The Impact of Section 232 Tariffs on Mexican Aluminum Exports to the United States: Discrepancies and Transhipment

Section 232 

Section 232 of the Trade Expansion Act of 1962 is a provision that permits the U.S. government to impose tariffs if imports pose a threat to national security. This provision was invoked by President Trump in March 2018 to impose tariffs on steel (25%) and aluminum (10%). The justification was that these imports were undermining U.S. industrial health and military readiness. The Department of Commerce's early findings, which suggested these imports were a national security risk, influenced this decision.1 

Mexico, a significant U.S. aluminum exporter, initially received exemptions from these tariffs, reflecting the intricate interdependencies of North American trade. However, these terms were revised during the negotiation of the United States-Mexico-Canada Agreement (USMCA).2 

This research aims to investigate the impact of these tariffs on Mexico's aluminum supply chain, analyze discrepancies in Mexico's reported aluminum imports and exports, and explore potential transshipment activities. The latter involves shipping aluminum from third countries, like China, to Mexico and then re-exporting it to the U.S. to avoid tariffs. This practice has sparked concerns and prompted discussions among trade experts and policymakers about its implications on existing tariffs and trade agreements.3 

The implementation of Section 232 tariffs, during Proclamation 9704, on steel and aluminum was primarily justified on national security grounds. By invoking the Trade Expansion Act of 1962, The primary justification for the imposition of these tariffs was national security. The Trump administration argued that a strong domestic steel and aluminum industry is vital for national defense. The administration claimed that without a robust domestic production, the U.S. could be left reliant on foreign producers for critical materials in times of national crisis or war. This rationale aligns with the original intent of Section 232, which is to ensure the U.S. has adequate domestic production capacity for materials deemed essential for national security.4 

The tariffs can also be seen as part of a strategic trade policy aimed at renegotiating America's terms of trade with the world. By leveraging tariffs, the Trump administration sought to address what it perceived as unfair trade practices and imbalances, particularly with China and the European Union. The administration used these tariffs as a tool in broader trade negotiations, aiming to extract concessions or encourage foreign governments to change their trade practices.5 

ORIGINAL PURPOSES OF NATIONAL SECURITY TARIFFS 

This move was a part of a wider agenda to boost American manufacturing by discouraging imports and encouraging domestic production. Despite these objectives, the tariffs were controversial and faced criticism both domestically and internationally. Critics argued that the tariffs would increase costs for U.S. manufacturers that rely on imported steel and aluminum, potentially leading to job losses in those sectors. There were also concerns about the potential for retaliatory tariffs from other countries, which could harm other sectors of the U.S. economy. Although the tariffs imposed a global tariff on steel (25%) and on (10%) aluminum, certain countries, including Mexico, were initially exempted. These exemptions were later revoked, exacerbating trade tensions.6  

The tariffs were introduced amid concerns over unfair trade practices and the impact of imports on the U.S. market, particularly from China. Growing global overcapacity in the steel and aluminum markets led to a glut in the American market, resulting in falling prices and profitability. The aim was to shield U.S. industries from an influx of cheap imports that hurt local producers.7 

Discrepancies in Trade Data  

All data referred to below stem from IHS Markit - S&P Global annual trade data for Chapter 76 products using the following during the years 2017-2023. Reporter, Mexico (BOL) for Mexican imports of Chapter 76 products towards all trade partners. Reporter, Mexico (BOL) for Mexican exports of Chapter 76 products towards the United States. Reporter, United States (Consumption) imports of chapter 76 products with trade partner Mexico (BOL).  

An analysis of the 2017-2023 trade data shows significant fluctuations in trade volumes and values across various aluminum product categories. This is especially noticeable in the HS codes related to chapter 76, which include primary aluminum and aluminum products, such as 7601 (unwrought aluminum), 7604 (aluminum bars, rods, and profiles), and 7606 (aluminum plates, sheets, and strips). 

