Leibowitz on Trade: Section 232 on Autos, Circumvention by Korea and Taiwan

• Secretary of Commerce Wilbur Ross will testify before the Senate Finance Committee on June 20. The Chairman of the Committee, Orrin Hatch (R-Utah), has vocally criticized the Section 232 tariffs on steel and aluminum and called the Section 232 investigation into autos and auto parts “deeply misguided.” In a related development, Sen. Bob Corker’s amendment requiring congressional approval of Section 232 tariffs could not get a vote on the Senate floor in connection with the Defense Authorization Act. The White House urged senators not to support the Corker amendment because it would “undercut” the president’s “negotiating leverage.” I would feel better about that point if someone was negotiating with the president. The mission now seems to be breaking the international trading system. The hearing should be interesting because it will provide a platform for expressing frustration with the administration’s trade policy. I do not expect any new initiatives or announcements from Secretary Ross, although he is likely to be asked about product exclusions under the steel and aluminum tariffs.

• On Tuesday, the nominee for Assistant Secretary of Commerce for Enforcement and Compliance, Jeffrey Kessler, had a confirmation hearing before the Senate Finance Committee. Enforcement and Compliance is the Commerce office responsible for administering antidumping and countervailing duty cases. E&C has added people to the daunting task of handling product exclusions under the steel and aluminum tariffs, but plays a supporting role to the Bureau of Industry and Security. Mr. Kessler agreed with ranking member Ron Wyden (D-Ore.) that exclusion requesters had a right to “due process,” but there did not seem to be agreement between Sen. Wyden and Kessler about what that means. In particular, Sen. Wyden complained about requests where objections had been filed against requests and the requesters had no opportunity to rebut the claims in the objection. Thus far, this is a legitimate concern. In a number of cases involving semifinished steel (slabs, billets, etc.), objections asserted without factual support that semifinished steel was available domestically. There is little evidence to support this assertion. Domestic producers claim that they would supply slabs and other semifinished products if the prices were higher, but there is little evidence of that desire, either. The new assistant secretary, if confirmed, is not likely to be of significant assistance in gaining more due process in exclusion cases. We will have to wait and see when the results start coming in.

• As reported last month, the Commerce Department determined that imports of cold rolled and corrosion resistant (CORE) steel from Vietnam were circumventing the orders on cold rolled and CORE steel from China. Imports from Vietnam are now treated as Chinese, so long as the hot rolled or cold rolled came from China. This circumvention finding vastly extends the reach of antidumping and countervailing duty orders. On Tuesday, as expected, domestic steel producers filed petitions alleging circumvention of cold rolled and CORE steel orders on Korea and CORE on Taiwan, alleging that these products from Vietnam are circumventing the orders on Korea and Taiwan if they use substrate (hot rolled or cold rolled steel) from those countries. The precedent set under the Chinese orders, if followed, will allow orders on a few countries to be expanded indefinitely. The concept is dangerous to steel traders, importers and users in the United States. The Commerce Department’s determination in the China cases will certainly be challenged in the WTO, and the U.S. could well lose. A lot of damage will ensue before those decisions can be implemented, however.

Lewis Leibowitz

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