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News & Knowledge

Negotiating uncertainty: Legal options for manufacturers confronting tariffs

12th June 2018
Daniel J. Ferris and Derek R. Boyd - Kerr Russell

In this article MSI's Michigan law member Kerr Russell details the implications of recent tariffs imposed on steel and aluminium articles imported into the US from countries other than Argentina, Australia, Brazil, and South Korea.

Pursuant to a series of Proclamations issued by President Trump, tariffs recently went into effect on all steel and aluminum articles imported into the United States from countries other than Argentina, Australia, Brazil, and South Korea. The authority for the tariffs is contained in the Trade Expansion Act of 1962, which empowers the executive branch to investigate the effect of imports on national security and to impose duties or other import restrictions on trade as a result. 19 U.S.C. § 1862.

The duties imposed by the tariffs are set at 25% for steel and 10% for aluminium. The affected articles include  a wide variety of raw and semi-finished products, all of which are specifically identified in the Harmonized  Tariff Schedule published by the U.S. International Trade Commission. They currently include iron and nonalloy steel ingots, semi-finished products, flat-rolled steel, bars, coils, angled sections, and wire, as well as unwrought aluminum and aluminum bars, rods, profiles, wires, plates, sheets, strips, foil (flat rolled products), tubes, pipes, tube and pipe fittings, castings, and forgings.

Anticipation of the tariffs was enough to contribute to increases in steel prices in the months leading up to the official announcement, and the last-minute exemptions issued to a number of impacted countries, as well as the view that the tariffs are being used as leverage in negotiations relating to U.S. trade agreements, has contributed to widespread uncertainty about the precise effect the tariffs will have on prices over time. At a minimum, however, the tariffs will impact many companies involved in manufacturing, including the automotive industry, and could cause supply-chain disputes between manufacturers and suppliers of steel and aluminum components. Many companies are parties to long-term, fixed-price contracts for the supply of components, and such  arrangements are directly impacted by significant fluctuations in raw material prices. Suppliers of steel and aluminum products may determine that these contracts are no longer profitable as written following an increase in the market price of steel and aluminum and may wish to renegotiate contract prices as a result.

Read the full article ‘Negotiating uncertainty: Legal options for manufacturers confronting tariffs’

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