Background
As we previously reported, President Biden and Congress took steps in March 2022 to revoke Russia’s most-favored-nation (or “MFN”) trade status, known as Permanent Normal Trade Relations (“PNTR”) status under U.S. law. As a result of these actions, the Suspending Normal Trade Relations with Russia and Belarus Act (“Suspending NTR Act”) entered into force on April 8, 2022, formally revoking PNTR status for Russia and Belarus. Under the terms of the Act, imports into the United States of products from Russia and Belarus became subject to tariff rates set out in column 2 of the U.S. tariff schedule, rather than the column 1 rates that had previously applied. Column 2 tariff rates are often higher—sometimes much higher—than MFN tariff rates in column 1, and as a result of this change, tariffs on U.S. imports from Russia increased from an average of approximately three percent to 32 percent. In addition to implementing this immediate change in applicable tariff rates, the Suspending NTR Act also temporarily authorized the President, through the end of 2023, to increase even further tariffs applicable to imports from Russia and Belarus.
On June 27, pursuant to the authority granted under the Suspending NTR Act, President Biden issued Presidential Proclamation 10420, announcing that the United States would further increase tariffs applicable to certain categories of imports from Russia, worth approximately $2.3 billion annually. U.S. Customs and Border Protection (“CBP”) recently issued guidance on these tariff increases, which will apply effective July 27, 2022. This alert provides additional information on the forthcoming tariff increases, and discusses potential implications for importers of Russian goods.
Overview of July 27 Tariff Rate Increase on Certain U.S. Imports from Russia
Since revocation of PNTR status in April, products imported into the United States from Russia and Belarus have been subject to tariff rates set forth in column 2 of the U.S. tariff schedule. Under the terms of Presidential Proclamation 10420, however, duty rates of 35 percent ad valorem will apply to 570 categories of Russian products in lieu of column 2 rates, beginning July 27, 2022. These product categories have an estimated value of approximately $2.3 billion annually. The Proclamation does not impact imports from Belarus, which will remain subject to column 2 tariff rates.
This action impacts a wide range of products, including imports of steel, aluminum, iron, minerals, chemicals, explosives and pyrotechnic products, plastics and rubbers, wood, charcoal, paper, leather, stone, cement, vehicles, and aircraft from Russia. The full list of product categories impacted by this action can be found here. Notably, of the 570 product categories listed, relatively few include products that have been imported into the United States in substantial values in recent years. In particular, of the 570 product groups, only eight are categories whose imports into the United States were valued at $50 million or more in 2021. The product categories facing the greatest impact in terms of value as a result of this increase in tariffs will likely be semi-finished products of iron or non-alloy steel, firearm cartridges, silver bullion and dore, as well as the other products identified in the table below. Covington can assist importers of such products to assess the specific impact on their business of Presidential Proclamation 10420, as well as the potential impact of future executive action under the Suspending NTR Act.
Table: July 27 Tariff Rate Changes to U.S. Imports from Russia
| Tariff Code | Product Description | 2021 Customs Value | Rates of Duty | ||
| Column 1 (MFN Rate) | Column 2 (Non-MFN Rate) | New Rate Effective July 27 | |||
| 7207.12.00** | Semifinished products of iron or nonalloy steel with less than 0.25% carbon, with rectangular cross section (excluding square) | $886.7 million | Free | 20% | 35% |
| 9306.30.41 | Cartridges and empty cartridge shells | $163.5 million | Free | 30% | 35% |
| 7106.91.10 | Silver bullion and dore | $143.9 million | Free | Free | 35% |
| 7115.90.05 | Articles of precious metal, in rectangular or near rectangular shapes, containing 99.5 percent or more by weight of a precious metal and not otherwise marked or decorated than with weight, purity, or other identifying information | $93.4 million | Free | Free | 35% |
| 7801.10.00 | Refined lead, unwrought | $86.3 million | 2.5% on the value of the lead content (kg) | 10% | 35% |
| 7408.11.60 | Refined copper, wire, with a maximum cross-sectional dimension over 6 mm but not over 9.5 mm | $70.9 million | 3% | 28% | 35% |
| 7605.11.00 | Aluminum wire not alloyed, with a maximum cross-sectional dimension over 7 mm | $60.5 million | 2.6% | 11% | 35% |
| 7224.90.00** | Alloy steel (other than stainless steel) and semifinished products | $57.2 million | Free | 28% | 35% |
** Products marked with asterisks are also currently subject to an additional 25 percent special duty as a result of action taken by the Trump Administration under Section 232 of the Trade Expansion Act of 1962, and maintained by the Biden Administration.
Conclusion
This action is the first taken using the President’s new authority to increase tariffs under the Suspending NTR Act, and it is currently unknown whether and when the Administration may take further action to increase tariffs on additional products, or ratchet up tariffs on these same products beyond the 35 percent set out in Proclamation 10420. Companies should closely follow these developments, and we will continue to provide guidance to clients seeking to evaluate the impact of increased tariff rates on Russian products on their operations.