One significant issue Wisconsin manufacturers should follow closely is U.S. foreign policy. This is particularly important because U.S. foreign policy goals drive U.S. trade policy; the two areas oftentimes intertwine. This holds particularly true with respect to U.S. trade relations with perceived “adversaries,” especially if they are major suppliers of certain primary commodities that are vital to the global economy.
Recent U.S. focus on aluminum imports from the Russian Federation following its invasion of Ukraine, as well as an increased focus on imports from China — a declared economic competitor — have increased constraints on the short-term supply of aluminum, which has significantly impacted U.S. downstream producers and consumers of the commodity.
U.S. government takes action on imports
Following the Russian invasion of Ukraine, the Biden Administration issued its Proclamation on Adjusting Imports of Aluminum into the United States. The proclamation imposed a 200% ad valorem tariff on all aluminum articles and derivative aluminum articles produced in the Russian Federation starting March 10, 2023. Further, a 200% ad valorem tariff on aluminum articles “where any amount of primary aluminum or derivative aluminum articles used in the manufacture of the imported articles was smelted or cast in Russia” was also announced to go into effect April 10.
These trade actions are set against the backdrop of U.S. aluminum imports from Russia being the fifth-largest source of imported aluminum in the United States and Russia being the largest exporter of unwrought aluminum in the world.
The U.S. government is not only scrutinizing Russian aluminum imports, but also in recent months it has increased its scrutiny of aluminum sourced from China under the Uyghur Forced Labor Prevention Act. This increased scrutiny is based on a report published by researchers affiliated with the Helena Kennedy Centre for International Justice at Sheffield Hallam University, which states that many auto manufacturers use parts and raw materials that are sourced directly or indirectly from the Uyghur Region. These include iron, steel, aluminum and copper, as well as other automobile elements like tires, seat cushions, batteries and electric components. With aluminum import from China amounting to 11% of total U.S. aluminum imports, the impact of this increased scrutiny on America’s aluminum markets is not insignificant.
An ongoing logistical challenge
It is difficult to overstate how important aluminum is to the U.S. economy. Aluminum is a vital commodity to industries ranging from aerospace and automotive to construction and electronics. Given its importance, it comes as no surprise that price is affected when the U.S. government implements import and export restrictions and other trade restrictive policies on aluminum that create a second order effect.
These trade restrictive measures are compounded by the ongoing pandemic-related disruptions and volatility in global logistics. It has exacerbated component shortages, having an impact on major trade lines across all transportation modes. High energy costs, particularly in Europe due to its shunning of Russian aluminum, have caused multiple smelters to close or curtail output. These constraints have caused demand for aluminum to outstrip its supply.
As aluminum is an important commodity to the U.S. economy, Wisconsin importers of aluminum should carefully review the recent proclamations and new requirements to ensure they are aware of how they apply to their import process. Furthermore, Wisconsin importers of aluminum and derivative aluminum articles should trace supply chains and understand the smelt and cast information to not only ensure that their products are not held up at customs for alleged forced labor violations, but also prepare for the upcoming reporting requirements that apply to all aluminum articles and aluminum derivative articles from all countries. Thus, a robust import compliance and recordkeeping program will help prepare Wisconsin importers for potential U.S. Customs and Border Protection inquiries.
Ngosong Fonkem is a Wisconsin-based trade compliance lawyer with broad experience in diverse business sectors. He has served as a full-time law professor at the oldest private university in Malaysia and today teaches international trade and global business as an adjunct professor at St. Norbert College Schneider School of Business and the Cardinal Stritch University College of Business and Management. He is chair of the Wisconsin Bar Association International Practice Section, a member of the Wisconsin Bar Association Business Law Section, a member of the Global New North steering committee and a frequent contributor to Insight.