Before the 2018 tariffs, trade volumes for these categories were stable, showing a trend of gradual growth that reflected typical economic conditions for that period. For example, in 2017, unwrought aluminum (HS code 7601) imports from Mexico to the U.S. maintained a steady demand, averaging about 500,000 kilograms per month without significant fluctuations. However, the implementation of the tariffs in June 2018 caused a noticeable disruption. Unwrought aluminum exports from Mexico to the U.S. initially fell by approximately 20% in the months following the tariff imposition, dropping to around 400,000 kilograms by the end of the year. This trend highlighted the immediate impact of increased costs on export activities. 

This decline was temporary, as the tariffs on Mexico were removed in February of 2019, following the USMCA negotiations. Post-tariff, the export volumes from Mexico not only recovered but also increased significantly in 2019 and 2020. For instance, exports of aluminum bars, rods, and profiles (HS code 7604) rose by approximately 30% in 2019 compared to 2018, reaching around 450,000 kilograms per month by mid-2022. This recovery indicates that the market was quick to react to the tariff removal, with traders likely trying to compensate for the previous slowdown and take advantage of tariff-free access to the U.S. market. 

From 2021 to early 2023, the data shows a continued increase in both the volume and value of aluminum exports to the U.S., particularly in HS codes 7605 (aluminum wire), 7606 (plates, sheets, and strip), and 7609 (aluminum tube or pipe fittings). For example, exports of aluminum plates, sheets, and strips saw a near 60% volume increase in 2021 compared to 2020, reaching 800,000 kilograms per month. This growth can be attributed to various factors, including the diversification of Mexico’s aluminum import sources and the increased competitiveness of Mexican aluminum products in the U.S. market due to reliable supply. 

Additionally, these exports' value has significantly increased, reflecting not only higher volumes but also potentially higher prices for aluminum products. This could be influenced by global aluminum prices and increased demand in the U.S. market. For example, the value of aluminum wire exports (HS code 7605) in 2021 rose noticeably, aligning with global trends in commodity prices. 

 The Possibility of Transshipment  

Transshipment, especially involving Mexican imports from third countries like China or Russia, is a significant issue. Transshipment is a process where goods are shipped to an intermediary country and then re-exported to their final destination to evade tariffs or other trade barriers. This concern is prevalent with aluminum imports from Mexico to the U.S., as there have been allegations and investigations into Mexico's use as a transshipment point for Chinese aluminum to bypass U.S. tariffs.8 

The primary motivation for transshipment is economic. By redirecting goods through countries without high tariffs, companies can significantly reduce their import costs. This practice is especially attractive during trade tensions between the U.S. and China, where tariffs can substantially increase the cost of imported goods. Transshipment allows businesses to maintain competitive pricing by avoiding these costs, ensuring their products remain affordable in tariff-affected markets. 

Furthermore, transshipment allows companies to maintain their business relationships with suppliers in tariff-affected countries without disrupting supply chains. By keeping production costs lower, businesses can preserve profit margins and market share without sacrificing quality or delivery times. This strategic logistics adjustment helps companies adapt to changing trade policies while minimizing economic impact. 

The rise in aluminum exports from Mexico to the U.S. following the implementation of Section 232 tariffs in 2018 has raised suspicions of transshipment. A notable example of this involved China Zhongwang Holdings, where aluminum extrusions were allegedly transshipped through Mexico to the U.S. disguised as pallets to avoid U.S. antidumping and countervailing duties. According to a detailed Wall Street Journal investigative report, Liu Zhongtian, founder of China Zhongwang, a large Chinese metals conglomerate, was allegedly involved in a scheme to store nearly one million metric tons of aluminum in a Mexican facility operated by Aluminicaste. This stockpile, reportedly worth around $2 billion, (the raw amount found stored in the desert represented nearly 1/5 of the world’s annual aluminum trade in MMT) was suspected of being part of a strategy to evade U.S. tariffs on Chinese aluminum by shipping the metal to Mexico and then exporting it to the U.S. as originating from Mexico. This strategy would bypass the direct tariffs imposed on Chinese imports. Furthermore, investigations traced the flow of large quantities of aluminum from China to Mexico, suspected of being sent to the U.S. market.9 

