Publication

The use of IEEPA for the imposition of tariffs is a relatively untested mechanism for the President’s authority for raising tariffs.  We anticipate that these tariffs will be challenged in court if they remain in place, even if the tariffs are ultimately only imposed on non-USMCA-qualifying importations of Canadian or Mexican origin.  Importers are advised to track the liquidation of entries for which the IEEPA duties on goods from Canada or Mexico are assessed in order to file protests, if necessary. 

Continue to watch this space for updates regarding the implementation of these and other tariff programs.

Policy Specifics

Section 2 of the Memorandum states that the policy of the United States is to reduce its annual trade deficit and address “other unfair and unbalanced aspects of our trade with foreign trading partners.” To this end, the “Fair and Reciprocal Plan”  aims to determine “the equivalent of a reciprocal tariff with respect to each foreign trading partner.” The plan considers the following to be “non-reciprocal” aspects of a trade relationship:

(a)  tariffs imposed on U.S. products; 
(b)  unfair, discriminatory, or extraterritorial taxes imposed by U.S. trading partners on United States businesses, workers, and consumers, including a value-added tax; 
(c)  costs to U.S. businesses, workers, and consumers arising from nontariff barriers or measures and unfair or harmful acts, policies, or practices, including subsidies, and burdensome regulatory requirements on U.S. businesses operating in other countries; 
(d)  policies and practices that cause exchange rates to deviate from their market value, to the detriment of Americans; wage suppression; and other mercantilist policies that make U.S. businesses and workers less competitive; and  
(e)  any other practice that . . . imposes any unfair limitation on market access or any structural impediment to fair competition with the market economy of the United States. 

Section 3 instructs the Secretary of Commerce and USTR to investigate “the harm to the U.S. from any non-reciprocal trade arrangements adopted by any trading partners” after agency reports under the America First Trade Policy Memorandum are due (i.e., 1 April 2025). After their investigations, they will submit a report “detailing proposed remedies in pursuit of reciprocal trade relations with each trading partner.”

Additionally, the Memorandum instructs the Director of the Office of Management and Budget to “assess all fiscal impacts on the Federal Government and the impacts of any information collection requests on the public,” and to provide a written assessment to the President by 12 August 2025.

Unanswered Questions

The Memorandum leaves considerable questions unanswered.

• Scope and authority questions. What is the full array of trade measures that will be considered for implementation? What authorities will be used to implement any response measures? Do these authorities require additional investigations or reports? Will the President need new authority from Congress to implement any measures, or with the implementation of reciprocal tariffs require an act of Congress?
• Timing questions. How long will the Secretary of Commerce and USTR need to complete their investigations after the agency reports are submitted on April 1? Weeks? Months? Years? How long after these investigations are complete will implementation take? Does the OMB fiscal impact assessment due 12 August mean that implementation cannot occur before this date?
• Implementation questions. What HTS heading or subheading level (i.e., 6-digit, 8-digit, etc.), which comprises tens of thousands of individual classifications and rates, will be the basis for the reciprocal analysis or tariff implementation? Will the reciprocal rates be made unique for each country against which action is taken? Will the U.S. rates adjust if the foreign rates adjusts (up or down)? What are the “collection requests on the public” that are mentioned, and will there be a process to challenge these comments or request exemptions?

What To Do Now

Delayed timing could leave opportunities for nations to negotiate and reduce the impact of these measures, but the bottom line is it is currently unclear how and when these tariffs will be implemented, limiting the ability of industry to adapt. A self-assessment of exposure by country and tariff classification using all available data (i.e., ACE data, internal sales data, etc.) and access to non-U.S. tariff schedules to begin to measure the possible impact of the Reciprocal Trade and Tariff Memorandum. Additional measures include:

• Set up news alerts specific to your merchandise or countries of interest.
• Don’t make decisions too quickly…some of this is likely a negotiation tactic and political theater, similar to the 25% tariffs on Mexico and Canada which were postponed.
• Negotiate appropriate contractual and sales terms to mitigate the impact of sudden and significant costs associated with tariff implementation.

