Leibowitz on Trade: Steel and Aluminum—the Latest Tariffs and News on Exclusions

I was reminded of the movie “The Monster that Devoured Cleveland,” which was a staple of the old TV show “The Many Loves of Dobie Gillis.” Many readers will thankfully be too young to remember this show, which ended its run in 1963. But one of the most endearing characters was Maynard G. Krebs, a prototypical beatnik. He was always planning to see “The Monster that Devoured Cleveland” at the local theater. These images stick with you.

Section 232 brings back memories of “The Monster that Devoured Cleveland”—especially after Friday’s proclamation. Beginning with a Commerce Department investigation on “steel” (which listed tariff numbers divided into five basic product groups—semifinished, flat, long, pipe & tube and stainless) and “aluminum” (similarly divided), after nine proclamations on steel and eight on aluminum, we now see an expansion of the actual products subject to import restrictions. For the first time, we are seeing an increase in tariffs on products that were not covered by the original Commerce Department report, a major effort to expand the president’s authority.

Add to this the Justice Department’s decision that the statutory requirement to release reports under Section 232 did not apply to the Commerce report on autos and auto parts. Despite a statutory requirement that any Section 232 report be published (redacting classified information), the attorney general issued an opinion that permits the president to withhold the report even from Congress.

Friday’s proclamation on steel and aluminum mentions an assessment by the Commerce secretary that imports of these articles have increased since 2017 and that “foreign producers of these derivative articles have increased shipments of such articles to the United States to circumvent the duties on aluminum articles and steel articles.” The assessment referred to by the Commerce secretary has not been released.

The reader may begin to see the connection between Section 232 and the “Monster.” Once unleashed, it can devour everything.

The precise products covered by Friday’s proclamation are not available yet. They may be available by Monday, but that is only a guess. It is certain, however, that whatever products are included, imports will be subject to additional tariffs (10 percent on aluminum derivatives and 25 percent on steel derivatives) effective Feb. 8. Certain countries (Australia, Argentina, Canada and Mexico for both steel and aluminum—Korea and Brazil only for steel) are exempt from the new restrictions.

The new proclamation lists certain products that are likely to have new tariffs as of Feb. 8—steel nails, corrugated nails, staples, drawing pins “and similar derivative articles,” as well as bumper and body stampings for motor vehicles and tractors. Aluminum wire and wire strand are mentioned also.

The new proclamation also contains an exclusion provision that strongly resembles the procedures in the original steel and aluminum proclamations, giving the Commerce secretary near-absolute discretion to waive the tariffs if he finds that products are not “produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.” So, the exclusion process that has been so vexing to so many will be expanded.

Speaking of product exclusions, the Mercatus Center recently issued a new report on exclusions. This is the first Mercatus report analyzing the new exclusions portal that was unveiled in June of last year.

The unmistakable conclusion is that exclusions that are objected to are very likely to be either denied or delayed for a long time. While a few exclusion requests have been approved despite objections under the old “regulations.gov” regime (less than 1 percent), none, according to Mercatus, have been either approved or denied so far under the new exclusions portal. All remain pending as of Jan. 21.

The effect of neither approving nor denying an exclusion request is that all entries of that product are subject to the tariffs. While there are now two cases in the Court of International Trade challenging denials of exclusion requests, if any requester filed suit against inaction, the government would doubtless claim that the case is not “ripe” for court action because the Commerce Department has not finished its work. Under the rules Commerce issued for exclusions, there is no deadline for action. So, many importers and manufacturers will remain in limbo for an indefinite period.

At the end of the day, the new proclamation and the logjam of exclusions creates a situation that cannot last indefinitely. If U.S. manufacturers cannot get the materials they need from U.S. producers at a reasonable price and in a reasonable time, they will move their production overseas or leave their industry altogether. The new proclamation, if carried to its conclusion, will expand the tariffs to new products as imports increase on those products. Where will this end? The president’s assertion that Congress intended to authorize the president to create an ever-expanding list of new tariffs without congressional oversight or authorization cannot be right.

As court cases multiply, eventually we can expect some balancing of power between the executive and legislative branches, even if Congress continues to lack the ability to respond to the apparently unlimited expansion of executive power. Without the courts, we could find ourselves with a real-life example of “The Monster that Devoured Cleveland.”

Lewis Leibowitz

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