Women in International Trade Communiqué: Section 232 Tariffs on Aluminum and Steel



Jennifer Hillman, Eileen P. Bradne, Anne Clawson, Ann Wilson, Nicole Vasilaros, and Evelyn M. Suarez, Esq. |Women in International Trade Communiqué

Trade talk can be wonky. And technical. And complicated. But one of the benefits of organizations like WIIT is to leverage our great networks to bring together perspectives that make the technical understandable; that bring to life the impact of dry policy; and that can explain what’s REALLY going on.

In this communique, we have some fascinating perspectives to share with you as we take on the challenge of bringing together a wide range of thought leadership on Section 232.   
What exactly is Section 232?  It’s part of the Trade Expansion Act of 1962, and, in essence, creates a safeguard provision for the President to “adjust” imports if an investigation determines that they impair U.S. national security. Little used, but much talked about today.

To start, we have an interview with Congresswoman Judy Walorski (Indiana – 2nd District), and one of our featured speakers from WIIT’s International Women’s Day event last March. Congresswoman Walorski is a passionate defender of the downstream industry, including local RV manufacturers, that need access to steel and raw materials to be competitive. The Congresswoman goes on to detail her intense and driven efforts to ensure that Commerce provides an efficient and effective product exclusion process.

Jennifer Hillman of the Georgetown Law Center provides her views on the outcome of a likely challenge to the recent use of Section 232 by the U.S. at the World Trade Organization.

Nucor’s Eileen Bradner provides a perspective from the steel industry, documenting the genuine global over-capacity issue that caused this issue, and the devastating impact it has had on local American steel production.  Her article notes the relevant use of Section 232 as a tool to mitigate unfair trading practices while securing critical industrial production. Alcoa’s Anne Clawson provides an interesting overview of the impact to the aluminum industry, how Section 232 can provide help but the importance of ensuring the remedies target the problem directly particularly global overcapacity. 

But tariffs can also hurt, particularly highly integrated global supply chains, as noted by Ann Wilson of the Motor and Equipment Manufacturers Association (MEMA) and Nicole Vasilaros of the National Marine Manufacturers Association. Tariffs increase prices for access to necessary raw materials, and in some cases can prevent access to specialty steel production that comes from across these global value chains.  Combined with the addition of another potential 232 action on autos and auto parts, that uncertainty can be destabilizing for industry. Of interest is that the President has postponed issuing a Section 232 remedy on auto/auto parts while we progress bilateral trade negotiations, with the EU and Japan.

Finally, our own Evelyn Suarez, of the Suarez Law Firm AND a former WIIT President, breaks down the real details on how the product exclusion process works, and how you can leverage this process to remain competitive. This is critical guidance on how to avoid unintended consequences.

Ultimately, Section 232 is an option to be used within the trade policy toolkit. As we host trade talks and bring together all sides of this debate, pro and con, the critical issue it to ensure that all our trade tools work towards the good of a free and fair-trade policy. Negotiating a deal to resolve Section 232 steel tariffs on Canada and Mexico, for example, is a critical component of moving forward the USMCA (the focus of our last WIIT Communique – check it out on www.wiit.org).

Enjoy these insightful articles and look for more great WIIT discussions in the WIIT Weekly.

An Interview With Representative Jackie Walorski, U.S. Representative from Indiana’s 2nd District


Q.  The 232 safeguards on steel and aluminum have the objective of addressing genuine global over capacity – does this tactic meet the objectives?  What are the positives an and negatives of a 232 approach?

A.  Global overcapacity of steel and aluminum, mainly driven by China, is a serious problem facing American producers. President Trump is right to take action to counter bad actors, but the best way to do so is with a scalpel, not an axe.

Rather than narrowly targeting Chinese overcapacity, the broad-based steel and aluminum tariffs that took effect in March 2018 have raised costs for American manufacturers and threatened our nation’s robust economic momentum. To make matters worse, American farmers have found themselves squarely in the crosshairs for retaliation, including by some of our nation’s closest trading partners.

I represent Indiana’s 2nd District, which has one of the highest concentrations of manufacturing jobs in the country and is home to companies that build RVs, boats, trailers, and countless other products built using steel and aluminum. Many of our local job creators have told me the impact of tariffs all but canceled out the benefits of the historic tax reform law enacted in 2017. They remain confident in the overall strength of America’s economy, but they are worried about the long-term harm tariffs and retaliatory measures are doing to their businesses.

