In response to Brazil's recent adoption of trade defense strategies aimed at managing imported steel acquisitions, traders and importers are turning to innovative solutions like adding boron to their steel materials. This move is designed to circumvent additional tariffs imposed on steel imports, as local sources have reported significant changes in trading practices since the new measures were implemented earlier this year.
The Brazilian government introduced a quota-tariff mechanism in June 2024, establishing volume limits on specific steel products classified under 11 NCM (Mercosur Common Nomenclatures) codes. Exceeding these limits triggers a steep increase in tariffs, raising import duties from the existing 9-12% to as high as 25%. This has compelled Brazilian steelmakers to advocate for stricter trade defense measures, leading traders to explore alternative products to mitigate the financial burden of tariffs.
Boron, even in minimal quantities, enhances the hardening properties of carbon steels. As a result, steel containing boron is categorized differently under the NCM code system, allowing it to escape the higher tariffs associated with non-boron-added materials. Traders have noted that the addition of boron enables them to import steel at a fixed tariff rate of only 12.6%, compared to the potential 25% tariff on traditional materials that exceed quota limits.
According to data from Comex Stat, imports of hot-dipped galvanized steel with added alloys, including boron, surged by over 400% from January to July 2024, compared to the same period in previous years. This dramatic increase reflects traders' strategic pivot towards boron-added products as a means to avoid the financial penalties associated with the quota-tariff system.
Despite the rising interest in boron-added steel, the Brazilian government is closely monitoring these transactions to prevent what is termed “NCM escapes.” This term refers to practices where importers modify product specifications or dimensions to change their classification and evade tariffs. Marco Polo de Mello Lopes, president of Aço Brasil, highlighted that the association is vigilant in tracking such activities to ensure compliance with trade regulations.
Additionally, the Brazilian government opened an anti-dumping investigation into imports of flat-rolled steel coil and plate products from China on August 19, 2024. This has prompted some importers to consider boron-added cold-rolled steel as a viable alternative to avoid potential anti-dumping tariffs. Traders are beginning to quote prices for boron-added materials, indicating a shift in purchasing strategies as they navigate the complexities of the new trade landscape.
