Update on Section 232 Steel Tariff Exclusions

No objections to product exclusions had been posted on the regulations.gov website as of April 29. The BIS regulations require objections to be submitted to BIS within 30 days after a request has been posted. The first exclusion request was posted on April 3. Objections are due by midnight on May 3-May 4. Commerce has not committed to a date by which it will post objections to exclusion requests. There may already be objections in the hands of BIS—but there are none on the website thus far. Objections are required to be made public. However, the regulations published in March do not prescribe when they must be released for public inspection. Like the requests themselves, BIS may review them before they are posted on line.

The exclusion request count as of April 27 was about 650 posted on the regulations.gov website. The number of requests submitted is not public information; various reports peg the number of submitted requests at well over 3,000. A letter from Sens. Orrin Hatch (R-Utah) and Ron Wyden (D-Ore.) estimated over 3,800 requests have been submitted. While nearly 20 percent of the submitted requests have been posted, the Commerce Department has a long way to go to post all that have already been submitted.

The 650 posted exclusion requests were submitted by only 65 separate companies. That is an average of 10 requests per company. Several companies each have more than 20 requests posted. Marubeni-Itochu Tubulars America has posted 37 requests for exclusion on oil country tubular goods. A major foreign producer of slabs, Evraz, has posted 32 exclusion requests dealing with semifinished steel products. Evraz, headquartered in Russia, is a major supplier of imported semifinished steel into the United States. Borusan Mannesmann, a U.S. affiliate of Borusan Mannesmann of Turkey, has posted 27 exclusion requests for line pipe.

Requests from some large companies are not yet posted. For example, California Steel Industries, a major West Coast reroller of slabs into steel plate and sheet, said it submitted a request to Commerce on March 26, but it has not yet been posted online.

On the aluminum front, only 36 requests have been posted online. Fully half of the posted requests (18) were submitted by Rusal America. It has been essentially removed from the U.S. market by sanctions leveled against the company and its principal shareholder, Oleg Deripaska. Last week, the imminent collapse of Rusal was delayed, at least, by an extension of the unwinding period from early June to late October. Whether this will affect the exclusion requests filed by Rusal America remains to be seen. The huge volume of steel exclusion requests compared to aluminum suggests two things: the 10 percent tariff on aluminum products is easier to live with than the 25 percent tariff on steel; and the international connections between steel traders, importers and manufacturers may be much more complex than is the case with aluminum. [ARTICLE CONTINUES BELOW]

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Country Exclusions—What’s Next?

Wilbur Ross, the U.S. Secretary of Commerce, promised an announcement tomorrow on the next step for country exclusions, the day before the country exemptions for Argentina, Australia, Brazil, the EU and South Korea are set to expire. Secretary Ross was quoted on Friday as saying the U.S. expected countries to accept quotas if not tariffs after May 1.

Cecilia Malmstrom, Angela Merkel and Emmanuel Macron all visited Washington last week to discuss the steel and aluminum situation, as well as larger issues such as the Iran nuclear deal. There has been no announcement of any results of the discussions in Washington. The EU has said that it would not accept a “voluntary export restraint” deal on steel and aluminum. The WTO rules adopted in 1994 specifically rejected such “gray area measures” as VRAs, orderly marketing agreements and voluntary quotas. The U.S. apparently argues that trade restrictions on national security grounds are not covered by the ban on gray area measures.

South Korea and the U.S. announced a quota agreement on steel imports from South Korea. The details of the agreement have not been released. Even the Koreans apparently have questions about important aspects of the quota deal. One problem with quotas is that they affect other countries because the steel that once came to the U.S. is likely to be diverted to other markets. Those countries that must contend with increased imports are likely to complain and have a good chance to win their dispute settlement cases.

Other countries have approached the United States for country exemptions, although it is not clear whether they have offered quotas instead of tariffs. Turkey, Brazil, India and other countries are hoping for exemptions, also.

Japanese Prime Minister Shinzo Abe was in Washington last weekend seeking an exemption for his country. He apparently returned home from Mar-a-Lago without any assurance of an exemption for Japanese exports of steel or aluminum.

Canada and Mexico appear to be nearing agreement on much, if not all, of a revised NAFTA agreement. The deal could still come apart. An exemption for Canada and Mexico would likely be part of the revised NAFTA. Whether quotas for steel and aluminum from Canada and Mexico would be part of that deal remains uncertain.

What’s next? The administration has not revealed its course of action. There is a real possibility of further delaying the end of some or all the exemptions to permit further negotiations. If so, we should find out tomorrow. Another month might settle markets and save importers from an avalanche of duty bills starting May 1.

Lewis Leibowitz will be a speaker at the 2018 SMU Steel Summit Conference on August 27-29 in Atlanta, Georgia. Go to www.SteelMarketUpdate.com/events/steel-summit for more details.

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