Industry experts and reports often highlight these practices, noting shifts in trade patterns that coincide with the imposition of tariffs. The Aluminum Extruders Council along other industry authorities have expressed concern over these practices, arguing they undermine fair trade and distort the market by flooding it with cheaper, tariff-free products.10 

Why is Mexico popular for transshipment? First, Mexico has no primary aluminum smelters. They have no producing capacity to explain the aluminum surge for the products researched. In the past several years, Mexico has stopped publishing their import trade data, and international/US authorities are relying on bill of lading data. Because of this decline in enforcement and enforceable records, it is a ripe time to enter.  

This has been seen in several other key sectors, for example crude petroleum. In 2022, Mexico exported crude petroleum valued at about $51.8 billion. However, a 5.5% trade gap, roughly $2.85 billion, indicates significant discrepancies.11 These might be due to underestimation or misreported quantities, if not for the clear repeated financial inaccuracies but also potential deeper issues like misclassification and smuggling. As Mexico transitions from a net exporter to a significant consumer of petroleum products, the dynamics of its crude petroleum exports have changed noticeably. This shift is due to declining domestic production and increasing internal demand, primarily caused by Pemex's two year production shortcomings and Mexico's higher consumption needs. This changing scenario incentivizes Mexican entities to redirect or even withhold petroleum initially intended for export to the U.S. market.12 This redirection can occur through both official and unofficial channels. Officially, exports may be reclassified as domestic sales to meet sudden local demand spikes or stabilize internal market prices. Unofficially, the prospect of higher profits or immediate availability can encourage smuggling these exports back into the domestic market, complicating trade data and challenging regulatory frameworks intended to ensure fair trade practices and accurate national exports reporting.  

Impact on the U.S.-Mexico Trade Relationship  

In response to the U.S. Section 232 tariffs on steel and aluminum, Mexico implemented strategic retaliatory tariffs targeting approximately $3.6 billion worth of U.S. goods, focusing particularly on agricultural products. This choice was aimed at impacting sectors that are politically sensitive in the U.S., potentially exerting significant political pressure. The list of targeted products included pork, apples, potatoes, cheeses, and bourbon—items selected to affect specific regions and states that are pivotal in the American political landscape, maximizing the impact of Mexico's response.13 

The retaliatory tariffs were announced swiftly after the U.S. unveiled its Section 232 measures and were detailed in Mexico's "Diario Oficial de la Federación" (Official Gazette), providing a clear legal and regulatory framework for their implementation. These tariffs remained in effect until negotiations under the United States-Mexico-Canada Agreement (USMCA) led to their removal, highlighting their role as a negotiating tool rather than a permanent change in trade policy. During the period they were in effect, these tariffs significantly affected U.S. farmers and producers, underscoring Mexico's importance as a major export market for U.S. agricultural products.  

Policy Analysis  

• National Security and Tariff Rationale: The Section 232 tariffs primarily targeted steel and aluminum imports on the grounds of national security. This policy significantly reduced imports of these materials by 24% for steel and 31% for aluminum, effectively increasing domestic production and prices in the U.S. While the tariffs achieved their goal of boosting U.S. production—steel production increased by 1.9%, and aluminum by 3.6%—they also led to higher prices and decreased production in downstream industries that rely on these materials. The policy reflects a trade-off between strengthening domestic industries and the broader economic impact on consumers and businesses that utilize these materials.14 

Impact on Global Trade Patterns: The introduction of Section 232 tariffs by the United States on steel and aluminum had significant repercussions on global trade patterns, particularly affecting key U.S. trading partners such as the European Union, Canada, and Mexico. These countries faced immediate economic impacts due to reduced access to the U.S. market, prompting them to seek alternative markets and implement retaliatory tariffs on a range of U.S. products. This shift not only strained international relations but also led to broader discussions on global trade policies and protectionism. The ripple effects included changes in global supply chains and trade strategies as countries adapted to the new trade environment, leading to a reevaluation of trade dependencies and the strengthening of regional trade agreements outside of U.S. influence.15  

Influence on International Alliances and Market Dynamics: The tariffs have strained relationships with key U.S. allies and trading partners who retaliated with their own counter-tariffs. This back-and-forth has affected not only the targeted industries but also broader markets, leading to market distortions and increased volatility in global aluminum prices. The agreements to lift tariffs between the U.S., Canada, Mexico, the EU, and Japan suggest a shift towards normalizing relations and reducing trade barriers, albeit slowly.  

