative imports into the US totaled approximately 5.429 million metric tons (MT), out of which approximately 4.053 million MT originated in Formerly Exempted Countries (minus Ukraine). Canadian imports are particularly impactful. In 2024, they accounted for 58.07% of aluminum imports (3.153 million MT of 5.429 million MT total imports) and 22.78% steel imports into the US (5.951 million MT out of 26.127 million MT). Steel imports from Mexico (12.22% or 3.194 million MT) and from Brazil (15.61% or 4.080 million MT) are also important to consider in supply chain discussions. The impact to supply chains for not only steel and aluminum manufacturing, but also for products derived from steel and aluminum, will continue to be revealed throughout the course of this Administration.
Moreover, President Trump’s recent tariff actions have impacted other industries beyond, the steel and aluminum industries. These Proclamations appear to be just the beginning of sustained changes to US trade policy under the Trump Administration.
For example, the Proclamations follow President Trump’s announcement of the imposition of additional tariffs on products from China, Mexico, and Canada, pursuant to the International Emergency Economic Powers Act (“IEEPA”), as discussed in our previous client update.
Similarly, on February 26, 2025, the Trump Administration announced imminent 25% tariffs on the EU.
These tariff actions could have broader impacts on supply chain than just the direct impact of the tariffs themselves. Many of these tariffs could result in retaliatory tariffs being imposed by the target countries on products from the US, which could exacerbate effects on supply chains and affect profits of companies that export products from the US. Canada has stated it will consider retaliatory tariffs if the Proclamations are enforced. The EU will also consider such tariffs. In response to steel and aluminum tariffs in the first Trump Administration (2017-2021), the EU imposed retaliatory tariffs on a range of products, including steel and aluminum, but also agricultural and manufactured products (e.g., bourbon or motorcycles). The EU suspended those tariffs, but the suspension is due to lapse on March 31, 2025. A revival of these tariffs cannot be ruled out.
The imposition of these tariffs is not the end of the analysis, however. There are potential commercial and legal remedies that companies can and should consider to alleviate the potential impact of the tariffs on day-to-day operations.
Potential commercial remedies (changes to supply chain, industrial processes, and contractual arrangements)
Because of the broad potential impact of tariffs on multiple commercial industries, it is likely beneficial for companies to:
- stay informed about and seek legal guidance on the implementation of the Proclamations, the tariffs under IEEPA, any additional tariffs, any retaliatory tariffs, and the expiration of any granted exclusions (“Relevant Tariff Actions”);
- carefully assess which inputs and products in their supply chains will be affected by the Relevant Tariff Actions;
- review existing and in progress contracts to determine whether:
- the relevant supplier or sales contracts should be amended to address the new costs that may impact pricing clauses and contractual economics;
- force majeure clauses or provisions of contract law that deal with similar situations have been triggered;
- termination rights might be triggered;
- contractual dispute settlement provisions may be triggered in the event of alleged nonperformance; and
- there is any trade or investment treaty protection for projects and operations impacted by sovereign measures or countermeasures in relation to trade policies (discussed further below);
- consider any supply-chain modifications, including changes to production processes and facilities (e.g., to take advantage of “melt and pour” or “smelt and cast” exemptions);
- carefully document the origins of the steel and aluminum products and derivatives in supply chains for any potential future dealings with U.S. Customs and Border Protection and to ensure eligibility for any current or future exemptions; and
- remain in contact with officials and legislators about the burdens of the tariffs or the necessity to include additional derivatives under the tariffs.
Potential legal remedies
Companies should also consider the legal remedies available to them (or against them) in response to the Proclamations. These can include:
- initiating arbitration and/or litigation in domestic courts but companies should bear in mind that US courts in particular generally defer to the Executive Branch in relation to national security determinations;
- pursuing contractual remedies in supply or sales contracts, including but not limited to price review clause and termination rights; and
- seeking protection under international trade and investment treaties. Some investment treaties provide protections to covered investments, which may be infringed in some situations by increased taxes and tariffs as well as other trade-related sovereign measures that adversely impact foreign investment.
At least three investment tribunals have decided that if measures taken in response to breaches of trade obligations (e.g., a tariff enacted as a remedy to dumping) themselves breach investment treaty protections, the host state could not defend its wrongful conduct by arguing that World Trade Organization (WTO) treaties or international law allowed it to enact these measures. To date, no investment tribunal has found a state that issues the original tariffs (in the case of the Proclamations, the US) responsible for breaches of investment treaties. That said, a similar argument could conceivably be made that the original tariffs, otherwise permissible under international law and WTO treaties, breach investment treaties.
