Status Report on Complex Trade Issues

Korea agreed to a quota on steel imports into the United States equal to 70 percent of the three-year average from 2015-2017. According to the Peterson Institute for International Economics, the figure for all steel products covered by the tariff proclamation is about 2.68 million short tons annually. This is a 21 percent decrease from 2017 import levels for Korea—so this quota will “bite.”

The White House has announced that it will also impose quotas on a product-by-product basis. Each individual steel product will have a quota. It remains to be seen if the quota can be transferred between specific products. It’s also unclear if a product exclusion provision will apply to the quota deal, which means an excluded product would not be counted against the quota.

• Severstal Files Suit: Russian steelmaker Severstal has filed suit in the U.S. challenging the president’s tariff proclamation. Severstal is seeking an exemption on the grounds the tariffs will cause irreparable harm to its trading company Severstal Export Miami Corp. The U.S. government has filed a motion to dismiss the complaint, asserting that a presidential decision is not subject to judicial review. This is a complex legal point (as a review of the administration’s controversial travel ban and DACA orders illustrates). Severstal’s complaint directly challenged the president’s proclamation but did not directly challenge the Commerce Department’s Section 232 report, which provides the foundation for the proclamation.

A hearing on the Plaintiffs’ motions for temporary restraining order and preliminary injunction was held on Thursday. A decision is expected within a day or two.  If a restraining order or preliminary injunction is granted, the tariffs on steel could be suspended while the litigation runs its course, either for everyone or perhaps only for Severstal as the importer. 

• Product Exclusions: The Commerce Department is reviewing more than 100 requests for product exclusions that have been submitted so far. When the review is complete, those requests considered to conform to the interim rules released March 19 will be posted to regulations.gov. The 90-day window for consideration will commence when the request is posted. Objections must be filed within 30 days after the posting date. During the 90-day review process, Commerce will hear from other agencies, including Enforcement and Compliance within the Commerce Department. If a request is approved, according to Commerce, the importer will not be liable for tariffs on or after the date that the request is posted to the regulations.gov website.

• Customs Issues: While downstream steel-using manufacturers may file exclusion requests, the names of the importers for those manufacturers must be included on the request form so that Customs can identify which entries are eligible for the exclusion from the tariffs. Customs compliance will be a key to avoiding an erroneous application of the tariffs.

The effective date of the tariffs (March 23) applies to entries for consumption (CF7501), not to immediate entries (CF7512), warehouse entries or FTZ admissions. If the importer believes the tariffs have been erroneously applied, the importer must file a timely protest.

• WTO Actions: The United States has taken the position in other pending dispute settlement cases that the invocation of national security is not reviewable by a World Trade Organization panel. The EU has taken a contrary position. Two cases (against Russia and the UAE) may be decided this year.

As stated in Article XXI of the GATT, “nothing in the agreement shall be construed to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests.”

Obviously, the U.S. has shown that it considers the tariffs necessary for its national security. Should a WTO panel determine that the U.S. interpreted the provision too broadly and that the national security exemption was improperly invoked, that does not prevent the U.S. from taking the action. Only if eventual trade retaliation by other nations under WTO rules is considered a “prevention” of action would the issue come up.

Under WTO rules, only three possible events permit a national security action: use of fissionable material; traffic in arms, ammunition or implements of war; or action “taken during a time of war or other emergency in international relations.”

Is the dumping of steel an emergency in international relations? This is not a cinch for the U.S. to win on, but it’s an interesting point.

Lewis Leibowitz

The Law Office of Lewis E. Leibowitz

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