Copper Under Fire: New Tariffs Spark Metal Mayhem

At a Glance

• Section 232 investigation aims to assess the impact of copper imports on the United States' national security.
• While the U.S. has significant copper reserves, the investigation is aimed at the lack of domestic smelting and refining capacity.
• A White House official said any potential tariff rate would be determined by the investigation.

The White House proclamation directing Commerce to initiate a Section 232 investigation on copper imports is now live. As always, the stakes are high, and the outcome could leave industries feeling a bit short-circuited.

The Investigation and What is Covered

This investigation aims to assess the impact of copper imports on the United States' national security and determine whether trade remedies are necessary to safeguard domestic industries. The investigation will cover all forms of copper, including raw mined copper, copper concentrates, refined copper, copper alloys, scrap copper and derivative products. The White House has broadly defined “derivative products” in the Section 232 actions for steel and aluminum, so it is likely that there will be broad application here as well.

We likely will not have a list of tariff classifications until the investigation is complete, but reviewing the tariff schedule just for the listed articles in the 232 notice, as well as considering the listed aluminum and steel tariff classifications (i.e., without considering the potential derivative copper articles), we think it may include the following:

• Heading 2603
• Headings 7401-7409
• Headings 7410-7415

Rationale and Objectives

The President has deemed copper as a critical mineral vital in defense applications, infrastructure and emerging technologies. While the U.S. has significant copper reserves, the investigation is aimed at the lack of smelting and refining capacity in the U.S. The President found that the dominance of a single foreign producer, which controls over 50% of global smelting capacity, poses a direct threat to U.S. national security and economic stability.

Process

The Department of Commerce will assess factors such as current and projected demand for copper in defense, energy and critical infrastructure sectors, the extent to which domestic production can meet this demand, and the role of foreign supply chains in fulfilling U.S. needs amongst others. The Secretary of Commerce must consult with the heads of relevant executive agencies to evaluate the national security risks associated with copper import dependency.

While Commerce has historically requested public comments and offered a public hearing concerning Section 232 investigations, we note that the governing regulations make clear that to do so is permissive and there is no underlying statutory requirement for comments.

"If the Department determines that it is appropriate to afford interested parties an opportunity to present information and advice relevant and material to an investigation, a public notice shall be published in the Federal Register soliciting from any interested party written comments, opinions, data, information or advice relative to the investigation." 19 C.F.R. § 705.7(a).

Timeline

The Department of Commerce has 270 days to investigate and issue a report, but that is a deadline for submission, i.e., reports can be issued sooner than 270 days. The President then has 90 days to determine trade restrictions based on the report and must act 15 days thereafter, but, just like the 270 day deadline, the President can act sooner than these dates.  No later than 30 days after making a decision to implement trade restrictions, the President must submit their reasoning to Congress. We anticipate that the timeline will likely be escalated to have reports and actions determined sooner than the deadlines as former officials in the Trump administration have previously indicated as such

Specifically, Nazak Nikahtar, the Assistant Secretary at the U.S. Department of Commerce during the President’s first term, stated as follows in his role:

"A new [Section 232] investigation is not a heavy lift and can rely on well-documented evidence of unjustified Chinese export practices . . . so you can complete one pretty quickly. It doesn't have to take a year.”

When Section 232 was first utilized by President Trump in his first term, the processes and procedures that exist today were not in place to allow the report to be issued and actions taken more quickly than the statutory deadlines.

Outcome

As mentioned, tariffs are a likely outcome of this investigation. A White House official said any potential tariff rate would be determined by the investigation, adding that Trump preferred tariffs over quotas. We have not heard particularities regarding a specific rate, but 25% seems likely given the current ubiquitous use of that measure.