Rebuilding in the Age of 50% Tariffs on Steel

Rebuilding often requires a retrospective examination. In the case of rebuilding homes and businesses after a natural catastrophe, such as Hurricane Katrina or the 2025 LA fires, that retrospective examination includes reviewing the composition of prior building materials and making prospective choices as to building materials and available global supply chains to mitigate potential future effects. Rebuilding may include contracting (or subcontracting) the project, retaining an architect, and sourcing materials. In 2025, there is one additional crucial consideration: steel tariff compliance.

Building With Steel to Mitigate Fire

The January 2025 fires devastated Los Angeles, California, necessitating the rebuilding of homes and businesses. Lahaina, Hawaii experienced devastating fires in August 2023 which provided insights into rebuilding for fire resiliency in LA. One such report by the Insurance Institute for Business & Home Safety (IBHS), an insurance industry nonprofit organization that studies “why buildings burn,” found that properties built from certain materials withstand fires better.¹ IBHS research engineer Faraz Hedayati explained that concrete walls and fencing act as a “heat shield;” “commercial-grade corrugated metal roof[s] [and] stone” resist the spread of embers; and fiber cement or stucco siding is noncombustible, as is double-paned tempered glass.² Recommended fire-safe materials include “class A” materials such as asphalt fiberglass composition shingles, clay and cementitious tiles, and certain metal roofing materials.³

The Building Code for Los Angeles County, California requires the use of Class A materials in roofs.⁴ The California Building Code further lists ignition-resistant materials requirements, in compliance with State Fire Marshall Standard 12-7A-5.⁵ Noncombustible materials must pass the test specified in the Advanced Standards Transforming Markets E136.⁶ The National Fire Protection Association lists concrete and steel as “noncombustible (or limited-combustible).”⁷ Since steel is noncombustible, those affected by the LA fires are likely to use that material to rebuild.

Tariffs on Steel and Steep Penalties Throughout the Supply Chain

Creating a budget for building projects has become more complex due to tariffs on materials from foreign countries. In February 2025, President Trump announced tariff increases on steel “at a minimum of 25 percent,” which went into effect on March 12, 2025.⁸ Doubling down on the steel tariffs, the President raised the steel tariff to 50% in a June Executive Order,⁹ with the increased tariffs affecting steel loaded on vessels starting August 7, 2025.¹⁰

On May 12, 2025, federal prosecutors within the Criminal Division of the Department of Justice (DOJ) were directed to meticulously track and prosecute parties attempting to evade tariffs.¹¹ The DOJ has bolstered its whistleblower program to encourage increased prosecution.¹² The DOJ is thoroughly investigating misclassification and undervaluation of goods, country of origin misrepresentation, rerouting, tampering with tracking data, and efforts to conceal or manipulate records.¹³ In addition to criminal penalties, civil penalties multiply unpaid tariffs.¹⁴ Penalties may apply to foreign suppliers, brokers, importers, freight forwarders, and “downstream US buyers.”¹⁵ DOJ enforcement compels importers to “reconfirm[] product classification, valuation, and countries of origin” to avoid prosecution and fines.¹⁶

The largest concerns relate to schemes to get around the tariffs. One such scheme includes parallel or duplicate commercial invoices, one for payment and one for supporting the tariff at a lower cost. Another scheme relates to transshipments via third party countries and marking shipments with a new country of origin. A third scheme involves a foreign manufacturer opening a domestic entity to import shipments at cost and then sell them at the regular market rate with a lower tariff cost point without substantial transformation domestically. Anyone involved in current and future building projects in the United States — from homeowners and small business owners to corporate entities and importers — should closely monitor upstream compliance to avoid steel tariff evasion penalties.

Enforcement Actions Impacting Builders in LA

Many LA building projects are advised to use steel to mitigate fire risks. All parties involved in these projects should consider conducting due diligence to hedge against the risk of tariff penalties within their steel supply chain. Due to increased steel import costs, businesses may explore cost reduction options. However, cost reduction efforts should not involve product misclassification, value underreporting, or inaccurate country of origin representations, as such actions may incur penalties far worse than increased steel costs.¹⁷ An additional 40% tariff will apply to for “transshipment violations” — rerouting products subject to tariffs in one country through countries with lower tariff rates to lower the effective tariff on the import.¹⁸

Within the past eight months, there has been a significant increase in whistleblower inquiries regarding tariff evasion, including an increase of over 100%, often from “industry rivals seeking fair competition.”¹⁹ Even parties making negligent errors regarding steel tariff compliance will now be investigated by the DOJ, alongside those making deliberate misstatements.²⁰ The DOJ is focusing on steel due to frequent “classification ambiguities” and high tariff margins, with enforcement efforts expected to increase in the coming months.²¹ Property owners undertaking construction projects may be subject to penalties due to tariff evasion within their supply chain, even if they were not expressly complicit in such evasion.²² Therefore, supply chain scrutiny is crucial, along with ensuring relevant contracts account for increased risk.