That’s why I’ve urged the Trump administration to take a more balanced, narrowly targeted approach to address China’s unfair trade practices, and I’m working to ensure there is a fair and efficient product exclusion process.

I also introduced bipartisan legislation to fix the flawed Section 232 national security process so it is only used when necessary. I joined Congressman Ron Kind and Senators Rob Portman and Doug Jones to introduce the Trade Security Act, which would move national security investigations from the Commerce Department to the Defense Department and give Congress the opportunity to vote on national security tariffs. These important reforms would restore accountability and ensure Section 232 is only used for its intended purpose.
Q.  One challenge is the impact to American producers is the impact on access to raw materials, which is meant to be resolved through the product exclusion process.   what’s the role of Congress engaging with the Administration to ensure a fair and efficient product exclusion process?

A.  Many U.S. manufacturers and other businesses need steel and aluminum products that are not available in a sufficient quality or quality from domestic producers. For these companies, a robust product exclusion process is absolutely critical. The Commerce Department established an exclusion process and, after I pressed Secretary Wilbur Ross in a Ways and Means Committee hearing, made relief retroactive.

In the 14 months since then, my office has closely tracked the exclusion process and stayed in contact with companies across the country, as well as with officials at the Commerce Department. Unfortunately, what we’ve seen is a master class in government inefficiency. Instructions have been unclear and inconsistent, the process has been burdensome and slow, and Commerce hasn’t provided clear explanations of its decisions.

The Department made some improvements last summer after I requested a series of commonsense fixes, which included implementing a rebuttal process and making relief retroactive to the date of filing rather than the date of posting. This was a step in the right direction, but I continue to have serious concerns about the fairness, transparency, and efficiency of the process.

Since Commerce began releasing decisions for requests that went through the rebuttal and surrebuttal process, the evidence increasingly points to a process that’s tilted against requesters in favor of objectors. I recently sent two letters to Commerce Secretary Wilbur Ross detailing my concerns and requesting answers to numerous questions about the process and decisions. Some outstanding questions include:
  • Is the Commerce Department evaluating the overall capacity of an objector to deliver on time the quantity and quality specified for all requests on which it prevails, or is each request evaluated individually in a vacuum?
  • Who has the burden of proof: the requester or the objector? Does the burden shift if a rebuttal or surrebuttal is filed?
  • What is the process for renewing approved exclusions, which are generally valid for one year? Is there any expedited procedure to renew an approved exclusion?
  • What steps is the Department taking to ensure that it is not giving an unfair advantage to one competitor that requested an exclusion over another with a pending request for a similar or the same product?

As I wrote to Secretary Ross, “I stand ready to work with the Commerce Department to fix this process so U.S. businesses that use steel and aluminum – including RV, boat, and trailer manufacturers in my district – are treated fairly.” I hope the Department will take steps to improve the transparency and efficiency of the exclusion process, provide clarity and certainty to all participants, and ensure fairness for businesses seeking tariff relief.

Q.  The 232 is a separate activity but does overlap with USMCA especially based on the tariffs (and retaliation) on Mexico and Canada.  How can that most effectively be resolved so that Congress can consider the broader opportunity of moving the USMCA?

A.  The U.S.-Mexico-Canada Agreement, or USMCA, is a long-overdue update to the existing trade agreement between the U.S. and our closest trading partners. Canada and Mexico are vitally important markets for American exporters, including manufacturers and farmers, and they play key roles in the supply chains of numerous industries.

A modernized trade agreement with Mexico and Canada will strengthen America’s economy and open new markets for made-in-America products. The USMCA will benefit U.S. businesses, farmers, workers, and consumers, and I hope Congress will have the opportunity to approve the agreement this summer. The timing of such a vote, of course, will be up to House Speaker Nancy Pelosi.

However, in order to move ahead with the USMCA, the Trump administration must follow through on its promise to resolve the steel and aluminum tariffs and retaliatory measures that remain in place. These tariffs on our trading partners are doing nothing to solve the problem of China’s unfair trade practices. As long as they remain in place, American manufacturers will face higher costs and diminished global competitiveness, American jobs will be at risk, and the USMCA will have a difficult, if not impossible, path forward. I have repeatedly urged the administration to resolve this issue as soon as possible, and once they do I’m confident Congress will approve this modernized, pro-growth, pro-jobs trade deal.