Modification of Existing Section 232 Aluminum Tariffs

The actions cancel the following allowances for specific countries:

• Argentina, Australia (Proclamation 9758 with respect to imports of aluminum articles);
• Canada (Proclamation 9893, Proclamation 10106 with respect to imports of aluminum articles);
• Mexico (Proclamation 9893, Proclamation 10782 with respect to imports of aluminum and derivative aluminum articles);
• EU members (Proclamation 10327, Proclamation 10690 with respect to imports of aluminum articles); and
• United Kingdom (Proclamation 10405 with respect to imports of aluminum articles).

As a result, after 12:01 a.m. Eastern time on March 12, 2025, all imports of aluminum articles and derivative aluminum articles from these countries will become subject to the additional tariffs proclaimed in Proclamation 9705 and Proclamation 9980 at a rate of 25%, except for derivative aluminum articles processed in another country from aluminum articles that were smelted and cast in the United States.

Effective “immediately,” no more product exclusions may be considered or renewed, with previously granted product exclusions remaining in effect until they expire or until the applicable excluded product volume is imported, whichever occurs first.

The action also revokes the ability of the Secretary of Commerce to grant relief from the duties or quantitative restrictions, including the provisions of clause 3 of Proclamation 9704, clause 1 of Proclamation 9776, or clause 2 of Proclamation 9980.

Inclusion of Additional Aluminum Articles

The actions will apply an additional 25% tariff to all imports of derivative aluminum articles specified in Annex I (which was not published with the order).

• These products (yet to be identified) will be subject to the increased tariff as of the date that the Secretary of Commerce publishes a notification in the Federal Register.
• These additional duties do not apply to derivative aluminum articles processed in another country from aluminum articles that were smelted and cast in the United States.
• To the extent derivative aluminum articles identified in Annex I (not published) that are not in Chapter 76 of the HTSUS, the additional duties apply only to the aluminum content of the derivative article.

Importers must provide to U.S. Customs and Border Patrol (CBP) “any information necessary to identify the aluminum content used in the manufacture of aluminum derivative articles imports.”

Process for Including Additional Derivative Aluminum Articles within Scope

The order directs the Secretary of Commerce to establish a process for including additional derivative aluminum articles within the scope of the proclamation within 90 days. This process will involve a mechanism for domestic producers of an aluminum article or derivative aluminum article, or an industry association representing one or more such producers, to where the request additional products be included if such products “impair the national security or otherwise undermine the objectives” of the actions. The Secretary will have 60 days to issue a determination regarding whether to add the products to the scope.

Prioritization of Classification Reviews

The order also directs CBP to “prioritize reviews of the classification of imported aluminum articles and derivative aluminum articles” and to punish misclassification to “the maximum amount permitted by law and shall not consider any evidence of mitigating factors in its determination.”

CBP is further instructed to notify the Secretary of Commerce regarding “evidence of any efforts to evade payment of the … duties … through processing or alteration of aluminum articles or derivative aluminum articles prior to importation,” and such processed or altered aluminum articles shall be considered to be derivative aluminum articles. It is not entirely clear from the order, however, if this Commerce department “consideration” will be made ad hoc as applied to an individual importer or if it will inform additional actions by the Secretary via the process for including additional derivative aluminum articles to be published in the Federal Register.

Miscellaneous

Aluminum or derivative articles admitted to U.S. foreign trade zones on or after March 12 not eligible for domestic status will be entered under “privileged foreign status” subject upon entry for consumption to any added duties, as applicable.

Derivative aluminum or steel articles that are in a foreign trade zone in privileged status prior to the March 12, 2025 and withdrawn for consumption after March 12, 2025 will be subject to the rates of duties applicable under this proclamation.

Finally, the duties imposed by the E.O. are not available for duty drawback.

