# Rationale test — S232 metals derivative-article expansion (JCC-3892, FR 2026-15961)

BIS's stated rationale for adding these 14 articles is that their imports "threaten to
undermine the objectives" of the Section 232 steel/aluminium/copper tariffs — the standard
derivative-article circumvention logic: importers reclassify covered metal into downstream
products to dodge the primary tariff, so the tariff base has to follow the metal downstream.
This memo tests that rationale against who actually supplies these 14 products, using the
2024 USITC origin breakdown (HS8-precise, `answered` — see `data_vintages.md`) computed by
`code/s232_derivatives/rationale_test_metrics.R` into
`results/s232_derivatives/origin_concentration.csv`. All three vintages behind this pipeline
(2024, 2025, 2026 YTD) are now HS8-precise USITC data, `answered` throughout; this memo
anchors on 2024 because it is the clean pre-proposal baseline (see `data_vintages.md`).

## Origin-concentration metrics, all 14 articles (2024 baseline)

HHI here is the Herfindahl-Hirschman Index on supplier shares (0–10,000 scale; the standard
antitrust convention: <1,500 unconcentrated, 1,500–2,500 moderately concentrated, >2,500
highly concentrated — used here descriptively, not as a competition-policy claim).

| # | Article | 2024 imports | Suppliers | HHI | Top supplier | China share | Switzerland share |
|---|---|---:|---:|---:|---|---:|---:|
| 1 | Aluminum powder | $70.9M | 21 | 2,977 | Australia 50.2% | 15.3% | 0.0% |
| 2 | Brass-wind instruments & parts | $137.2M | 53 | 2,204 | China 37.1% | 40.8% | 0.4% |
| 3 | Welding-machine parts | $380.3M | 50 | 1,235 | Germany 20.6% | 11.5% | 1.6% |
| 4 | Free-standing floor safes | $344.2M | 38 | 4,219 | China 61.7% | 61.7% | 0.1% |
| 5 | Electric conductor cables | $2,467.7M | 158 | 2,347 | Mexico 45.9% | 5.1% | 0.3% |
| 6 | Fire extinguishers | $219.7M | 45 | 5,813 | Mexico 75.6% | 6.1% | 0.0% |
| 7 | Heat exchange unit parts | $615.3M | 55 | 882 | China 19.3% | 19.3% | 2.0% |
| 8 | Hydraulic engine/motor parts | $2,985.2M | 88 | 1,479 | Mexico 29.2% | 15.2% | 0.1% |
| 9 | Mobile lifting frames/straddle carriers | $134.4M | 21 | 2,822 | Poland 49.1% | 9.9% | 0.0% |
| 10 | Other self-propelled cranes | $512.3M | 19 | 4,418 | Japan 64.2% | 0.4% | 0.0% |
| 11 | Tanker trailers | $299.7M | 5 | 6,563 | Mexico 78.0% | 0.0% | 0.0% |
| 12 | Agricultural trailers | $71.2M | 6 | 5,027 | Mexico 59.4% | 0.1% | 0.0% |
| 13 | Other trailers | $203.8M | 34 | 4,586 | Canada 65.2% | 8.2% | 0.0% |
| 14 | Filled steel containers | $1,963.5M | 27 | 7,474 | Canada 86.2% | 0.1% | 0.0% |

Two clusters fall out of this table, not one:

- **China-concentrated, consumer/finished-goods-adjacent:** floor safes (61.7% China),
  brass-wind instruments (40.8% China), heat exchange parts (19.3% China). These are exactly
  the origin pattern a circumvention story needs — dominant-adversary-origin supply for
  goods that could plausibly embed reclassified metal.
- **USMCA-concentrated, capital-goods/vehicle-adjacent:** trailers (Mexico 78.0%/59.4%,
  Canada 65.2%), filled steel containers (Canada 86.2%), fire extinguishers (Mexico 75.6%).
  China's share in this cluster is 0.0–8.2%. These are dominated by treaty allies already
  inside their own metals arrangements, not by the jurisdictions the S232 program's stated
  security logic targets.

The remaining articles (aluminium powder, welding parts, cables, hydraulic parts, lifting
frames, cranes) sit in between — moderate concentration, no single dominant adversarial or
allied origin.

**A separate data note, not a rationale caveat.** Articles 9 (mobile lifting frames) and
14 (filled steel containers) show the largest gap between the 2024 baseline used here
and a same-basis 2024 rebuild — a USITC trade-flow-basis difference (General Imports vs
Imports for Consumption), documented in `data_vintages.md`. `article_sizing.csv` resolves
this for its 2025-vs-2024 change figure (`pct_change_2025_vs_2024_ifc`, computed on a
single basis for all 14 articles); it does not affect the 2024 origin-concentration read
above, which is unaffected because it never mixes vintages.

