A proposed new rule issued by the US Commerce Department’s Bureau of Industry and Security this week, aimed at improving the exclusion process for Section 232 steel and aluminum tariffs, appears to be a “mixed bag” for the domestic industry, according to American Iron and Steel Institute CEO Kevin Dempsey.
There is one proposal the domestic industry, and specifically the AISI, has recommended in earlier comments to Commerce on how to improve the exclusion process, however overall, the department is trying to improve a system that is fundamentally flawed, Dempsey said in an interview with S&P Global Commodity Insights Aug. 30. The AISI was still working through details of the proposal and will be filing comments to Commerce on the planned changes, he said.
The proposed rule issued Aug. 28 include four primary changes “intended to create a more transparent, fair and efficient process,” the BIS said. These include changes to the existing “general approved exclusions process,” the introduction of a “general denied exclusions” process, the introduction of new certification requirements to show that a requester has tried to source the product from the US or from countries that are already excluded from the tariffs, and similar certification on objections to ensure domestic companies that raise an objection to a request can supply a comparable quality and quantity of steel or aluminum and make it “immediately available.”
After the US introduced tariffs of 25% on steel imports and 10% on aluminum imports in March 2018, Commerce established a process for US companies to file product-specific exclusion requests for cases where there are no domestic availability or overriding national security concerns regarding the specific product.
The latest proposed changes stem from a January 2022 order that President Joe Biden instructed Commerce to seek public comments on the exclusion process.
Steel Manufacturers Association President Philip Bell said in a statement to S&P Global that while the SMA “appreciates the Bureau’s attempt to address the many fundamental concerns that the domestic steel industry has voiced regarding its management of the Section 232 exclusions process, the proposed changes will do little to address an overly broad exclusions process that favors foreign steel producers over the domestic industry.”
Representatives of the Aluminum Association said they are reviewing the proposed changes.
Domestic industry supports changes
The AISI and domestic steelmakers are supportive of requiring those making exclusion requests to show they have attempted to source the product from countries that have already negotiated alternative arrangements to the tariffs, in addition to attempts to source in the US, Dempsey said.
Countries that have either had the tariffs fully removed or have had them switched to a tariff-free quota system include Argentina, Australia, Brazil, Canada, the EU, Japan, Mexico, South Korea and the UK.
“Most steel products are available in the US so you shouldn’t need an exclusion for the vast majority of steel products,” Dempsey said. “But if you add in all these other countries that are exporting steel duty-free to the US, that’s a lot of sources of steel products. You shouldn’t even be requesting an exclusion from the 232 until you’ve actually tried all of these sources where you can buy steel without paying a tariff.”
GAEs vs. GDEs
One of the biggest unknowns with the proposed change is what products would fall under a newly established list of “general denied exclusions,” or GDEs. BIS said this would include products that have consistently been found to have been manufactured in the US and would be identified following an analysis of substantiated objections and exclusion requests that have generally been consistently denied.
While there could be some benefit to the domestic industries under the new GDE process, depending on which products qualify, the move seems more in line with trying to balance the “general approved exclusions” process that the US steel industry has opposed, Dempsey said.
“The general approved exclusions, which they’re trying to make some additional adjustments to, really are a fundamental problem because in that area, they’ve said ‘well, if we find products that a lot of exclusions were granted, we’re going to take the tariff code for those products and say that anything coming in under those tariff codes can be duty free,’” Dempsey said.
The problem for domestic steelmakers is there are generally many steel products that fall under the same tariff code, so while the domestic industry may not object to one niche product with a low volume, using the associated tariff code to apply a blanket exclusion can greatly expand what is allowed to enter duty free past the original request.
“We think the general approved exclusion process was a mistake and should still be changed,” Dempsey said. “It needs to be, frankly, we think, eliminated because it’s allowing exclusions for products that the steel industry can definitely make in the US.”
BIS has proposed creating a “more efficient” GAE process by changing the criteria generally used for determining GAEs by focusing on the substance of objections submitted rather than whether any objection has been submitted or not.
BIS is collecting public feedback on the proposed rule through Oct. 12.
Author Justine Coyne