United States Imposes 200 Percent Duties on Russian Aluminum and All Products Containing Russian Aluminum; Takes Other Actions Targeting Mining & Metals Sector
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On February 24, 2023, the US government announced a new round of trade actions targeting goods and entities from Russia. The new actions, which coincide with the one-year anniversary of Russia's invasion of Ukraine, significantly raise tariffs on over 100 products; sanction over 100 entities, including from the mining and metals sector; and introduce new export controls. This alert focuses on those actions with implications for the Russian mining and metals sector, with potential for repercussive global effects.
The White House issued A Proclamation on Adjusting Imports of Aluminum Into the United States, having the effect of imposing:
- As of March 10, 2023, a 200 percent duty on "aluminum articles that are the product of Russia and derivative aluminum articles that are the product of Russia"; and
- As of April 10, 2023, a 200 percent duty on "aluminum articles where any amount of primary aluminum used in the manufacture of the aluminum articles is smelted in Russia, or the aluminum articles are cast in Russia, and derivative aluminum articles where any amount of primary aluminum used in the manufacture of the derivative aluminum articles is smelted in Russia, or the derivative aluminum articles are cast in Russia." (Where "primary aluminum" is defined as new aluminum metal that is produced from alumina (or aluminum oxide) by the electrolytic Hall-Heroult process.)
In justifying these new duties, which will be imposed under section 232 of the Trade Expansion Act of 1962, the White House cited to: (1) challenges faced by US aluminum producers in the face of high levels of aluminum imports and high energy prices; (2) recent increases in imports of aluminum from Russia – whose market is especially export-oriented – by 53 percent between March and July 2022; and (3) the fact that the Russian aluminum industry is a key part of Russia's defense industrial base.
The extension of the 200 percent duties to products incorporating Russia-sourced aluminum could have profound implications for companies in third countries that source materials from Russia. However, the Proclamation also states that any country that imposes a tariff of 200 percent or more on its imports of aluminum articles that are products of Russia may be exempt from the tariff. In explaining this rule, the Proclamation cited the "need to work together with our partners to ensure that the global market distortions caused by Russian aluminum articles do not distort our markets and threaten our national security."
The precise scope of coverage of the tariffs is listed in the Annex to the Proclamation, which is not yet publicly available.
The Proclamation is available here.
In addition to the above-discussed proclamation regarding aluminum, the White House also issued on February 24, 2023 A Proclamation on Increasing Duties on Certain Articles from the Russian Federation.
Acting under the authority of the Suspending Normal Trade Relations with Russia and Belarus Act, the Proclamation establishes new duties of 35 percent or 70 percent on certain products. It also increases duties (from 35 percent to 70 percent) on certain products covered by Proclamation 10420 of June 27, 2022, which are listed in the Federal Register here. The US Trade Representative Katherine Tai characterized these lists as covering "most metal and metal products."
While the Annex to the Proclamation listing the covered products is not yet available, a White House fact sheet states that the "action will result in increased tariffs on more than 100 Russian metals, minerals, and chemical products worth approximately $2.8 billion to Russia" – a dollar figure that also appears to include the aluminum duties.
The US Department of Treasury's Office of Foreign Assets Control ("OFAC") issued a new determination pursuant to Executive Order 14024 targeting the metals and mining sector of the Russian economy, which OFAC defines as "any act, process, or industry of extracting, at the surface or underground, ores, coal, precious stones, or any other minerals or geological materials in the Russian Federation, or any act of procuring, processing, manufacturing, or refining such geological materials, or transporting them to, from, or within the Russian Federation." This determination allows for sanctions to be imposed on any individual or entity determined to operate or have operated in the sector. The first four such entities to be designated are as follows:
- Joint Stock Company Burevestnik Central Scientific Research Institute, a Russian defense equipment company involved in metals production;
- OOO Metallurg-Tulamash, a Russian steel manufacturer tied to the Russian navy;
- TPZ-Rondol OOO, a Russian company specializing in coating metals that is linked to an ammunition manufacturer; and
- Mtsenskprokat, a Russian company which produces unique metal alloys and counts the Russian defense industry as a client.
Separately, the State Department designated LLC Titan-Avangard, which operates in the metalworking machinery manufacturing industry and has ties to the Russian military-industrial complex.
All property and interests in property of persons on the SDN List that are located in the United States or within the possession or control of a US person, wherever located, are blocked, and US persons may not engage in any dealings, directly or indirectly, with them, absent an applicable license or exemption. Any entity in which one or more blocked persons owns in the aggregate, directly or indirectly, a 50 percent or greater interest is automatically blocked.
OFAC also designated entities operating in the financial services, defense, aerospace, and technology sectors. OFAC's press release, which lists all entities and individuals newly designated by OFAC, is available here. OFAC's determination with respect to Russia's mining and metals sector is available here. The State Department's press release, listing entities and individuals newly designated by the State Department, is available here.
Role of the G7
In addition to the US actions, the G7 convened on February 24, 2023 to discuss additional actions by the alliance. Leaders endorsed the new sanctions against Russia's energy, extractive, financial, and defense industrial sectors discussed above, indicating that the other members may take further action.
A factsheet on all of the US government's February 24, 2023 actions related to the Russian invasion of Ukraine can be found here.
More information on the above actions will follow. In the meantime, please let us know if you have any questions.
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