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US imports from Mexico are exempt from Section 232 tariffs due to an independent agreement between the US, Mexico and Canada previous to the United States-Mexico-Canada Agreement (USMCA).
But the White House announced on July 10 that aluminium that is shipped from Mexico must not contain primary material that was smelted or cast in China, Russia, Belarus or Iran, otherwise it does not qualify for that exemption and will be subject to a 10% tariff.
Material from Russia was already subject to a 200% tariff, thus resulting in a total rate of 210%.
The new measure requires aluminium importers into the US to present proof to the US Customs and Border Protection (CBP) of the material’s country of origin in the form of a certificate of analysis, showing that the country of first smelter, second smelter and casting is not one of the four listed above.
“[The decision] does not surprise us […]. Companies have the option of seeking alternative markets. In terms of volume, around 80% of all the aluminium exports from Mexico goes to the US,” Julio César Martínez Rivas, president of the National Chamber of the Aluminium Industry in Mexico (Canalum), told Fastmarkets.
“But the biggest concern right now is that [Mexican exporters] will have to seek certification. Regardless of what it is, if you are importing, you have to present a certificate of origin, which was not mandatory before. You must have a certificate even if you do not buy from China or Russia to demonstrate its origin. That’s [what] companies should be working [on] now. At Canalum, we are going to check which documents can be used,” Canalum’s president added.
Fernando Garcia Martinez, vice-president of operations at Mexican aluminium institute IMEDAL, said the US government has yet to clarify what the certificate of origin and analysis should cover, as well as if supplementary documentation will be required.
“Anyone who wants to export [Section] 232 products to the US must generate a license and declare the origin of their raw material. This has existed since last year. The new thing is that you must present a certificate of analysis, which previously was not necessary,” IMEDAL’s Garcia said.
“What we need to know is if it is a mandatory additional document. Perhaps it is now mandatory to present a certificate with chemical analysis and mechanical properties that mentions the country of first smelter, second smelter and casting with traceability data. We must wait for this requirement to be clarified,” he added.
A Mexican extrusion source told Fastmarkets that there is a lot of uncertainty – and there will be even more if former President Donald Trump wins the US presidential elections in November, according to the source – which prompted them to take a “stand by” approach.
“When asking for a certificate of origin, we will have a problem. I don’t know exactly how to get it. Even if I buy billet [from] Brazil or Argentina, they will ask me for this new certificate of origin,” they said.
For IMEDAL’s vice-president of operations, the White House decision was not unexpected because the possibility of removing the exemption of Section 232 tariffs for aluminium coming from one of the four countries was already being discussed.
“What we didn’t know exactly was how this would be done,” Garcia said, adding that the measure does not widely affect the Mexican industry.
The products most affected by the new rules are products from Section 232, according to IMEDAL. They are:
“[The measure] only affects these products; and most of the Mexican aluminium exports to the USA are already incorporated into finished products that are not [included in Section] 232,” Garcia said.
“For example, 60% of aluminium production in Mexico is castings, which are components for cars, and this is already incorporated into the vehicle. And many other products, such as air conditioning, are not affected because they are not exported as semi-finished products,” he added.
According to Garcia, the largest export from Mexico that is affected by Section 232 is secondary aluminium ingot, but because it is produced from Mexican scrap, it meets origin requirements. Also, extrusions are exported in a great quantity to the US.
“[Secondary aluminium ingot and extrusions] are the ones with the largest export volume, I would say. The good news is that almost no one uses aluminium from these four sources [Belarus, China, Iran and Russia],” he said.
“In a nutshell, we see that Mexico would have to be supportive of these measures and it seems like a fair solution that does not affect our industry and effectively limits indiscriminate use of Mexico as a platform for simulated source export,” Garcia added.
A Mexican secondary producer told Fastmarkets that they are happy with the measure.
“I only use Mexican aluminium post used scrap and I only import from non-sanctioned countries,” they said.
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