At Main Line Supply, we see our responsibility as not only providing your company with pipe and related piping products, but to also keep you informed of important matters to our industry.
Accordingly, we offer an update on the Section 232 25% steel tariff imposed by President Trump and effective on March 23, 2018. We will send additional updates as this rapidly changing situation evolves and we hope you find our comments helpful and informative.
Since the proclamation effective date of March 23, 2018, there have been several changes. Listed below are the key changes:
• On March 22, the White House announced that application of the Section 232 tariffs on the following countries will be suspended until May 1, 2018: Canada, Mexico, Australia, Argentina, South Korea, Brazil, and the European Union (on behalf of its member countries).
• The tariff is imposed on the FOB shipping point value and is not applied to other costs like ocean freight, financing costs, Marine Insurance, Import entry fees or any USA domestic freight costs. Generally this will result in the actual tariff to be about 22% on the actual cost to import the pipe into the USA.
• In the case of Canada and Mexico, application of the tariffs have been temporarily suspended beyond May 1 and will be part of the renegotiation of the North American Free Trade Agreement (NAFTA).
• On March 26, South Korea entered into an agreement with the USA and was granted a waiver of the steel Section 232 tariffs in exchange for an annual steel import quota of 2.68 million tons per year.
1. 2.68 mm metric tons per year amounts to approximately 70% of South Korea’s average annual imports of steel to the United States from 2015-2017.
2. It appears that the effective start date for the quota will be May 1, 2018 ending on April 30, 2019 coinciding with the USA’s annual review of the waiver.
3. It is not known what will be the consequences of shipping more than the agreed quota.
4. The basis for the counting of tons against the quota is the date of arrival into the USA.
5. The quota is reported to be product specific although there are many details to understand. South Korea, as the largest exporter of pipe used in the energy industry, will experience substantial reductions in what energy pipe they can ship to the USA. It is reported that the amount of energy pipe will work out to be about 50% of Korea’s 2017 energy pipe shipments.
6. It is unknown at this time the amount of A53 South Korean pipe that will be available.
7. South Korean mills have advised us that the lost profit from the reduction in tons they can ship to the USA will result in their increasing prices by 20% without consideration of any possible further manufacturing cost increases. The result of this will be to almost fully replace the tariff’s impact.
• The following countries have also applied for an exemption from the Section 232 tariffs on the basis of a special security relationship: Taiwan, Oman, UAE, Turkey, Ukraine, and India. Other countries, such as Russia, are also applying for a waiver.
• China has filed a complaint with the World Trade Organization that the 232 tariff is non-WTO complaint as there is no threat to USA’s national security. The motivation is political.
• With an agreement being negotiated with South Korea, the largest pipe exporting country, we believe that any other waivers will be along the lines of the South Korean waiver with import quotas being implemented.
Over time we are beginning to better understand the impact of the 232 tariffs and, with this increased understanding, our costs as it relates to 232 and our resulting sales prices. Please contact your sales representative for an update on our current selling prices.
We will continue to provide additional updates as information becomes available and are committed to ensuring we support and meet our valued customer’s requirements.