Are Manufactured HR and CR Parts Included in the Antidumping Suits?

Chapter 72 of the Harmonized Tariff Schedule defines the various iron and steel products using a six digit code. These codes are used when importing foreign products into the United States so they can be identified and tracked.

Earlier this month I received the following information from a very large manufacturing company:

“I thought I would forward you what I just received from my customs & legal group.  It appears that the scope of the CR case may now apply to stamped parts as well.  If that is the intent, it could have serious repercussions as my company has had a trend over the past decade of moving tier 1 stampings as well as final production/assembly to Mexico and China, although majority is still based in the US.  I would then expect that many other OEM’s would reassess potentially moving more production/assembly of finished goods outside of the US, considering the new total cost of ownership in order to remain competitive.   

The scope of the Cold-Rolled Steel Investigation by DOC has been significantly altered from the initial notice of domestic industry petition.   

Of note, the following scope exclusion has been removed:

• Non-rectangular shapes, not in coils, which are the result of having been processed by cutting or stamping and which have assumed the character of articles or products classified outside chapter 72 of the HTS.”

Now, the scope is broadly defined in the attached Federal Register Notice, specifically pages 15204-15205, and even now includes the following language:

Subject merchandise includes cold-rolled steel that has been further processed in a third country, including but not limited to annealing, tempering, painting, varnishing, trimming, cutting, punching, and/or slitting, or any other processing that would not otherwise remove the merchandise from the scope of the investigations if performed in the country of manufacture of the cold-rolled steel.”

Steel Market Update began investigating and found that the scope language has changed on both the cold rolled and hot rolled suits but not in the corrosion resistant suits. We spoke to trade attorney Lewis Liebowitz who told us the language change was in the initiation notice which defines the scope of the investigation. The initiation notice is published in the Federal Register as part of the public record.

It is not 100 percent clear as to what the intention of the language change is – especially as it is related to Tier 1 parts manufactured outside of the United States (such as a bracket which will then be added to other parts and assembled into the final product inside the United States).

Late last week we receive another note from a manufacturer regarding the hot rolled scope language:

“FYI, I was notified about this change on the hot rolled petition today, similar to the CR petition scope change.  I personally believe that this is a very smart and sneaky way for the US mills to expand the scope without a lot of people in the market realizing the full breadth of the petitions.

As you will note, the revised version of the scope no longer includes the exclusion for:

•    USS abrasion-resistant steels (USS AR 400, USS AR 500).
•    Non-rectangular shapes, not in coils, which are the result of having been processed by cutting or stamping and which have assumed the character of articles or products classified outside chapter 72 of the HTSUS.”

As we corresponded with various sources we received the public version of letter dated August 20, 2015 responding to Commerce’s questions the hot rolled scope amendment with the language contained above with the following:

With regard to the exclusion for “non-rectangular shapes, not in coils, which are the result of having been processed by cutting or stamping and which have assumed the character of articles or products classified outside chapter 72 of the HTSUS,” please clarify what is meant by this exclusion and why it is necessary.

Alternatively, you may wish to delete this exclusion.

This exclusion language was intended to demonstrate that processing sufficient to render subject hot-rolled flat steel no longer classifiable within Chapter 72 of the Harmonized Tariff System of the United States (“HTSUS”) would remove the product from the scope. Minor processing that does not change the name, character and use of a hot-rolled fiat steel product does not remove the product from the scope. Petitioners have therefore removed the exclusion language for shapes that place a product outside of Chapter 72 of the HTSUS.

In addition, however, petitioners have added language to clarify the scope by providing examples of the types of minor processing that would not remove a hot-rolled flat steel product from the scope, regardless of whether that processing was done in the subject country or a third country. First, petitioners have added a specific paragraph addressing third country processing. That language is provided below and is included in the revised scope in Attachment 1:

Subject merchandise includes hot-rolled steel that has been further processed in a third country, including but not limited to pickling, oiling, levelling, annealing, tempering, temper rolling, skin passing, painting, varnishing, trimming, cutting, punching, and/or slitting, or any other processing that would not otherwise remove the merchandise from the scope of the investigation if performed in the country of manufacture of the hot-rolled steel.

Second, petitioners have provided in footnote 3 of the revised scope language examples of those additional rolling processes after the hot-rolling process that are insufficient to remove the product from scope as “cold-rolled steel”, whether or not those processes are performed in the subject country or a third country:

For purposes of this scope exclusion, rolling operations such as a skin pass, levelling, temper rolling or other minor rolling operations after the hot-rolling process for purposes of surface finish, flatness, shape control, or gauge control do not constitute cold-rolling sufficient to meet this exclusion.”

We have asked the American Iron and Steel Institute (AISI) to assist us in getting clarification on this subject and we will share that information with you once we have it.