Modification of Existing Section 232 Steel Tariffs

The actions cancel the following allowances for specific countries:

• South Korea (Proclamation 9740 with respect to imports of steel articles);
• Argentina, Australia, and Brazil (Proclamation 9759 with respect to imports of steel articles); 
• Brazil (Proclamation 10064 with respect to imports of steel articles);
• Canada and Mexico (Proclamation 9894 with respect to imports of steel articles);
• Mexico (Proclamation 10783 with respect to imports of steel articles);
• EU members (Proclamation 10328 and Proclamation 10691 with respect to imports of steel articles and derivative steel articles);
• Japan (Proclamation 10356 with respect to imports of steel articles and derivative steel articles);
• United Kingdom (Proclamation 10406 with respect to imports of steel articles and derivative steel articles);
• Ukraine (Proclamation 10403, Proclamation 10588, and Proclamation 10771 with respect to steel articles and derivative steel articles).
• Argentina, Australia, Brazil, Canada, Mexico, South Korea, and EU member countries (provisions of clause 1 of Proclamation 9740 as applicable to imports of steel articles or derivative steel articles).
• Argentina, Australia, Canada, Mexico, and South Korea (provisions of clause 1 of Proclamation 9980 as applicable to imports of derivative steel articles).

As a result, after 12:01 a.m. Eastern time on March 12, 2025, all imports of steel articles and derivative steel articles from these countries will become subject to the additional tariffs proclaimed in Proclamation 9705 and Proclamation 9980 except for derivative steel articles processed in another country from steel articles that were melted and poured in the United States.

Effective “immediately,” no more product exclusions may be considered or renewed, with previously granted product exclusions remaining in effect until they expire or until the applicable excluded product volume is imported, whichever occurs first.

The action also revokes the ability of the Secretary of Commerce to grant relief from the duties or quantitative restrictions, including the provisions of clause 3 of Proclamation 9705, clause 1 of Proclamation 9777, and clause 2 of Proclamation 9980.

Inclusion of Additional Steel Articles

The actions will apply an additional 25% tariff to all imports of derivative steel articles specified in Annex I (which was not published with the order).

• These products (yet to be identified) will be subject to the increased tariff as of the date that the Secretary of Commerce publishes a notification in the Federal Register.
• These additional duties do not apply to derivative steel articles processed in another country from steel articles that were melted and poured in the United States.
• To the extent derivative steel articles identified in Annex I (not published) are not in Chapter 73 of the HTSUS, the additional duties apply only to the steel content of the derivative steel article.

Importers must provide to U.S. Customs and Border Patrol (CBP) “any information necessary to identify the steel content used in the manufacture of steel derivative articles imports.”

Process for Including Additional Derivative Steel Articles within Scope

The order directs the Secretary of Commerce to establish a process for including additional derivative steel articles within the scope of the proclamation within 90 days. This process will involve a mechanism for domestic producers of a steel article or derivative steel article, or an industry association representing one or more such producers, to request that additional derivative products be included if such products “impair the national security or otherwise undermine the objectives” of the actions. The Secretary will have 60 days to issue a determination regarding whether to add the products to the scope.

Prioritization of Classification Reviews

The order also directs CBP to “prioritize reviews of the classification of imported steel articles and derivative steel articles” and to punish misclassification to “the maximum amount permitted by law and shall not consider any evidence of mitigating factors in its determination.”

CBP is further instructed to notify the Secretary of Commerce regarding “evidence of any efforts to evade payment of the … duties … through processing or alteration of steel articles or derivative steel articles prior to importation,” and such processed or altered steel articles shall be considered to be derivative steel articles. It is not entirely clear from the order, however, if this Commerce department “consideration” will be made ad hoc as applied to an individual importer or if it will inform additional actions by the Secretary via the process for including additional derivative steel articles to be published in the Federal Register.

Miscellaneous

Steel or derivative articles admitted to U.S. foreign trade zones on or after March 12 that are not eligible for domestic status will be entered under “privileged foreign status” and are subject upon entry for consumption to any added duties, as applicable.

Derivative aluminum or steel articles that are in a foreign trade zone in privileged status prior to the March 12, 2025 and withdrawn for consumption after March 12, 2025 will be subject to the rates of duties applicable under this proclamation.