## The Switzerland-brass-instruments case

Switzerland (CH+LI customs union, the convention used in the June 2026 S232 Annex I-C
drill-down, `code/analysis/annex_ic_swiss_analysis.R`) is the plausibility check because it
is a byword for "developed, non-adversarial, not a raw-metals exporter" — a country whose
presence or absence in a metals-derivative supply chain says something about whether the
article is really about national security.

Switzerland's actual position: **$485,212 of the article's $137.2M in 2024 imports — a 0.4%
share, ranked 20th of 53 suppliers.** It is not a meaningful supplier of brass-wind
instruments to the United States at all. The article's real supply base is China (37.1%),
Japan (24.8%) and Taiwan (11.7%) — 73.6% cumulative — the world's three largest musical-
instrument manufacturing hubs, ordinary consumer-goods trade with no distinctive
"circumvention corridor" signature.

That splits the plausibility question in two, and they point in different directions:

- **On origin:** China's 40.8% share (rank 1) is *not* implausible for a circumvention
  story — it is the textbook pattern. Switzerland's near-total absence doesn't undercut
  that; it simply confirms Switzerland isn't part of this trade at all.
- **On product:** a finished brass-wind musical instrument is a poor fit for "national
  security" reasoning regardless of who ships it. Nothing about a trumpet or a tuba
  threatens the defence industrial base the notice's own justification invokes (steel,
  aluminium and copper "essential products for producing U.S. weapons"). The implausibility
  here is about the *product category*, not the *origin* — the Switzerland test returns a
  clean, uncontaminated read on origin precisely because it rules out one confound (a
  friendly-country presence that might otherwise complicate the "is this really about
  security" question) without resolving the other.

## Steelman: the anti-circumvention rationale

The origin-concentration critique above is the risk case; the balanced read requires taking
the notice's own legal theory seriously on its own terms (analytical-balance rule).

**Section 232 derivative-article authority does not require adversarial-country
concentration to be legitimately exercised.** Proclamation 11021 authorizes BIS and USTR to
add a derivative article whenever imports "have increased in a manner that threatens to
impair the national security," "contribute to the national security threats" already found,
**or** "otherwise undermine the objectives of the actions taken" — the third prong is about
the *tariff programme's own effectiveness*, not about any specific country's behaviour. On
this reading, the relevant question is not "does China dominate this trade" but "does
duty-free import of the finished/downstream good let steel, aluminium or copper content
avoid the tariff that would apply to it as raw or semi-finished metal" — a question about
**product form**, answerable regardless of origin mix. A brass-wind instrument embeds sheet
brass; a floor safe embeds structural steel; an electric cable embeds copper wire. Under this
reading, the entire point of a derivative-article programme is to chase the metal downstream
through *any* product, from *any* origin, precisely because a narrowly adversarial-country
scope would just relocate the reclassification problem to non-adversarial intermediaries
instead of closing it.

This is a real, legally grounded argument, and this memo does not have the evidence to
falsify it: nothing in the origin-concentration data above can distinguish "these products
are being used to route metal around the tariff" (a claim about product substitutability
and reclassification incentives) from "these products are ordinary finished-goods trade that
happens to be metal-intensive" (a claim about product composition). Both produce the same
origin-share pattern. The steelman's own internal tension is that if product-form chasing is
truly origin-blind, the pattern above should look roughly similar across all 14 articles —
and it does not: the China-concentrated cluster and the USMCA-concentrated cluster diverge by
40–80 percentage points on both China and North American shares, which is more heterogeneity
than a purely origin-blind, product-form-driven rationale would predict on its own, though
it is also consistent with 14 genuinely different product markets each having their own
ordinary (non-tariff-driven) supplier geography.

## Net assessment

Neither "obvious pretext" nor "obviously justified" survives contact with the full 14-article
set. The concentration data is consistent with a **mixed docket**: several articles (floor
safes, brass-wind instruments, heat exchange parts) show China-dominated supply consistent
with the stated circumvention logic; several others (trailers, filled steel containers, fire
extinguishers) are dominated by USMCA partners already inside their own S232 metals
framework, where the security rationale is harder to sustain on origin grounds alone and
would need to rest on the product-form argument above rather than on adversarial-country
exposure. The Switzerland test specifically clears one confound (friendly-country presence)
without resolving the deeper one (origin-blind product-form reasoning is legally available
and this dataset cannot adjudicate it). The S232 post should present both clusters, not
collapse them into a single verdict — [status: answered, all shares/HHI from
`origin_concentration.csv`, 2024 baseline].