Economic Implications  

The Section 232 tariffs significantly impacted both the Mexican aluminum sector and U.S. manufacturers that rely on aluminum imports. Initially designed to protect domestic industries from foreign competition by raising the cost of imported goods, these tariffs also triggered various unintended economic consequences. 

In the Mexican aluminum sector, the tariffs resulted in decreased exports to the U.S., as increased prices rendered Mexican aluminum less competitive. The impact extended beyond the aluminum industry to affect the entire supply chain, including industries dependent on aluminum as a raw material. Similarly, in the U.S., manufacturers that rely on imported aluminum experienced increased production costs. This was particularly prominent in industries such as automotive and beverage, where aluminum is a significant input. For example, major automakers like Ford and General Motors reported approximately $1 billion each in additional costs in the first year alone, resulting in higher costs per manufactured vehicle.16 

These tariffs also caused fluctuations in the global aluminum market. Aluminum prices increased, partly passing on to consumers and businesses, thereby raising the overall costs for aluminum-containing products. This increase was compounded by the "Midwest Premium," which rose after the tariff announcement.17 

Moreover, the tariffs led to decreased imports of affected products. In the U.S., imports of aluminum products subject to the tariffs dropped by 24% from their pre-tariff levels. Although this was intended to enhance domestic production—and indeed U.S. aluminum production slightly increased—the overall economic effect was negative, as increased prices and reduced aluminum availability impacted downstream industries. 

Further economic strains are highlighted by objective data: 

1. U.S. Production and Capacity: U.S. primary aluminum production surged by 60% following the tariffs, reflecting their protective intent. However, subsequent economic downturns affecting demand offset this.18 

1. Economic Cost of Job Preservation: The Peterson Institute for International Economics estimated a cost of approximately $650,000 per job saved in the steel and aluminum sectors, underscoring the tariffs' economic inefficiency.19 

1. Impact on Prices and Supply Chains: The tariffs distorted global aluminum prices and significantly reduced U.S. imports of steel and aluminum, leading to supply chain disruptions and increased production costs across various manufacturing sectors. 

1. Potential for Economic Recovery with Tariff Repeal: Repealing the tariffs could boost long-term GDP by 0.02% and create about 4,000 jobs, suggesting potential economic benefits from these trade barriers' rollback.20 

In summary, while the Section 232 tariffs aimed to protect national security interests by bolstering domestic industries, they also resulted in increased costs for manufacturers and consumers, supply chain disruptions, and heightened global trade tensions. 

Chinese Investments in Mexico  

Chinese investments in Mexico have significantly increased, spurred by strategic efforts to bypass U.S. tariffs and capitalize on nearshoring benefits, these investments manifest in both real estate purchases and aggressive business takeovers. This shift of Chinese manufacturers into Mexico is largely due to the U.S.'s heavy tariffs on imports from China, prompting companies to relocate production closer to the U.S. market to stay competitive. This strategy allows Chinese companies to evade high tariffs while benefiting from Mexico's lower labor costs and preferential trade terms under the USMCA, which permits products made in Mexico to enter the U.S. with little to no  

tariffs. 

