Leibowitz on Trade: Steel Traders and Anti-circumvention

The injection of self-initiated cases into the anti-circumvention picture adds an additional risk for steel traders. 

In order to understand this, it’s necessary to give some background on the context of circumvention cases. Commerce has had the authority to investigate alleged circumvention of AD/CVD orders since the 1980s. If a product is imported into the United States which is not within the scope of an existing AD/CVD order, but is changed in the United States or a third country into a product that would be if “produced” in a country that is subject to an order, the Commerce Department can initiate an anti-circumvention investigation. The key feature in circumvention is a “small” addition to value. If that “small” addition to value occurs in the United States or elsewhere, Commerce can sweep in the non-subject product into an existing AD/CVD order.

In the CORE cases, for the first time, Commerce examined the cost of building a steel mill to manufacture slabs and hot rolled steel and determined that, by comparison, the cost of building a cold rolling or coating mill is “small.” This finding has not yet been challenged in court, but the latest self-initiations could change that.

I was counsel to an importer in the Vietnam/China anti-circumvention investigation, which concluded last year. That experience brought home to me that, if basic steelmaking was compared to almost any downstream operation on steel, the downstream operation could be considered “small” by comparison.

Thus, operations put at risk, in the United States or elsewhere, could include importing hot rolled steel and exporting cold rolled steel; importing plate and exporting pipe; importing tin-free steel and exporting tin plate; or dozens of other similar operations. 

Once the Commerce Department crosses the line into self-initiated anti-circumvention investigations, it could radically affect the steel market.  Commerce could choose, for “industrial policy” reasons, rather than commercial reasons, to take aim at those companies that trade or import steel into the United States. 

The Section 232 steel proceeding and the China Section 301 case could be added to this list. The pieces are in place to prevent trading in steel from any country. To be sure, Commerce this time picked countries (Costa Rica, Guatemala, Malaysia, South Africa and the United Arab Emirates) from which imports significantly increased this year compared to last, but this is not the only basis for Commerce to act. 

If steel traders import product that is subject to AD/CVD orders from any country, they run a real risk of being subject to AD/CVD orders from countries with which they do not do business because the raw steel in those products comes from a country that is subject to those orders for that product. As we learned in the Vietnam circumvention case, traders need to know where the raw steel comes from in order to protect themselves. CORE may be the first product that has been hit by the Commerce Department, but there is no doubt that they will be thinking of other cases.

Lewis Leibowitz

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