New Tariffs and Metal “Melt-and-Pour” Requirements Implemented to Prevent Chinese Circumvention Through Mexico

By Brett W. Johnson, P.C., T. Troy Galan, and Rajveer Walia¹

On July 10, 2024, the U.S. Government narrowed the tariff exclusions on imports of certain steel and aluminum articles from Mexico, citing national security concerns. These measures effectively impose new tariffs aimed at preventing the circumvention of Section 232 tariffs under the Trade Expansion Act of 1962, primarily directed at Chinese steel and aluminum being rerouted through Mexico.² This new development aligns with the U.S. Government’s broader strategy to decouple from China’s industrial overcapacity and its global market impacts. Previously, the U.S. Government tripled tariffs on Chinese metals directly imported into the United States. This enhanced enforcement focus on transshipment – even via the United States’ most vital trading partner, Mexico – is another indicator for companies to reevaluate its global supply chain, refocus on compliance, and evaluate efforts that are meant to avoid U.S. import and export control regulations, especially as it relates to China.

The New Measures

Under the new proclamations, a 25% ad valorem tariff will be imposed on steel products not melted or poured in North America (Mexico, Canada, or the United States) before becoming a finished product. Additionally, Mexican aluminum containing metal smelted or most recently cast in China, Russia, Belarus, or Iran will be subject to a 10% ad valorem tariff. Importers must now provide U.S. Customs and Border Protection (CBP) a certificate of analysis for steel and aluminum goods verifying the country of melt-and-pour to qualify for tariff exemptions under the United States-Mexico-Canada Agreement (USMCA).

The changes became effective for goods entered for consumption, or withdrawn from warehouse for consumption, starting at 12:01 a.m. Eastern Daylight Time on July 10, 2024, and will remain in effect unless explicitly reduced, modified, or terminated. However, CBP has not yet implemented the necessary amendments to the Harmonized Tariff Schedule of the United States (HTSUS) needed to declare goods that no longer qualify for the tariff exclusions.³

Foreign Trade Zones – Goods from Mexico admitted into U.S. foreign trade zones under “privileged foreign status” before 12:01 a.m. Eastern Daylight Time on July 10, 2024, are subject to the new tariff provisions upon entry for consumption after this time. Generally, once privileged foreign status is granted, the goods are appraised for customs purposes, with duties and tariffs determined at the time the status is elected. However, for purpose of this new proclamation, tariffs will be reassessed upon entry for consumption.

Enforcement and Bilateral Cooperation

The primary purpose of these tariffs is to close the loophole allowing Chinese metals to bypass existing tariffs by entering the United States through Mexico. As such, the U.S. and Mexican Governments announced, in tandem with the new proclamations, close collaboration to ensure fair competition and management of the surge in metal imports that threaten United States industries and national security.

In support of these efforts, Mexico now requires importers to provide more detailed information on the melt-and-pour of steel products, complementing its recent tariff increases on steel and aluminum products from non-free trade agreement countries. Moreover, the U.S. Government reiterated its commitment to strict enforcement, continuous monitoring of circumvention attempts, and severe penalties for violations. Such commitment is consistent with the U.S. Government’s rigorous enforcement of similar China-related trade restrictions, such as Section 301 tariffs.

Next Steps

The newly imposed tariffs and melt-and-pour requirements on steel and aluminum imports from Mexico by the U.S. Government reflect a strategic move to bolster national security and protect domestic industries. The rigorous enforcement and bilateral cooperation with Mexico also highlight a concerted effort to ensure fair competition and maintain the integrity of U.S. trade policies.

Companies should evaluate their international trade policies and consider engaging in internal and external audits to ensure compliance against transshipments and avoidance tactics. In addition to the metals example at issue with the new tariff requirements, companies should look out for re-labeling tactics where items are manufactured in China, sent to a third country, and then relabeled as if manufactured in that third country. Further, companies should be aware of fraudulent documentation, especially as it relates to undervaluations to avoid tariffs and other taxation. There is heightened scrutiny concerning any transactions with China. As companies engage in nearshoring, the scrutiny by government agents (and competitors) surrounding transshipment, re-labeling, and utilization of strawmen will increase.