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1 1 (October 9, 2018)

handle is hein.crs/govchwu0001 and id is 1 raw text is: FF. ' ,iE S .r, i , Updated October 9, 2018 Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing Since March 2018, the United States has assessed duties of 10% or more on certain imports of aluminum on national security grounds. The duties are controversial, with some Members of Congress questioning whether the duties will encourage domestic aluminum production and whether they could adversely affect U.S. industries that use aluminum. Acting under Section 232 of the Trade Expansion Act (19 U.S.C. § 1862, as amended), which allows the President to levy tariffs and quotas on imports found to threaten or impair U.S. national security, President Trump signed a proclamation that imposed a 10% tariff on foreign-made primary unwrought aluminum and certain semifinished aluminum products effective March 23, 2018. Although aluminum manufactured in certain countries was initially exempted, most exemptions expired on June 1, 2018, thereby extending the tariff to key sources of aluminum imports, including Canada, the leading import source of primary unwrought aluminum into the United States. Argentina, which agreed to a quota, and Australia are the only two countries that have been permanently exempted. The tariff has no set expiration date; it can be removed at any time. On August 10, 2018, the President announced in a tweet he had authorized an increase of the tariff on aluminum from Turkey to 20%, but he has not yet signed a Section 232 proclamation putting the higher duty into effect. The United States has also imposed sanctions on Rusal, a Russian aluminum company and the world's largest producer outside China. As Figure 1 shows, unwrought aluminum, a light metal, is made in two distinct ways. Primary aluminum production consists of mining bauxite, refining it to produce alumina, and then smelting alumina to yield aluminum. Figure I. Aluminum Industry Overview Source: Figure adapted by CRS from NERA Economic Consulting, Impacts of Potential Aluminum Tariffs on the U.S. Economy, June 2017. Secondary aluminum production uses recycled scrap melted in a smelter. Although secondary aluminum can be substituted for primary aluminum in most uses, primary aluminum is favored in applications with high quality and consistency requirements, such as electronics and aerospace manufacturing. One U.S. smelter produces primary aluminum of sufficient purity for use in military aircraft. In 2017, U.S. production of primary aluminum totaled 741,000 metric tons, the lowest level since 1951, down from 2.6 million metric tons in 2007, according to the U.S. Geological Survey (USGS). U.S. production peaked in 1980 at 4.7 million metric tons, and the United States was the world's top producer through 2000. In 2017, the United States accounted for 1.2% of the world's primary aluminum production. At the end of 2017, Alcoa and Century Aluminum were the two remaining operators of primary aluminum smelters in the United States. In June 2018, Magnitude 7 Metals restarted limited production at its primary aluminum smelter, which had been closed since 2016. According to USGS, capacity utilization of primary smelters stood at 37% in 2017. Secondary aluminum is produced in two ways. Old scrap is recovered from used aluminum cans, auto parts, aircraft, and other products. New scrap is the leftovers from processing wrought aluminum and cast products into consumer or industrial products. Secondary aluminum accounted for 83% of U.S. aluminum production in 2017. The United States is now the world's largest producer of secondary aluminum. China ranks second. Unlike primary aluminum production, domestic production of secondary aluminum has been fairly steady over the past two decades. Caus-eso De inn Prinry Allumi'fl A Department of Commerce investigation of the aluminum industry found that imports and global overcapacity, caused in part by foreign government subsidies (particularly in China), have had a substantial negative effect on domestic production of primary aluminum. But it appears that comparatively high electricity costs have been another important factor affecting domestic production. According to the Aluminum Association, electricity can account for up to 40% of the costs of primary unwrought aluminum production. For this reason, many U.S. aluminum smelters were constructed in locations with access to abundant developed hydropower. U.S. electricity prices today, however, are generally higher than in many other countries that produce aluminum. Alcoa and Century have located their newer smelting operations near low-cost electricity sources outside the United States. Favored locations for primary smelting include Iceland, Russia, the United Arab Emirates, Norway, and Canada. In response to this and other factors, including exchange rates and labor costs, many domestic facilities have cut back production or shut down entirely. The newest U.S. primary smelter was built nearly 40 years ago. Primary smelting involves large capital investments- industry groups estimate the cost of a new smelter at around .O 'T gognpo goo g , q 'S a X 11LULANJILiN,

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