There is No Such Thing as a “National Security” Tariff under WTO Rules—U.S. Likely to Lose Its Claim that Steel and Aluminum Tariffs Can be Justified

by Jennifer Hillman, Professor from Practice, Georgetown Law Center

On March 8, 2018, President Trump accepted the recommendation of Commerce Secretary Ross that imports of steel and aluminum imports threatened the national security of the United States and that he was therefore entitled to impose a 25% tariff on steel and a 10% tariff on aluminum imports. The tariffs went into effect on March 23, 2018.  An immediate firestorm erupted at the WTO, with nine countries (China, India, EU, Canada, Mexico, Norway, Russia, Switzerland, and Turkey) filing challenges to the tariffs. As a result, there are now nine panels in Geneva adjudicating these challenges. It is most likely that each country will prevail because the tariffs are a violation of the United States’ WTO obligations and they do not fit within the exception to the rules for national security.

Each of the nine countries are making a number of challenges, including, among others:
  1. the tariffs break the commitments the United States made to charge tariffs no higher than those found in our agreed upon tariff schedule.For steel, the agreed rate is 0% and for aluminum, it varies by product between 0% and 5.6%, so imposing 25% and 10% duties breaks that commitment.
  2. the tariffs break the United States’ obligation not to treat some WTO members better than others because the steel and aluminum tariffs were placed on most countries, but not on Australia, South Korea, Argentina and Brazil.
  3. the tariffs were administered without “due process” since they were imposed with virtually no notice, hitting goods that were already on the water before the tariffs were proclaimed. 

The response of the United States has been to insist that the measures can be justified under the national security exception to the GATT. Article XXI allows countries to pile on tariffs or take other actions that would otherwise violate their trade commitments when they judge them to be necessary for the protection of their essential security interests provided that the actions relate to trade in nuclear materials, or involve the trafficking in arms or ammunition, or are taken in a time of war or other international emergency. The problem for the Trump Administration is that it has not and likely cannot make the case that its tariffs on steel or aluminum fit within any of those three boxes.

Those crafting this exception to the international trading rules were very aware of the balance between every country’s need to be its own judge of last resort on questions of its security and the concern that an open-ended, undefined exception would permit anything under the sun to be justified. Hence the limitation to measures related to emergencies, war and weapons. 

And because the provision is so sensitive, it had never been invoked in proceedings before a WTO panel in the more than 20 years that the WTO has existed –until now. In a decision handed down on April 26, 2019, a panel examining a dispute between Russia and Ukraine over Russia’s ban on goods transiting from Ukraine provided a first look at some of the key questions related to Article XXI. First, is Article XXI justiciable at all or does the language that says a country may invoke measures that it considers to necessary to protect its essential security mean that the provision is entirely self-judging? The U.S. (and Russia) had argued the latter, but the Russia-Ukraine panel found that Article XXI is justiciable because panels can discern, based on objective evidence, whether the goods at issue are nuclear materials or arms or ammunition, or whether their exits a state of war or other emergency in international relations. Second, the panel addressed the question of whether the “other emergency in international relations” means something entirely other than war. Here, the panel found that the phrase “other emergency” must be interpreted in the context of the rest of the provision, which refers explicitly to “war” and sits alongside the exceptions for trafficking in nuclear materials or arms. As such, not any emergency in international relations will qualify as providing a justification for breaking the rules in the name of national security; it must be an emergency akin to war.

If the WTO panels were to follow a similar line when adjudicating the nine countries’ complaints (which they are not required to do, but may find the reasoning to be persuasive), then the Trump Administration will have to, at a minimum, indicate which box the steel and aluminum tariffs fall in (presumably the “taken in a time of . . . an emergency in international relations” box) and demonstrate that the tariffs fit within it. This will be a very tall order, because tariffs on steel and aluminum, particularly when imposed on America’s staunchest allies, are not likely to be viewed as taken in a time of war or anything close to it.

What is less clear is how the Trump Administration will react when it is told that its steel and aluminum tariffs violate WTO rules. It may decide not to show up at the proceedings given its view that Article XXI is non-justiciable. It may try to ignore any adverse rulings. Or it may try to block the adoption of the report of any panel ruling against it, which it can do only because the United States has all but killed the WTO Appellate Body by blocking any process to appoint new members. The Appellate Body is supposed to have seven members, but it currently has only three (the bare minimum to decide a case) and two of those three have terms expiring on December 11, 2019. No functioning Appellate Body means that any country that wants to block the adoption of a panel report needs to do nothing more than file a notice of appeal since the rules are quite clear: panel reports cannot be adopted while an appeal is pending. For the United States, this would mean that if a panel decides that the imposition of the tariffs on steel and aluminum is a violation of our WTO obligations, the U.S. can prevent the report from becoming binding and creating a formal obligation to comply by simply filing a notice of appeal.



