Trade Cases
Leibowitz on Trade: Tariff Exclusion Process is Troubling
Written by Tim Triplett
June 21, 2018
Lewis Leibowitz, trade attorney and contributor to Steel Market Update, offers the following commentary on the latest developments in Washington:
On Wednesday, during a Senate hearing on the Section 232 tariffs, Commerce Secretary Wilbur Ross offered some additional information on the volume of product exclusion requests he has received. As of June 20, there were 20,003 exclusion requests submitted for steel and 2,503 for aluminum. Commerce posted 8,168 steel exclusion requests online and “of those, we have rejected 2,513,” Ross said.
He defended the exclusion process, but the defense seems tepid. He was critical of some requests, suggesting they were “thinly constructed.” Having worked on a number of requests, and closely reviewed many others, I don’t believe they are fairly described as thinly constructed. And many had no objections filed. It remains to be seen if a lack of objection is a strong indicator of a successful request.
Secretary Ross referred to thousands of objections (almost 4,000 steel objections and 98 aluminum), which creates work for the Commerce staff. The Washington Post reported that, in addition to staff from the Bureau of Industry and Security, and Enforcement and Compliance (the AD/CVD arm of Commerce), private contractors have also been retained to review the requests. They undergo a three-hour “crash course” in the steel market. That may not be enough. A link to the article is here.
One company whose future may be on the line is California Steel Industries, a West Coast reroller of flat steel that relies on imported slabs. U.S. Steel, Nucor and AK Steel have objected to CSI’s many requests for exclusion. As a purchaser of steel slabs (a semi-finished product rolled into hot-rolled sheet and then often further processed into cold-rolled and galvanized steel), CSI has been totally reliant on imports. Domestic steel producers do not often sell slabs in the open market, but generally use them in their own finishing operations. In addition, the cost of transporting steel from the Midwest or the Eastern U.S. to the West Coast is vastly higher than shipping it across the Pacific Ocean or north from Brazil, for example. This has been true for decades. Yet, in objecting to CSI’s exclusion requests (about 300 of them), the domestic companies argue that they make the same product that CSI needs and at one time sold it to them. I didn’t see a commitment from the domestic mills to supply the market on the West Coast from slab production facilities in the eastern half of the country. CSI is not the only reroller in a similar position. Brazilian slab may be an option because it is not subject to tariffs—but the quotas are filling up fast. If foreign suppliers have a choice between supplying slabs or supplying higher-value finished steel on the West Coast—their decision might be easy.
Lewis Leibowitz
The Law Office of Lewis E. Leibowitz
1400 16th Street, N.W.
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Washington, D.C. 20036
Phone: (202) 776-1142
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Cell: (202) 250-1551
Tim Triplett
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