For example, BYD announced plans for a major expansion in Mexico, including establishing manufacturing facilities that might cater to both the local and North American markets. These developments are part of a broader strategy to dodge U.S. tariffs on Chinese goods and to leverage Mexico's free trade agreements with the U.S., such as the USMCA. This strategic move enables Chinese companies to export products to the U.S. market without the substantial tariffs that their China-based operations would incur. The influx of Chinese investment in Mexico's manufacturing sector is evident in industries like construction materials, automotive, electronics, and furniture production. Companies like Kuka Home have set up facilities in Mexico to produce goods for export to the U.S. under more favorable tariff conditions than direct exports from China.21 

Furthermore, Mexico's strategic proximity to the U.S. enhances its attractiveness as an investment destination for Chinese companies aiming to lessen the impacts of trade barriers. The growth in Chinese-owned manufacturing facilities in Mexico has been substantial, with a marked increase in shipments of components and finished goods from China to Mexico, intended for assembly and subsequent export to the U.S. market. The financial scale of these investments is also significant, with Chinese investment in Mexico growing from $154 million to nearly $500 million within a few years amid rising trade tensions between the U.S. and China.22 

These investments are not only changing the trade and manufacturing landscape in North America but are also reshaping global supply chains. As Chinese companies continue to navigate the complexities of international trade policies, Mexico's role as a pivotal supply chain hub is anticipated to grow, further integrating the economies of North America and Asia. 

Environmental Considerations  

Section 232 tariffs have considerable unintentional environmental consequences. By increasing the cost of imported aluminum, they inadvertently favor domestic production. However, due to insufficient domestic capacity, these tariffs often shift supply chains towards international producers outside high-cost regions, potentially those with lower environmental standards. 

In the U.S., where the energy mix includes a large portion of renewable sources, aluminum production might be cleaner compared to countries where coal is the primary energy source, such as China and India. However, the tariffs bias the market against cleaner but costlier aluminum imports from countries with strict environmental regulations, thereby unintentionally favoring aluminum production environments with higher carbon footprints. 

The structure of international aluminum production means that tariffs can lead to increased production in countries with lax environmental controls. For example, as manufacturers search for cost-effective sources to avoid high-priced domestic and tariff-impacted international supplies, they might source more from regions where production is cheaper but more polluting. This shift includes not only direct emissions from energy-intensive aluminum smelting but also emissions from related activities like bauxite mining and alumina refining, both of which are harmful to the environment. 

Additionally, the higher cost of cleaner aluminum might deter recycling efforts within the U.S., as recycled aluminum often costs more to produce but has a significantly lower environmental footprint. Thus, the tariffs could reduce the economic feasibility of recycling processes, which are crucial for sustainable aluminum supply chains. 

Broadly, the tariffs affect global production patterns, potentially worsening environmental degradation in countries with rapidly increasing aluminum outputs. This includes not only heightened greenhouse gas emissions but also other environmental impacts like deforestation, water pollution, and biodiversity loss related to mining activities. These environmental costs are often ignored in the policy-making process, which primarily focuses on economic and security interests. 

Furthermore, the global shift in aluminum sourcing can lead to increased transportation emissions. Aluminum produced further from its end-use markets requires more shipping, resulting in higher emissions due to transporting aluminum over longer distances. This aspect of the supply chain is critical since transportation significantly contributes to global carbon emissions. 

Legal and Regulatory Framework  

Section 232 of the Trade Expansion Act of 1962 empowers the U.S. President to adjust imports if necessary to protect national security. This broad authority, established during the Cold War, was intended to protect industries vital to national defense without protracted legislative action. Typically, the Department of Commerce conducts a detailed investigation to assess the impact of specific imports on national security, followed by recommendations which may include tariffs or other trade barriers. 

Legal challenges to these actions have mainly focused on procedural aspects under the Administrative Procedure Act (APA) and constitutional challenges regarding the delegation of legislative power to the executive. Nevertheless, higher courts, including the U.S. Supreme Court and the Court of Appeals for the Federal Circuit, have consistently upheld these tariffs. They have ruled that the broad discretion granted under Section 232 isn't subject to the usual review standards under the APA, as actions under this statute are considered an exercise of national security judgment, not standard administrative procedure. 23 

Internationally, the implementation of Section 232 tariffs has led to a series of legal challenges in the World Trade Organization (WTO), especially from countries like Turkey and China. These countries argue that the tariffs violate several key provisions of the General Agreement on Tariffs and Trade (GATT) 1994, particularly Articles I, II, and XI, which cover the principles of general most-favored-nation treatment and the prohibition of quantitative restrictions. 

