Japan Earns Highest Number of Exemptions from U.S. Tariffs in Past One Year

The additional tariffs of 25% announced by U.S. last year on the grounds of national security under Section 232 changed the entire global trade dynamics. While a trade war started between U.S. and China, other countries like Europe, Mexico, and Canada imposed additional tariff restrictions on their steel imports in an attempt to protect their domestic industry.

On one hand, world’s largest steel consumers tried protecting their domestic steel sector, on the other side, top steel producing nations like Japan, South Korea, India to name a few made efforts to earn exemptions from the U.S. tariffs. This is because, along with tariff imposition, U.S. has also created a system for importers to seek exceptions for items difficult to source in the U.S.

Globally, out of the total 44,000 steel exemption requests, U.S. has granted an exemption to 16,000 requests. Japan is the largest beneficiary by volume, with waivers covering 1.34 MnT of steel, or about 30% of exempted imports.

According to Japan’s industry ministry, out of the total 9,400 applicants submitted by the U.S. buyers for the waiver of Japanese steel products, about 41% (3,900) applications received a waiver from U.S. tariffs whereas about 2,000 (21%) requests were denied.

The rulings for remaining 3,500 applications are still pending and although U.S. intended to respond to requests within a few months, the process has been delayed, likely owing partly to the partial U.S. government shutdown between late Dec’18 and Jan’19.

The items that have received exemptions include products such as automotive steel sheet that are durable and safe, and can’t be made in the U.S. As per the market sources, in case of some Japanese products even when waivers are denied, U.S. importers often buy the products and pay the extra tariff. Despite earning exemptions, the tariff appears to have contributed to a decline in Japan’s steel exports to the U.S., impacting their steel production with y-o-y drops of 30% to 40%, though production problems at Japanese steelmakers was also a factor that impacted their production.