Steel 232: The Right Tool for the Current Crisis

by Eileen P. Bradner, Senior Director and Counsel, Federal Government Affairs,
Nucor Public Affairs, Inc.

Section 232 of the Trade Expansion Act of 1962 exists for times like these. It allows the President to “adjust” imports if he investigates and determines that they threaten to impair U.S. national security. “National security” under the law is more than direct military threats. It recognizes the relationship between the economic health of certain key industries and U.S. emergency readiness.

The President’s response on steel addresses a longstanding, global economic distortion that threatens U.S. readiness in the event of military conflict or national emergency. The national security threat is the erosion of an industry that supplies vital material for everything from weapons platforms to critical infrastructure. Whether steel is imported from adversary or ally, the economic threat to the domestic industry’s sustainability is the same.

The underlying economic distortion is clear. For decades, our trading partners have subsidized their steel industries to generate employment and economic growth, driving a massive buildup of excess capacity, under the assumption that any steel they couldn’t consume at home could be shipped abroad, tariff-free, in an open global trading system. For years, the problem has been studied and documented by numerous international bodies including the OECD and the G-20. Unfortunately, none of these initiatives have created the leverage necessary to generate an effective, long-term solution.

The OECD estimates that, as of 2018, global steelmaking capacity reached approximately 2.3 billion metric tons (mt), with nearly 60 million mt of additional expansions planned between now and 2021.[1] While China is a major contributor, much of this expansion is occurring outside of China. At the same time, “steel consumption growth has been decelerating in most of the large steel-consuming economies.”[2] The United States has become the world’s dumping ground for this excess supply. U.S. steel imports grew by 109% from 2009 to 2018, with the steel trade deficit reaching 23 million mt.[3]

The domestic steel industry has successfully prosecuted case after case under the U.S. trade remedy laws to defend itself against this onslaught. Without these laws, the industry would have been decimated long ago. But trade cases are time-consuming and expensive, and foreign governments and steelmakers have learned how to evade them over time. For example, subsidies are concealed or structured to fall just outside the letter of the law and may go unaddressed. Companies transfer limited processing operations to third countries to claim a country of origin that is not covered by trade remedy orders.

The result is an endless cycle of trade cases, followed by enforcement actions, followed by more trade cases, all of which are necessary for the steel industry’s survival but ultimately insufficient to solve the underlying problem. In the decade following the global financial crisis, global steel overcapacity was uniquely harmful to the domestic steel industry. In the ten years leading up to the 232 response, the industry operated at an average capacity utilization rate of 70.8%, as imports reached record levels. This depressed industry profitability and prevented steelmakers from recovering along with the rest of the economy.

The extent of this crisis created a genuine national security threat demanding a comprehensive, global solution. The President’s action has allowed the industry to begin recovering and reinvesting. After a decade of underperforming the broader manufacturing sector, the steel industry is closing the gap.
According to the American Iron and Steel Institute,[4] year-to-date production through April 27, 2019 was up by more than 2 million net tons, and capacity utilization reached nearly 82 percent. Since the measures went into effect, U.S. steel companies have announced investments of more than $14 billion in new facilities, expansions, restarts, and other activities that offer signs of genuine recovery. These investments will create thousands of new jobs in areas of the country hardest-hit over the last decade. Thus, the Section 232 measures are working to achieve their intended goals.

This recovery is proceeding without the harm to the broader economy that some analysts predicted. The U.S. economy expanded by nearly three percent in 2018 and by 3.2 percent in the first quarter of 2019. The manufacturing sector has added hundreds of thousands of jobs since the measures went into effect, while output has continued growing robustly.

To ensure that the steel industry is healthy enough to supply our military and critical infrastructure projects, the response needs to be comprehensive. Given the global nature of the overcapacity crisis, if some countries are exempted from the 232 regime, they will inevitably become the conduit for global excess supply to enter the U.S. market, undermining the 232 program.

The President recognized the need for a comprehensive solution by imposing quotas on certain countries, and not giving anyone a free pass. This is why some level of 232 measures should be maintained on Canada and Mexico. The industry supports the President’s efforts to reach an accommodation with our NAFTA partners that will allow them access to the U.S. market without undermining national security. Such an accommodation could include a quota or similar system that prevents imports from surging into the U.S. market through these countries.