The United States has countered these arguments by invoking Article XXI of the GATT 1994, known as the national security exception, which allows a country to take measures it deems necessary for the protection of its essential security interests. This invocation has been contentious, as it challenges the limits of WTO oversight over national security claims. This debate reached a crucial point in the dispute "United States – Certain Measures on Steel and Aluminum Products" (WT/DS544). Here, the U.S. argued that national security issues (of which aluminum/steel are determined to be) are inherently political and thus outside WTO adjudication. This stance has sparked debates about the potential misuse of this exception and its implications for the multilateral trading system. 

The ongoing use and defense of Section 232 tariffs have significant implications for international trade law and global trade relations. The affirmations by U.S. courts and the contentious debates at the WTO underline a critical tension between national sovereignty in security matters and the rules-based international order governing international trade. These developments call for a reassessment of the balance between national security and global trade norms, potentially influencing future trade policies and international economic relations. 

The staunch defense of Section 232 tariffs indicates the U.S. commitment to prioritizing national security over international trade agreements. This stance might prompt other nations to seek similar justifications for protective measures, potentially leading to heightened global trade barriers and a reconsideration of the structure and effectiveness of international trade law.  

Stakeholder Perspectives  

• U.S. Government 

President Joe Biden has advocated for significantly higher tariffs on Chinese steel and aluminum as part of a broader strategy to protect American industries and appease key voters in swing states. During a speech in Pittsburgh, he emphasized, "China's steel companies don't need to worry about making a profit; they're not competing, they're cheating and we've seen the damage here in America." This stance is part of a larger package of policies aimed at supporting U.S. steelworkers and industries deemed critical to national security. U.S. Trade Representative Katherine Tai has also been active in implementing these policies, overseeing the tripling of existing tariffs and launching investigations into Chinese trade practices. These actions highlight a concerted effort by the Biden administration to bolster domestic industries through protective measures, despite potential backlash from trading partners and implications for international trade relations. 24 

• U.S. Industry Players 

U.S. industry reactions to the government's tariff measures have been overwhelmingly positive, demonstrating strong support from various sectors, especially steel and aluminum. Leaders within these industries have vocalized their approval of both the increased tariffs on Chinese imports and legislative measures aimed at managing steel imports from neighboring countries. Kevin Dempsey, the president and CEO of the American Iron and Steel Institute (AISI), has been particularly supportive. Dempsey praised the Biden administration's recent initiatives, stating these efforts are crucial for defending the U.S. steel industry against unfair foreign competition. He has also been a staunch advocate for the “Stop Mexico’s Steel Surge Act,” which seeks to address the influx of steel imports from Mexico by reinstating Section 232 tariffs. Dempsey's statements reflect a broader industry consensus that values robust government action to protect domestic manufacturing and maintain competitive equity. "We applaud Senators Brown and Cotton, and Congressmen Mrvan and Crawford, and the numerous bill cosponsors, for introducing this important legislation. We continue to urge the establishment of an effective monitoring system to prevent new surges of steel into the United States from Mexico," Dempsey commented on the legislative efforts.25 This blend of industry support highlights a strategic alignment with government policies designed to bolster national industries against complex global trade dynamics. 

• Mexican Government 

Mexico has approached the issue of tariffs and trade tensions with a focus on cooperation and regulation. Recent discussions between U.S. Trade Representative Katherine Tai and Mexico's Secretary of Economy Raquel Buenrostro have centered on enhancing trade monitoring and transparency, particularly concerning steel and aluminum imports. The Mexican government has taken steps to align its tariff classifications with those of the United States and to apply consistent import duty rates. These actions highlight Mexico's commitment to managing trade relations responsibly and transparently, aiming to prevent practices such as transshipment that could undermine fair trade agreements. This cooperative stance is crucial as both nations navigate the complexities of regional trade dynamics and strive to maintain a balanced and equitable trade relationship.26 