Finally, the duties imposed by the E.O. are not available for duty drawback.

Summary

President Trump issued three executive orders that “impose, consistent with law, ad valorem tariffs on articles that are products of” 25% on products of Mexico, 25% on products Canada (except energy products, which are at a lower 10% rate), and an additional 10% on products of China as set forth in each order, under IEEPA and other authorities. These duties are effective Tuesday, February 4, 2025. There is no drawback or duty-free de minimis relief available for these duties, and they will apply on top of other applicable programs.

Products Affected

The executive orders cover “all articles” that are the product of Mexico, Canada, and China, “as defined by the Federal Register notice.” The Secretary of Homeland Security is tasked with determining and publishing “the modifications necessary to the Harmonized Tariff Schedule of the United States (HTSUS) in order to effectuate this order consistent with law.” This notice has not been published yet. While it is anticipated that these E.O.s will cover all products from each nation, with the exception of Canadian energy products, there are significant questions to be resolved. For example, if a Chinese item was excluded from the Section 301 tariffs, will it be subject to the tariffs under the February 1 E.O.? Similarly, does the E.O. apply equally to goods that originate in Canada or Mexico under the United States-Mexico-Canada Agreement (USMCA) as it does to goods that are substantially transformed in Canada or Mexico, but do not qualify as originating under USMCA?

Canadian “energy or energy resources,” which are subject to a 10% tariff instead of the 25% tariff applicable to other Canadian products, are defined by reference to section 8 of the president’s order on January 20, 2025, Declaring a National Energy Emergency to include “crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals, as defined by 30 U.S.C. 1606 (a)(3).”

Application in Relation to Other Duties

The rates of duty established in each order are defined to be in addition to any other duties, fees, exactions, or charges applicable to such imported articles.

No drawback program relief (19 CFR parts 190, 191) is available with respect to the duties imposed pursuant to these orders.

Duty-free de minimis treatment under 19 U.S.C. 1321 is not available for the articles affected by the tariff action.

For foreign trade zone products subject to each order, articles that are products of Canada, other than “domestic status” eligible products defined in 19 CFR 146.43, entered after the effective date must be admitted as “privileged foreign status” as defined in 19 CFR 146.41, and upon entry for consumption will be subject to the increased duties in effect at the time of admittance into the foreign trade zone.

There is no indication as to whether goods that are entered pursuant to one of the provisions of Chapter 98 of the HTSUS would be exempt from these duties.

Retaliation Clause

Each order contains a retaliation clause reserving the right to “increase or expand in scope” the tariffs imposed by each E.O., should the country retaliate by imposing additional tariffs on U.S. goods. Canada and Mexico have already announced tariff retaliations are planned, with Canada specifying 25% additional duties would be imposed on C$30 billion of U.S goods as of February 4, and an additional C$125 billion in goods in three weeks, according to Prime Minister Justin Trudeau’s announcement February 1. He stated the list of products would include “American beer, wine and bourbon, fruits and fruit juices, including orange juice, along with vegetables, perfume, clothing and shoes … major consumer products like household appliances, furniture and sports equipment, and materials like lumber and plastics, along with much, much more” as well as some “non-tariff measures” related to critical minerals, energy procurement, and other unspecified partnerships. See Transcript of Trudeau’s response to U.S. tariffs on Canada, Global News, Posted February 1, 2025, 10:21 pm, available at https://globalnews.ca/news/10993376/trudeau-trump-tariffs-us-canaaada/.

Products Excluded and/or Exclusion Process

No product exclusions or exclusion process were announced.

Removal of Duties

The Secretary of Homeland Security is charged with consulting with several other cabinet secretaries and the attorney general regarding the emergency situation and is required to “inform the President of any circumstances that, in the opinion of the Secretary of Homeland Security,” indicate the government of the tariffed country has taken “adequate steps” to alleviate the emergency that gave rise to the order. If the president determines sufficient action to stem the crisis has occurred, the tariffs will be removed. What constitutes “adequate steps” to justify removal is not defined.