[SMM Analysis]US Expands Section 232 Steel and Aluminum Tariff Product Scope (Adds 407 Items, Effective August 18, 2025) (Part 2)

On 15 August 2025, the U.S. Department of Commerce announced that an additional 407 derivative products containing iron, steel, or aluminum will be brought within the scope of Section 232 duties. The measure enters into force at 12:01 p.m. Eastern Time on 18 August 2025. According to the notice, the steel- or aluminum-containing portion of these goods—whether they arrive as in-transit shipments or are already held in U.S. inventory—will be subject to a 50 percent ad valorem duty, and no exclusions will be granted. Under the combined “whole-vehicle proportional duty” mechanism (Sections 301 and MFN) and the “material-content proportional duty” mechanism (Section 232), even a seemingly moderate nominal rate on the finished product can translate into a markedly higher total tax burden whenever steel or aluminum accounts for a large share of value.

1. Base MFN duty of roughly 3 percent
   After the U.S.-China Permanent Normal Trade Relations (PNTR) Act took effect in 2000 and China acceded to the WTO in 2001, the annual congressional waiver process for Most-Favoured-Nation (MFN) treatment was replaced by permanent application of the MFN rate (referred to in U.S. statutory texts as the “Column 1 General” rate). Consequently, the “baseline duty” applied to Chinese goods is simply the MFN bound rate, the same rate applied to all other WTO members. Additional duties imposed under Sections 301 and 232, as well as anti-dumping and countervailing duties, are layered on top of this MFN rate.

2. Section 301 duties of 7.5–25 percent
   Legal basis: Section 301 of the Trade Act of 1974
   Origin: A 2017 USTR investigation concluded that China’s intellectual-property and technology-transfer policies constitute “unfair trade practices.”
   Implementation: Beginning in 2018, the U.S. imposed four tranches of duties (Lists 1–4A) on Chinese-origin merchandise.
   Rates: Lists 1 & 2—25 percent; List 3—25 percent; List 4A—7.5 percent.

3. Fentanyl-related duty of 20 percent
   Initially justified on narcotics-enforcement grounds, this duty was later extended to virtually all Chinese goods and raised to 20 percent. Despite subsequent joint statements in which China suspended certain retaliatory measures, the U.S. continues to treat the Fentanyl duty as a key leverage point.

4. Section 232 steel and aluminum duty of 50 percent
   30 April 2025: The Bureau of Industry and Security (BIS) issued the Section 232 Inclusion Procedures, establishing a mechanism to add “derivative products” to the tariff list.
   15 August 2025 notice (effective 18 August):

• An additional 407 derivative products containing steel or aluminum will be subject to a 50 percent duty on the steel/aluminum value.

• Goods already in U.S. inventory are covered; no exclusions are available.

• The list is expansive, ranging from machinery parts to consumer packaging.

Illustrative calculation: electric scooter with aluminum frame and steel components

• Customs value: US$1,200

• Material breakdown: aluminum US$250, steel US$150, other materials/components US$800

• Assessed duties (illustrative rates):
  – Section 301: 7.5 % on full customs value
  – MFN: 3 % on full customs value
  – Section 232: 50 % on aluminum value, 50 % on steel value
  – Fentanyl: 20 % on full customs value
  – Reciprocal duty (suspended after 12 Nov): 10 % on remaining value

Duty computation
Section 301: US$1,200 × 7.5 % = US$90.00
MFN: US$1,200 × 3 % = US$36.00
Section 232 (aluminum): US$250 × 50 % = US$125.00
Section 232 (steel): US$150 × 50 % = US$75.00
Fentanyl: US$1,200 × 20 % = US$240.00
Reciprocal: US$800 × 10 % = US$80.00

Total landed-duty cost: US$646.00

Thus, under the overlapping “whole-vehicle proportional” and “material-content proportional” regimes, even moderate headline rates can yield a sharply elevated total tax burden whenever steel or aluminum represents a significant share of product value.

SMM New Energy Industry Research Department

Cong Wang 021-51666838

Xiaodan Yu 021-20707870

Rui Ma 021-51595780

Disheng Feng 021-51666714

Yujun Liu 021-20707895

Yanlin Lü 021-20707875

Zhicheng Zhou 021-51666711

Haohan Zhang 021-51666752

Zihan Wang 021-51666914

Xiaoxuan Ren 021-20707866

Jie Wang 021-51595902

Yang Xu 021-51666760

Boling Chen 021-51666836