‘Melted and Poured Standard’ Implemented to Prevent Tariff Circumvention

The United States and Mexico recently announced updates and clarification to U.S. Section 232 tariffs on steel and aluminum products from Mexico to stop the thwart Chinese efforts to circumvent existing tariffs by moving their products through Mexico.

Steel product imports from Mexico will be subject to 25 percent tariffs unless the steel is documented to have been melted and poured in Mexico, the U.S. or Canada. Aluminum imports would be subject to a 10 percent tariff and to avoid that penalty, the aluminum imports must not contain primary aluminum that is smelt or cast in China, Russia, Belarus or Iran.

Importers will be required to provide a certificate of analysis to U.S. Customs and Border Protection showing the country of origin for the metals, and Mexico has agreed to require importers of steel products to provide more information on the country of origin of these products.

Proactive joint legislation to reinforce North American steel and aluminum supply chains

The updated Section 232 requirements were implemented to address growing concerns that China would leverage its excess industrial capacity to flood global markets as domestic demand wanes and other sectors of the Chinese economy struggle.

As of 2023, volumes of Mexican steel imports originating outside of Mexico were small in 2023, accounting for roughly 13 percent of the total steel imported from Mexico, but the legislation is proactive, securing the U.S.-Mexico supply chain and curbing the expected surge from China.

Positive news for manufacturing

The U.S. has cautioned Mexico from aiding Chinese companies in securing potential factory sites in Mexico by way of incentives in addition to tightening the Section 232 tariffs that were initially introduced in 2018. The announcement is positive news for manufacturers of aluminum and steel to see that the government is taking steps to secure the domestic and allied supply chain and combatting China’s supposed strength in the global market.  However, this action will continue to keep commodity costs high, thus putting additional inflation pressure on goods sold.