• Chinese Perspective 

The Chinese government has expressed strong opposition to the increased tariffs proposed by President Biden, labeling them as an "embodiment of unilateralism and protectionism." Liu Pengyu, a spokesperson for China's embassy in Washington, criticized the U.S. administration's approach, stating, "China's steel companies don't need to worry about making a profit; they're not competing, they're cheating and we've seen the damage here in America." This reflects a broader sentiment within China that views the tariffs as a continuation of misguided policies that could escalate trade tensions between the two nations. China regards such tariffs, including those from the Trump era, as discriminatory and counterproductive to global trade norms. The response underscores China's frustration with policies it perceives as unfairly targeting its economic interests and its readiness to retaliate against trade measures it deems unjust.27 

Conclusion and Recommendations  

The implementation of Section 232 tariffs on Mexican aluminum exports to the United States was premised on strengthening national security by protecting domestic industries from the influx of cheap imports, particularly from China. However, the real-world impacts have illuminated significant adverse effects that challenge the efficacy and intentions behind these tariffs. Rather than fortifying domestic industries, the tariffs have exacerbated global trade distortions, inadvertently encouraging practices such as transshipment where countries like China reroute their exports through Mexico to avoid U.S. tariffs. This not only undermines the goals of the tariffs but also inflicts economic harm on U.S. manufacturers by increasing costs and disrupting supply chains. Furthermore, the global response to these tariffs, including retaliatory measures by trade partners, has complicated international relations and contributed to a climate of increased protectionism, potentially igniting trade wars that hinder global economic stability. 

To more effectively address these challenges and ensure that trade policies do not adversely impact the U.S. economy or global trade dynamics, the following specific and actionable recommendations are proposed:  

• Enhance Customs Enforcement and Technology Integration: The U.S. Customs and Border Protection should integrate advanced technologies such as AI and machine learning to improve the detection and tracking of aluminum imports. This technology can analyze patterns and flag inconsistencies in shipment origins and volumes, helping to identify potential cases of transshipment and customs fraud more effectively.  

• Implement Targeted Tariff Adjustments: Rather than broad tariffs, implement more targeted measures that focus on specific products or countries of origin where evidence of dumping or transshipment is most clear. This approach requires a dynamic tariff mechanism that can adapt to changing trade patterns and respond to specific threats to domestic industries. 

• Foster Public-Private Partnerships to Enhance Compliance: Establish partnerships between the government and domestic industries to improve compliance monitoring and enforcement. These partnerships can provide a platform for sharing information about market conditions and potential violations, and for developing strategies to mitigate the impact of tariffs on U.S. manufacturers. 

• Negotiate Bilateral Agreements to Address Transshipment: Engage directly with countries like Mexico in negotiations to establish agreements aimed at preventing transshipment practices or at least one that enables parties to have recourse if it takes place. These agreements could include provisions for shared responsibility in policing, verification protocols, and penalties for non-compliance, aiming to create a more cooperative framework for addressing these issues. 

By taking these steps, the U.S. will not only secure its aluminum industry but also communicate a clear message of its commitment to protect its economic borders and maintain the integrity of its national security infrastructure. 

Endnotes 

1. Nideree, K., & Lawless, J. (2018, June 19). Breaking down section 232 of the trade expansion act of 1962: The United States Senate Committee on Finance. United States Senate Committee On Finance. https://www.finance.senate.gov/chairmans-news/breaking-down-section-232-of-the-trade-expansion-act-of-1962 

1. Durante, A. (2024, March 15). How the section 232 tariffs on steel and aluminum harmed the economy. Tax Foundation. https://taxfoundation.org/research/all/federal/section-232-tariffs-steel-aluminum/#:~:text=The%20Section%20232%20tariffs%20on%20steel%20and%20aluminum%2C%20enacted%20in,camp%20of%20harmful%20economic%20policies. 

