Mexico Avoids Tariffs On Steel Used In Energy Sector

The Mexican government has agreed to strictly monitor exports of certain steel components to ensure they don't contain low-price steel from countries outside North America, according to the United States Trade Representative's (USTR) office.

In exchange, Mexico will be protected from any future U.S. tariffs against electrical steel transformers and components, according to the agreement announced Thursday.

"The resilience of North America's energy infrastructure is significantly enhanced by having electrical steel production capability within our region," said U.S. Trade Representative Robert Lighthizer in a release. "An influx of low-price steel from third countries imperils this capability."

The agreement affects the cross-border shipment of grain-oriented electrical steel (GOES) from outside North America into the U.S. through downstream products such as transformer cores that could contain such steel, according to the USTR.

The Mexican steel components and parts excluded from future U.S. tariffs include:

• Stacked core laminations for incorporation into transformers.
• Stacked cores for incorporation in transformers.
• Rolled cores for incorporation in transformers.
• Electrical transformers.
• Transformer regulators manufactured with GOES.

Beginning in this quarter, Mexico will start implementing a monitoring regime for exports of electrical transformer laminations and cores made of non-North American GOES, Mexico's Ministry of Economy said in a release.

"The imposition of tariffs on more than $1.2 billion of Mexican exports of these products is avoided and certainty is given to our country's manufacturing industry. This agreement includes a monitoring scheme for exports of these products to the U.S., which will come into effect from the [fourth] quarter of 2020," the announcement said. 

The Department of Commerce, based on section 232 of the Trade Expansion Act of 1962, and requested by companies in the U.S. steel industry producing GOES, began its investigation into Mexican electrical steel components on May 11.

The U.S. is the world's biggest steel importing nation, importing $23.9 billion (26.3 million tons of the raw material) in 2019, according to the International Trade Administration. 

The U.S. top three providers for steel imports are Canada, Brazil and Mexico.

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