Six Proactive Steps To Consider for Rebuilding:

1. Ensure contracts include provisions that facilitate supply-chain transparency. To the extent possible, shift the risk of tariff responsibility to the vendor (foreign or domestic) and avoid being listed as the importer of record.

2. Include contract indemnification provisions for protection, including against civil penalties for steel tariff evasion within the supply chain.

3. Review contracts and transport documentation related to steel for legal compliance.

4. Report tariff evasion or fraud; cooperation may reduce risk of prosecution or penalties.

5. Monitor tariff changes for building supplies, including steel.

6. Seek legal counsel and a customs broker for assistance with the actions listed in 1 – 5.

Conclusion

The global supply chain for building materials is currently in flux due to the tariff uncertainties. Businesses should evaluate both short- and long-term tariff mitigation strategies to help ensure operational success and legal compliance. Companies that are mindful of supply chain interferences and plan accordingly may enhance competitive advantages for long term sustainability.

Footnotes

1. Lauren Sommer, These houses survived one of the country’s worst wildfires. Here’s how, NPR (Sept. 17, 2024, 7:00 AM), https://www.npr.org/2024/09/17/nx-s1-5100886/lahaina-wildfire-maui-building-defensible-space.

2. Id.

3. Christina Restaino, Susan Kocher, Nicole Shaw, Steven Hawks, Carlie Murphy & Stephen L. Quarles, Wildfire Home Retrofit Guide, Univ. of Nev., Reno Extension (2020), https://readyforwildfire.org/wp-content/uploads/2024/03/wildfire-home-retrfito-guide-1.26.21.pdf.

4. L.A. Cnty., Cal., Code of Ordinances tit. 26, ch. 7A, § 703A, https://library.municode.com/ca/los_angeles_county/codes/code_of_ordinances?nodeId=TIT26BUCO_CH7A_SFMMACOMEEXWIEX_S703ASTQU.

5. Cal. Building Code § 704A.2 (2013), https://up.codes/viewer/california/ca-building-code-2013/chapter/7A/sfm-materials-and-construction-methods-for-exterior-wildfire-exposure#704A.2.

6. Id. at § 202.

7. Brian O’Connor, Types of Construction and Material Combustibility, NFPA Blog (Feb. 19, 2021), https://www.nfpa.org/news-blogs-and-articles/blogs/2021/02/19/construction-types-and-material-combustibility.

8. Wyatte Grantham-Philips, A timeline of Trump’s tariff actions so far, PBS NewsHour (Apr. 3, 2025, updated May 26, 2025), https://www.pbs.org/newshour/economy/a-timeline-of-trumps-tariff-actions-so-far.

9. Fact Sheet: President Donald J. Trump Increases Section 232 Tariffs on Steel and Aluminum, The White House (June 3, 2025), https://www.whitehouse.gov/fact-sheets/2025/06/fact-sheet-president-donald-j-trump-increases-section-232-tariffs-on-steel-and-aluminum/.

10. Adam Bruski, Aida Dismondy, Homayune Ghaussi & Laura You, Tariffs Day is Here … For Now, JD Supra (Aug. 8, 2025), https://www.jdsupra.com/legalnews/tariffs-day-is-here-for-now-3301197/.

11. Michael Culhane Harper, Nathaniel B. Bolin, David R. Allman, Jeffrey Orenstein, Michael P. Anderson & Steven F. Hill, Trump DOJ Elevating Criminal Prosecution of Tariff Evasion, Nat’l L. Rev. (July 28, 2025), https://natlawreview.com/article/trump-doj-elevating-criminal-prosecution-tariff-evasion.

12. Id.

13. Id.

14. Id.

15. Id.

16. Id.

17. Brittany Riehm, Eber Terceros & Mark Williamson, DOJ Ramps Up Tariff Evasion Enforcement, JD Supra (Aug. 6, 2025), https://www.jdsupra.com/legalnews/doj-ramps-up-tariff-evasion-enforcement-4811503/.

18. Bruski et al., supra note 12.

19. Riehm et al., supra note 17.

20. Id.

21. Id.

22. Id.