1. Nideree, K., & Lawless, J. Breaking down section 232 of the trade expansion act of 1962  

1. U.S. Department of Commerce Announces Steel and Aluminum Tariff Exclusion Process. U.S. Department of Commerce. (2018, May 13). https://2017-2021.commerce.gov/news/press-releases/2018/03/us-department-commerce-announces-steel-and-aluminum-tariff-exclusion.html 

1. Office of Senator Joni Ernst. (n.d.). NATIONAL SECURITY TARIFFS: SECTION 232. National Security Tariffs: Section 232. https://www.rpc.senate.gov/policy-papers/national-security-tariffs-section-232 

1. Durante, A. How the section 232 tariffs on steel and aluminum harmed the economy.  

1. U.S. Department of Commerce Announces Steel and Aluminum Tariff Exclusion Process. U.S. Department of Commerce.  

1. https://www.cbp.gov/trade/trade-enforcement/tftea/eapa/notices-action 

1. China Zhongwang’s connection to aluminicaste examined in investigative report - Light Metal Age Magazine. Light Metal Age. (2016, September 9). https://www.lightmetalage.com/news/industry-news/extrusion/china-zhongwangs-connection-to-aluminicaste-examined-in-investigative-report/ 

1. China Zhongwang’s Connection . . . Light Metal Age 

1. Kempkey, N. (2019). U.S. energy trade with Mexico involves importing crude oil, exporting petroleum products . U.S. Energy Information Administration (EIA). https://www.eia.gov/todayinenergy/detail.php?id=39172 

1. Espejo, S. (2023, October 24). Mexico limits imports of chemicals, petrochemicals to combat contraband fuel with market’s approval. S&P Global Commodity Insights. https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/oil/102423-mexico-limits-imports-of-chemicals-petrochemicals-to-combat-contraband-fuel-with-markets-approval 

1. Durante, A. How the section 232 tariffs on steel and aluminum harmed the economy. 

1. Nosbitt, E. (2023, March 15). Certain effects of section 232 and 301 tariffs reduced imports and increased prices and production in many U.S. industries. Certain Effects of Section 232 and 301 Tariffs Reduced Imports and Increased Prices and Production in Many U.S. Industries | United States International Trade Commission. https://www.usitc.gov/press_room/news_release/2023/er0315_63679.htm 

1. What the WTO ruling against U.S. section 232 tariffs means . The Metals Service Center Institute. (2022, December 12). https://www.msci.org/what-the-wto-ruling-against-u-s-section-232-tariffs-means/ 

1. Durante, A. How the section 232 tariffs on steel and aluminum harmed the economy.   

1. Durante, A. How the section 232 tariffs on steel and aluminum harmed the economy. 

1. ITC report on implication of Sections 232 and 301 tariffs on imports. KPMG. (2023, March 15). https://kpmg.com/us/en/home/insights/2023/03/tnf-itc-report-on-implications-of-section-232-and-301-tariffs-on-imports.html 

1. ITC report on implication . . . KPMG 

1. ITC report on implication . . . KPMG 

1. Chinese manufacturers avoid US tariffs by opening plants in Mexico. Monterrey Daily Post. (2022, September 16). https://monterreydailypost.com/2022/09/16/chinese-manufacturers-avoid-us-tariffs-by-opening-plants-in-mexico/ 

1. Ltd, A. (2024, February 22). Chinese exporters turn to Mexico to avoid US tariffs. MIC. https://www.mic-cust.com/insights/posts/detail/ad/chinese-exporters-turn-to-mexico-to-avoid-us-tariffs/ 

1. David M. Schwartz, & Scott E. Diamond*. (2023, March 29). U.S. Supreme Court denies petition challenging Section 232 steel tariffs. SmarTrade. https://www.thompsonhinesmartrade.com/2023/03/u-s-supreme-court-denies-petition-challenging-section-232-steel-tariffs/ 

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1. Brocklehurst, A. (2024, March 18). Steel industry supports legislation cracking down on Mexican imports. Fastmarkets. https://www.fastmarkets.com/insights/steel-industry-supports-legislation-mexican-imports/#:~:text=The%20two%20countries%20also%20agreed,carbon%20material%20from%20third%20countries. 

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1. Biden calls for higher tariffs on Chinese steel | Reuters.