The President’s decisive action does not threaten the global trading order. To the contrary, this action was necessary to ensure that U.S. industries that play by the rules are not wiped out by competitors that don’t.



Time to Address Chinese Overcapacity in Aluminum

by Anne Clawson, Director, Strategy & Program Coordination,
Government Affairs & Sustainability, Alcoa Corporation

Aluminum is everywhere in the U.S. economy: It’s in our buildings, our airplanes, our phones, our electrical grid. And increasingly, it’s in the cars and trucks we drive. In fact, we are likely never more than six feet away from a piece of aluminum. The industry has a notable impact on the U.S. economy, too, directly employing 162,000 U.S. workers, up 3% since 2013. According to the Aluminum Association, demand for aluminum is at record high levels in the U.S. The industry has also announced over $3 billion in investments over the past five years.

Despite this good news story, the persistent threat of overcapacity and overproduction in China continues to hamper the aluminum industry. There have been four anti-dumping and countervailing duty (AD/CVD) cases filed in the aluminum industry since 2011, the industry’s first-ever cases, all against Chinese producers. And yet, Chinese exports hit record highs in 2018, jumping up 21% from 2017 levels.

When President Trump issued a proclamation ordering a Section 232 investigation into the aluminum industry, the industry initially welcomed it. We hoped that it would serve as an opportunity to finally address our core challenge – unfair subsidies to the Chinese aluminum industry that create overcapacity.

However, the remedy imposed on aluminum under Section 232 actually doesn’t affect China much. China produces so much metal that all the Chinese aluminum coming into the U.S. amounts to less than 2% of total Chinese production. On top of this, Chinese companies have received product exclusions for 102% of 2017 Chinese exports to the U.S. by volume, according to the Mercatus Institute report on Section 232 product exclusions. Meanwhile, Chinese primary aluminum capacity grew by nearly 6 percent in 2018 and production actually picked up in the second quarter of 2018. So we must look beyond Section 232 tariffs at other solutions to address this challenge.
To take a step back and understand how we got here, we must start with the global financial crisis. In 2008-09, the aluminum industry saw a year of rapidly dropping demand with little corresponding slowdown in supply. Those dynamics created difficult operating conditions outside of China and led to a massive buildup in stockpiles. In fact, the market is still eating away at those inventories.
But in China, at the same time, production of primarily aluminum grew from 10% of the global market in 2000 to almost 57% in 2018. To put that in perspective, the U.S. now contributes less than 1.5% of global primary production.
This massive buildup in Chinese capacity and production is the result of a variety of unfair subsidies. The Organization for Economic Cooperation and Development (OECD) released a report on market distortions in the aluminum industry in January. The study finds that non-market forces and government intervention are driving Chinese capacity growth. The OECD profiled 17 firms that were geographically representative of the industry and found that the top five firms received 85% of all financial and non-financial subsidies – and these firms were all Chinese. Any support from any other government to the industry pales in comparison.

China had started to enforce long-standing regulations regarding operating permits and environmental laws at the beginning of 2017, which were viewed by many as positive steps to bring their industry under control. But since then, reform in the Chinese aluminum industry has stalled.

With reform stalled and the Chinese economy softening, metal continues to flow out of China.  Aluminum is a traded commodity with a single global price outside China, so the more metal that leaves China – wherever it goes – the lower the global price.

When the price of aluminum dips below the cost of production at a given smelter, that smelter will struggle. And when a competing Chinese smelter has artificially low input costs, the Chinese smelter will be more competitive.

We continue to see the structural challenges presented by Chinese overcapacity affect the market, and it cannot be addressed without governmental attention. The best approach forward is a government-led, multilateral solution to address the issue.

The U.S. Government can take the opportunity to build on the Section 232 work. The recent exemption for Canada and Mexico is an important step that can provide an opportunity to work with these trading partners to address aluminum overcapacity in China. The upcoming G20 summit could be a great time to start the dialogue.

Additionally, the Office of the U.S. Trade Representative has been working with the European Union and Japan to recommend industrial subsidies reform at the World Trade Organization; efforts like this could bear fruit. Aluminum industry associations in countries like Canada, Australia, Norway and others are eager to support, as well.

The aluminum industry represents a bright spot in U.S. manufacturing. Let’s work together to make it stronger for the future.

