The Tariff Exclusion Process: A Case Study in Frustration

One of the products Priefert makes calls for ultra-wide hot rolled steel sheet in a narrow gauge—A1011 CS/B hot rolled, 10 gauge (.130-.145) x 80-inch mill edge. It is used to manufacture the bed of a dump truck with fewer welds. The company seeks an annual exemption to import 26,000 tons tariff-free.

Priefert claims it has searched the market for a domestic mill that can provide the coil it needs, but none exist. So, it has developed a relationship with the HBIS Group Serbia Iron and Steel in Eastern Europe.

Nevertheless, two domestic mills filed objections to Priefert’s exclusion request. Upon further investigation, one withdrew its objection, but U.S. Steel continues to oppose Priefert’s filing, even though it admittedly does not offer the product Priefert needs.

In its objection, U.S. Steel noted that it formerly owned the Serbian mill that now supplies the product to Priefert.  During that 10-year period of ownership, the mill did not sell to Priefert. “They clearly were able to survive and prosper in those 10 years” without imports from the Serbian mill, said U.S. Steel executives. (Priefert’s response: “The steel we need is for a new customer we didn’t have then.”)

U.S. Steel also claims at least four mills in the United States make hot rolled coil in the needed widths. (Priefert’s response: “Simply wrong. Our exclusion request is for a 10 gauge 80-inch-wide hot rolled carbon steel coil. None of the mills mentioned can produce the product in question to the specified width and gauge combination. We had pursued all of these sources with due diligence before making an exclusion request.)

U.S. Steel also disputed Priefert’s claim that it is unable to procure material at an affordable price, and that the Section 232 tariffs are the source of the high steel prices in the U.S. “In our opinion, that is the key issue, as the buyer has now lost the ability to purchase cheap steel from a mill owned by a Chinese company. It is worth noting that China has a very long and notorious history of dumping cheap, subsidized steel products into this country, and this request for exclusion is simply an attempt to continue to exploit a cheap, below market supply chain cost…,” U.S. Steel wrote in its objection. It also argued that domestic steel prices are a function of strong U.S. demand, not the tariffs. (Priefert’s response: “There are indeed many factors affecting rising steel prices, but to suggest the Section 232 actions undertaken are not responsible is simply ludicrous.”)

U.S. Steel also suggested Priefert’s filing represents a threat to national security. “We formally ask that the exclusion request made by Priefert Mfg. Co., Inc., not be granted, and that the national security concerns as outlined in the Department of Commerce report in early 2018 be followed, and ensure that American steel producers are able to increase capacity utilization rates to 80%.” (Priefert’s response: “We are outraged to be referred to in this slanderous manner…. If national security concerns are really in play then perhaps Congress should step in and require the ‘Big Steel’ companies to use their already lucrative profits on this much needed capacity growth…. The types of steel we use and need to obtain from willing international sources having nothing to do with national security concerns.”

In its letter to the Committee on Ways and Means, Priefert appealed for a change in the review process, which now allows unsubstantiated objections by domestic steel producers to stymie an application for relief. “Please consider the process by which these exclusion requests and reviews are conducted. The current forum has been used against Priefert, serving to attack our integrity and character without fear of reprisal or legal actions against those who would slander us. Priefert welcomes the Department of Commerce to substantiate our rebuttal with its own investigation.”