CBP Adopting Tighter Restrictions on Section 232 Steel/Aluminum Content, Despite Lack of Guidance

The agency has recently been issuing a spate of CBP Form 29s on Section 232 entries, some asking for additional detail on how steel or aluminum content was calculated, and others appearing to adopt language used in informal communications by the base metals Center of Excellence and Expertise that undercuts attempts by importers to reduce duty owed by backing out non-raw material components of valuation.

CBP has yet to issue formal guidance, either by way of a CSMS message or in its tariff FAQs, that confirms the unpublished guidance from the base metals CEE. The agency didn't respond to our request for comment.

The issue stems from the proclamation issued by President Donald Trump on June 3 that hiked Section 232 tariffs on steel and aluminum to 50% (see 2506030071). That proclamation also included a provision that said Section 232 tariffs apply "only to the steel content of articles in Chapter 73 of the HTSUS and only to the aluminum content of articles in Chapter 76 of the HTSUS."

One customs broker familiar with the situation said they believe the "ambiguity lies in what some believe to be 'content.' Due to a failure on the part of CBP to answer this question publicly through the FAQ or through a CSMS, even though it has been asked by several parties, the definition has been left to interpretation." The person added that "some believe 'content' from the original order could have meant valuation components versus physical components. Others believed that the administration meant physical content."

The broker said they started hearing from importers of goods that were wholly made of steel and aluminum that wanted to pay the tariffs only on the raw steel or aluminum costs incurred by their suppliers, and report costs such as processing, labor and profit as non-steel or aluminum content subject to lower reciprocal tariffs. The broker and others reached out to the base metals CEE for guidance.

The base metals CEE replied with a much less expansive interpretation in at least two separate emails sent in September and October, according to a review of those emails by International Trade Today.

First, Section 232 tariffs are assessed on the full value of articles of Chapters 73 and 76 that are 100% steel or aluminum, respectively. Likewise, they are assessed on the full value of steel articles of Chapter 72.

For goods of Chapters 73 and 76 that are not 100% aluminum, the importer should report steel or aluminum content based on the cost to the importer, not the supplier, according to the CEE's September email. "'Non-steel content' does not refer to costs of fabrication, machining, labor, etc.," clarified the email from October.

"If allowed to separate out steel/aluminum and non-steel/aluminum content value, many importers have asked what costs they can exclude. There is no HQ guidance provided for 'backing out' costs to arrive at the steel/aluminum content value for articles that are not wholly of steel or aluminum (so no backing out fabrication, labor, machining, conversion, etc., costs)," the October email continued.

Following the end of the government shutdown last month, the customs broker began seeing the CF 29s come out. At first, they simply asked for an explanation of how steel or aluminum content was calculated. But lately, the broker has been seeing CF 29s that directly adopt some of the language included in the emails from the base metals CEE.

"Many importers believed the Section 232 duty applied only to the steel/aluminum material cost within a finished good," but notices of action and informal advice now indicate that the 'value' subject to Section 232 now must include fabrication and production costs associated with that steel or aluminum, and not just the raw material itself," said Kelly Nelson, KPMG managing director of tax, trade and customs. "This is a meaningful change, because that interpretation was never spelled out in guidance, FAQs, or public instructions."

Getting clarification from CBP on whether the steel/aluminum portion means just the raw material value or whether it includes the production and fabrication costs of the downstream derivative article would be helpful, Nelson continued, especially as this guidance seems to be coming out now through isolated notices of action.

Further complicating matters is that the machinery CEE has provided guidance that differs from that provided by the base metals CEE, according to the customs broker.

"When you make that line split claiming non-content and content, I think those [importers] are being targeted because [CBP is] questioning, did you really calculate your value correctly," said Denise Calle, a trade attorney with Olsson Frank.

An importer might be in a scenario "where you used reasonable care at the time of entry with the guidance that was available and with what your broker was advising your counsel. But you have to review that now because if you relied on an exception, it's pretty likely that Customs is going to come and ask for proof and substantiation," Calle continued.

Said Nelson: "This shift has retroactive implications. If CBP now expects production costs to be included, that raises questions about past entries where no such guidance existed. How will CBP treat enforcement concerning previously imported goods?"

As the trade awaits CBP to release additional guidance, sources told ITT that importers need to be prepared to show their calculations and their rationale for how they valued the steel or aluminum content for the derivatives.

"Expect more audits and more prior disclosures. Anytime CBP changes direction without formal guidance, it creates uncertainty. Many companies may need to reassess exposure and documentation," Nelson said.

"Suppliers may now need to provide more than just material composition. They may need to break out how much labor, overhead, and fabrication cost relates to the steel/aluminum elements or at a whole, something most vendors have never had to produce before," Nelson continued.