Trade Commission Moving on Greenhouse Gas Investigation
In this video from The Franklin Partnership, contributing author Omar Nashashibi offers updates regarding the global movement toward a climate-focused approach to tariffs.
In response to a request from the U.S. Trade Representative, on July 6, 2023, the U.S. International Trade Commission, an independent federal agency, announced it would conduct an investigation to assess greenhouse gas emissions (GHG) from the U.S. steel and aluminum industries, and aluminum casting and forging industries as well.
The investigation is already underway and manufacturers of covered products in the U.S. may have already a letter in January 2024, stating that the agency has identified their company as a producer of a covered product in 2022 and that they will receive a questionnaire, which the law requires recipients to complete.
Covered products include:
- Hot and cold rolled steel products
- Plate and tin
- Pipe and tube
- Stainless steel
- Long bars, blooms
- Billets, slabs and ingots for steel and castings.
On the aluminum side, in addition to aluminum castings and forgings, the investigation covers unwrought products, both alloyed and unalloyed and wrought aluminum products including bars, rods, wire, plates, sheet, strip, foil, tubes and pipes and their fittings.
The covered products list mirrors that of the Section 232 national security steel and aluminum tariffs former President Trump initiated in 2018. That program, administered by the U.S. Commerce Department, imposed a 25 percent tariff on steel imports and 10 percent on aluminum coming from around the world. In an effort to deescalate tensions with allies, President Biden in 2021 implemented a Tariff Rate Quota System to allow a certain amount of imports from the EU, Japan, and UK to enter the U.S. tariff-free.
While the Section 232 tariffs remain in place, USTR requested this investigation into the GHG emissions as the U.S. was engaged in 2023 with the EU as the parties negotiated the Global Arrangement on Sustainable Steel and Aluminum. That proposal, largely pushed by the Biden administration, sought to impose tariffs on imports of steel and aluminum produced in high-GHG emission countries that lack similar climate laws as those in the U.S. and EU. The intent was to increase the price of those imports to help protect domestic industries.
The U.S. and EU failed in November 2023 to reach an agreement to establish a carbon-based tariff system, in part due to the U.S. lacking a mechanism to calculate GHG emissions from products manufactured in the U.S. The EU, for its part, on January 1, 2024, launched its Carbon Border Adjustment Mechanism, or CBAM, that now requires importers of certain products including iron, steel, aluminum, cement, and certain fertilizers, among others to report on the level of carbon emissions generated during the production of those goods. Starting in 2026, the EU will begin imposing a carbon tariff to accompany the current reporting mechanism.
As the EU is well underway with its climate-focused approach to tariffs, the U.S. International Trade Commission investigation is an important step in Washington potentially setting up a similar system to place a carbon-based tariff on imports.
The ITC is seeking to collect information related to Scope 1, 2, and 3 emissions. U.S. Facilities that emit more than 25,000 metric tons must already report annually to the EPA their Scope 1 emissions, which covers emissions directly from the facility, such as stationary sources, equipment, vehicles, purchased gasses such as C02, and fugitive emissions.
This investigation adds Scope 2 and 3 for those larger emitting facilities, making all those with covered products, including those below 25,000 metric tons emitted to report on all three. Scope 2 refers to indirect emissions for the facility such as purchased electricity, heat, and steam from a utility provider. This is an effort to capture the emissions from the third-party possibly burning fuel. Scope 3 emissions refers to indirect sources, which is different from indirect emissions under Scope 2. Scope 3 covers business employee travel in vehicles not owned by the company, employee commuting to account for travel to and from work, waste and disposal, and also emissions from the transportation of materials shipped to the company, such as from their suppliers.
The draft ITC questionnaire the agency posted for public comment recently asks about production quantities, any onsite electricity generation, quantity of electricity in kilowatt hours purchased in 2022, whether the facility used certain material such as metallurgical coal or ferrous scrap, oxygen, nitrogen, or hydrogen. The draft questionnaire also asks for information on imported sources for some steel by country and original smelter.
The investigation will conclude in a report that the U.S. International Trade Commission must submit to the USTR by January 28, 2025, that will aggregate the results without company identifying information. Companies manufacturing covered products will respond in two phases, at the company level and facility level and must respond.
If a company receives a letter but does not manufacture a covered product, they should immediately contact the ITC and request an exemption.
For businesses not manufacturing a covered product, this process is important as the ITC investigation could mark the first step in efforts to establish a possible carbon-based tariff on imports into the U.S.
If you need assistance with the ITC questionnaire, or would like more information on trade and tariffs, Contact us.
Jennifer Clement is an executive sales and marketing leader specializing in value creation for the C-suite. In her current role at CLA, Jennifer collaborates on strategy with executives of global manufacturing and distribution companies to accelerate results. Previously Jennifer served as a Global Business Acceleration Leader for Complete Manufacturing and Distribution (CMD). During her time with CMD, Jennifer lived and worked in Asia from 2015-2019. Prior to CMD, she spent 10 years in senior care technology. Jennifer started her career at Johnson Controls (JCI) and spent nine years in leadership roles; followed by five years at Rockwell Automation (ROK) leading c-suite strategy and marketing operations.
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