Trade Cases
Leibowitz on Trade: Mercatus Report on Steel Exclusions Process Finds Worrisome Trends
Written by Lewis Leibowitz
July 9, 2019
Trade attorney and Steel Market Update contributor Lewis Leibowitz offers the following update on events in Washington:
Companies have filed thousands of requests seeking exclusions from the Trump administration’s Section 232 tariffs on steel imports, claiming the products they require are not available from domestic sources in the quantities or qualities required. The steel product exclusion process has come under increased scrutiny revealing noteworthy inconsistencies in Commerce’s decision-making and procedures. The Mercatus Center at George Mason University in Virginia has studied the steel exclusion process and decisions through exhaustive analysis. They have calculated the amount of steel products that large domestic producers have claimed the ability to produce. In one instance, with respect to Nucor, George Mason determined that the company objected to exclusion requests totaling 41.31 million metric tons, but that their annual production amounted to a bit more than 24 million metric tons. AK Steel objected to requests for over 30 million metric tons, but only produces about 6 million. Yet only 1 percent of exclusion requests receiving objections are approved by Commerce.
Clearly, if the exclusion process is intended to permit steel users to use imported steel, tariff- and quota-free, when domestic producers are unable to produce sufficient quantities, some method of verifying the ability of objecting producers would be desirable. Trade associations of steel users and their supporters in Congress are increasing their criticism of the exclusion process. A recent article in the newsletter Inside U.S. Trade detailed their complaints.
The process is characterized by delays (most exclusion requests that receive objections remain undecided for months, costing steel users in tariff payments and uncertainty) and minimal analysis. A typical denial decision recently stated, as the sole basis for decision, “ITA recommends finding, based on all of the evidence presented, that the product referenced in the above-captioned exclusion request is produced in the United States in a sufficient and reasonably available amount and of a satisfactory quality, and recommends denying the request for an exclusion.”
In some instances, requests are considered “not complete” because U.S. Customs claims that the tariff classification claimed is incorrect. There is minimal analysis of these claims, as well. For example, one denial stated that the dimensions claimed for the product were not consistent with the requirements of the particular ten-digit classification. Others have been denied because Customs claims the product is “non-alloy” steel rather than “alloy” steel. These are often details that are not relevant to the ability of domestic producers to make the product.
There has not been a legal challenge yet to the process or the legality of some denials. The amount of discretion claimed by Commerce in making these decisions is almost unbounded, making a legal challenge based on abuse of discretion difficult. However, particularly in semifinished steel cases, which have been denied in virtually every case, members of the steel industry itself are being rendered uncompetitive. I expect there will be more complaints about exclusions.
Lewis Leibowitz
The Law Office of Lewis E. Leibowitz
1400 16th Street, N.W.
Suite 350
Washington, D.C. 20036
Phone: (202) 776-1142
Fax: (202) 861-2924
Cell: (202) 250-1551
Lewis Leibowitz
Read more from Lewis LeibowitzLatest in Trade Cases
Price on Trade: Auto tariffs, auto parts, and Hyundai – a world of rapid changes
Trump's new auto tariffs will apply to passenger vehicles (including sedans, sport utility vehicles, crossover utility vehicles, minivans, and cargo vans), light trucks, and certain automobile parts (including engines and engine parts, transmissions and powertrain parts, and electrical components).
CRU: Canacero urges Mexico-US partnership to fend off Asian steel imports
Victor Cairo, head of Mexico’s steel sector body Canacero and CEO of ArcelorMittal Mexico, says he is confident negotiations between the Mexican and US governments planned for April 2 will lead to the creation of a regional block to substitute imports, especially from Asia.
US chassis makers seek duties on imports from Mexico, Thailand, and Vietnam
Upon the request of US chassis manufacturers, the Commerce Department this week initiated investigations into the alleged dumping and subsidization of chassis imported from Mexico, Thailand, and Vietnam.
European Commission eyes stricter limit on tariff-free steel imports
The European Commmission is reducing the amount of tariff-free foreign steel that can enter the EU.
Trump says exceptions could exist on reciprocal tariffs
President Trump said on Monday there may be exceptions for some countries on reciprocal tariffs.