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On March 1, the President announced his intention to impose tariffs of 25% on all imported steel and 10% on all imported aluminum. A more formal announcement of the tariffs is expected in the coming week and, while many might have been surprised by the timing of the President’s initial statement, it came after a 10-month process of investigation by the U.S. Department of Commerce, culminating with its January 2018 recommendation for tariffs or quotas to protect U.S. producers. The Commerce Department reports are available here and here.

When finalized, these tariffs could have significant impacts on contractors across a range of industries, increasing costs of performance and restricting available supply. Domestic prices are expected to rise, and foreign suppliers may turn their focus to other markets. Supply disruptions are possible, particularly in the short term. To protect themselves, federal contractors who manufacture or use products with steel or aluminum should examine existing contracts, re-evaluate bids being developed, and consider revisions to standard contract terms.

Price Adjustments and Recovery

Some contracts may include provisions allowing contractors to seek price adjustments and recover for increased costs of steel and aluminum caused by these tariffs. For example, under Federal Acquisition Regulation (FAR) clause 52.229-3 – “Federal, State and Local Taxes” the contractor is entitled to a price increase for after-imposed federal excise taxes or duties that it pays or bears. Contracts also may contain economic price adjustment (EPA) clauses, allowing contractors to obtain price increases when material costs rise. Contractors should evaluate the particular terms and restrictions in their affected contracts.

Managing Schedule Impacts

Buyers also could experience disruptions to supply as a result of the new tariffs. Contractors will need to evaluate whether they are entitled to schedule extensions if they are impacted by supply disruptions. Force majeure and excusable delay clauses as well as other specifically negotiated contract terms could prove useful to contractors needing relief. However, to the extent that contractors face a choice between significant schedule and cost impacts, they should carefully manage customer communications and operate with a coordinated understanding whenever possible.

Bids in Development and Downstream Contract Terms

Recognizing the importance of provisions addressing the cost and schedule impacts from new federal tariffs, contractors should closely evaluate bids and proposals being developed, to determine the degree of price risk. Similarly, buyers must evaluate the risks and protections in the terms and conditions of downstream contracts, and consider updates to their standard terms and conditions.

Our team of experienced government contracts attorneys is available to help guide your business through these new developments.

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Photo of Peter J. Eyre Peter J. Eyre

Peter J. Eyre is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He is also a member of the firm’s Management Board. Peter was named to BTI Consulting Group’s list of “Client Service All-Stars” in 2016, 2017, and 2019 and…

Peter J. Eyre is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He is also a member of the firm’s Management Board. Peter was named to BTI Consulting Group’s list of “Client Service All-Stars” in 2016, 2017, and 2019 and has been named an Acritas Star, Acritas Stars Independently Rated Lawyers (2016, 2017, 2019). He is nationally ranked by Chambers USA in Government Contracts since 2014, and by Super Lawyers since 2017.

Photo of J. Chris Haile J. Chris Haile

J. Chris Haile is a partner at Crowell & Moring with extensive experience in government procurement law. Mr. Haile litigates disputes and counsels clients in a broad range of government contract matters, with particular emphasis on the resolution of contract disputes. For example…

J. Chris Haile is a partner at Crowell & Moring with extensive experience in government procurement law. Mr. Haile litigates disputes and counsels clients in a broad range of government contract matters, with particular emphasis on the resolution of contract disputes. For example, Mr. Haile has represented clients in matters involving the government’s breach of contract, claims for contract changes, termination for default, termination for convenience, Truth in Negotiations Act (TINA) compliance and defective pricing, commercial-item procurement, contract negotiations, and bid protests. He also represents clients in other related matters, such as investigations and audits by government agencies or inspectors general (IGs), False Claims Act / qui tam relator suits, and disclosures to the U.S. Government.

Photo of Steve McBrady Steve McBrady

Steve McBrady is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He also serves as a member of the firm’s Finance and Strategic Growth Committees, where he has played a leading role in expanding client service offerings throughout the U.S.…

Steve McBrady is a partner and co-chair of Crowell & Moring’s Government Contracts Group. He also serves as a member of the firm’s Finance and Strategic Growth Committees, where he has played a leading role in expanding client service offerings throughout the U.S., Europe, Asia, and the Middle East.

In recent years, Steve has received the National Law Journal’s “Winning Litigator” award as a lawyer who has “tackled some of the most widely watched cases of the year,” as well as the “D.C. Trailblazer” award, recognizing lawyers who have “made significant marks on the practice.” In 2018, he was named “Government Contracts MVP” by Law360.

Photo of Brian Tully McLaughlin Brian Tully McLaughlin

Brian Tully McLaughlin is a partner in the Government Contracts Group in Washington, D.C. and co-chair of the False Claims Act Practice. Tully’s practice focuses on False Claims Act investigations and litigation, particularly trial and appellate work, as well as litigation of a…

Brian Tully McLaughlin is a partner in the Government Contracts Group in Washington, D.C. and co-chair of the False Claims Act Practice. Tully’s practice focuses on False Claims Act investigations and litigation, particularly trial and appellate work, as well as litigation of a variety of complex claims, disputes, and recovery matters. Tully’s False Claims Act experience spans procurement fraud, healthcare fraud, defense industry fraud, and more. He conducts internal investigations and represents clients in government investigations who are facing fraud or False Claims Act allegations. Tully has successfully litigated False Claims Act cases through trial and appeal, both those brought by whistleblowers / qui tam relators and the Department of Justice alike. He also focuses on affirmative claims recovery matters, analyzing potential claims and changes, counseling clients, and representing government contractors, including subcontractors, in claims and disputes proceedings before administrative boards of contract appeals and the Court of Federal Claims, as well as in international arbitration. His claims recovery experience includes unprecedented damages and fee awards. Tully has appeared and tried cases before judges and juries in federal district courts, state courts, and administrative boards of contract appeals, and he has argued successful appeals before the D.C. Circuit, the Federal Circuit, and the Fourth and Seventh Circuits.