Trade Cases

GAO: Commerce Needs to Fix Section 232 Exclusion Process

Written by David Schollaert

September 17, 2020

Importers of steel and aluminum who have been critical of the Commerce Department’s handling of Section 232 exclusion requests have found an ally in the Government Accountability Office. In a report released Tuesday, the GAO called for Commerce to improve and speed up the process it uses to review tariff exclusion requests. The report noted that nearly three-quarters of all steel and aluminum exclusion decisions regarding Section 232 duties failed to meet the DOC’s established timeliness guidelines from March 2018 to November 2019.

GAO’s probe was initiated in April 2019 in response to the 25 percent tariffs imposed by President Trump in March 2018 on imports of steel and aluminum products, citing the Section 232 of the Trade Expansion Act of 1962. The administration maintains that surges of unfairly priced imports pose a threat to the domestic metals industries and thus to national security. The DOC established a process to provide relief, or exclusion, from the tariffs to companies that can prove they are dependent on imports of products that are not available in sufficient quality or quantity domestically. The GAO found, however, that the process for exclusion was ladened with obstacles that impeded proper review and timely decisions.

The report noted that the DOC received more than 106,000 requests for exclusions and rejected more than 19,000 of them “prior to decision due to incorrect or incomplete information.” Additionally, the report revealed that the DOC did not take any steps to understand or address the causes of these paperwork errors. Although the DOC did implement some changes to improve timelines, three-quarters of the requests were not addressed within the required guidelines, 841 of those took more than a year to be decided, and there was a backlog of 29,000 requests as of November 2019.

GAO added, “Until Commerce takes additional steps, companies will continue to encounter delays in obtaining relief.” The audit noted that the DOC has failed to address the impact of imposed tariffs, as there is evidence to suggest that U.S. steel and aluminum imports and markets have both seen downward corrections after initial surges. “Evaluating whether the tariffs have achieved the intended goals and how they affect downstream sectors requires more in-depth economic analysis. Without assigning responsibility for conducting regular reviews and documenting the results, Commerce may be unable to consistently assess if adjustments to the tariffs are needed,” the report concluded.

As a result, GAO recommended the DOC take the following steps to improve their process: “Identify, analyze, and respond to factors in the process that may cause submission errors; take steps to improve timeliness of exclusion request decisions and address the backlog; and assign responsibility for reviewing the tariffs’ impact and document the results.”

David Schollaert

David Schollaert is a senior analyst for Steel Market Update. David joined SMU after more than a decade in the metals and mining industry in a myriad of different roles. Much of his early experience and expertise were within the coverage and analysis of steel-making raw materials and served previously as senior editor of the CRU Prices Service. Most recently, however, before his return to market analysis, David held roles as a metals buyer and an operations manager for raw material suppliers. Based in CRU’s Pittsburgh office, David can be reached at david@steelmarketupdate.com or 724-720-1008.

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