Tariffs, Trade and Increasing Turmoil in the U.S. Auto Parts Sector

by Ann Wilson, Senior Vice President for Government Affairs for the Motor
and Equipment Manufacturers Association (MEMA)

The motor vehicle industry of the 21st Century is in the midst of massive technology shifts and changes in consumer demands. Automation, electrification, and shared mobility will dramatically alter Americans perception and use of vehicles. These changes will impact our domestic manufacturing base as well as our global supply chain.

At the same time, the industry is facing a series of challenges in the trade policy arena.  President Donald Trump’s new trade agenda has as its cornerstones a re-negotiated agreement between the U.S., Canada, and Mexico (USCMA) and likely imposition of 25 percent tariffs on virtually all Chinese imports. And, in two separate significant moves the President has implemented tariffs on imported steel and aluminum and is considering tariffs on virtually all imported autos and motor vehicle parts. 

The U.S. industry has depended on a global supply chain to provide raw materials and finished goods in order to compete in the rapidly evolving mobility space. This global supply chain has in turn created almost 900,000 direct supplier jobs in an overall industry that supports over 10 million American job. Make no mistake about it, the global supply chain has been good for this industry but it has also been good for the U.S. economy and American workers. In fact, it has helped make the United States a center of industry innovation in areas like automation. 

The President’s tariffs on steel and aluminum and potential tariffs on autos and parts has focused on a previously little used or understood section of the 1962 Trade Expansion Action – Section 232. The basis for a Section 232 action is a finding by the Department of Commerce that the importation of a raw material or finished good causes a national security risk. Yet nothing could be further from reality in our industry. Importation of steel, aluminum, autos and parts from allies like Canada, the EU, Japan and Mexico is not a national security risk. The integrated global marketplace provides economic viability for an industry that contributes 3.5% of the total U.S. GDP. 

When steel and aluminum tariffs were implemented starting in March 2018, an exclusion process was announced. Yet, this process has been woefully inadequate and has failed the consuming industry. Manufacturers throughout the country have filed almost 130,000 steel exclusion requests. In one year, the Department of Commerce has only acted on 37,000 of these requests. This includes 24,000 exclusion approvals and over 12,000 exclusions denied. During this same period, suppliers have seen a price increase of almost 50% for steel purchased in the United States. This increased cost has weighed particularly heavy on smaller, domestic manufacturers.

Seventy percent of supplier employment comes from smaller suppliers located throughout the United States. These suppliers often have a limited number of manufacturing facilities in the U.S. and perhaps one outside of our country. They are the backbone of our successful domestic industry and are often the major employer in small and medium sized communities throughout our country.

But here lies the difficulty. These suppliers have two major costs – raw materials and employees. The increased cost of steel and aluminum has left them with few resources to find alternative sources of raw materials. In order to continue operations, these suppliers have had no choice but to reduce worker hours and not fill open positions. 

While the strong U.S. economy may mask the overall impact of these decisions, it cannot alter the impact these decisions have on individual Americans and their communities that depend on these manufacturers. Moreover, our domestic industry will ultimately be weakened and become less globally competitive.

However, this summer, the industry is facing an even bigger potential challenge. One year ago, the President ordered the Department of Commerce to investigate the national security risk posed by importing autos and parts. Unlike many other controversial issues facing this country, the Trump Administration did not hear from any stakeholder in favor of imposing wide scale tariffs on imported autos and parts. The industry – auto manufacturers, dealers, suppliers, and the aftermarket all agree that the importation of autos and parts does not impose a national security risk and the imposition of tariffs will have a significant negative economic impact. We are in fact working in a “Driving American Jobs” coalition to prevent imposition of tariffs. Recently 160 Members of Congress sent a bipartisan letter in support of perspective. And there is no doubt, that the imposition of these tariffs will increase the consumer prices, cost jobs and reduce industry sales. All of this would lead to reduced investment in the U.S. 

According to the Center for Automotive Research (CAR), 25 percent across the board auto tariffs would increase the price for consumers of a typical motor vehicle by $2750, eliminate 367,000 U.S. jobs and cut sales by 1.3 million units. (CAR, February 2019)

Yet the President has on his desk a report by the Department of Commerce that could do just that. Although this report has not been made public, Japan, and the EU are pursuing trade negotiations with the U.S. to forestall the possibility of wide scale tariffs. 

The decision to impose these tariffs or other measures lies squarely with the President.  MEMA and the entire industry have vigorously opposed the imposition of tariffs and we see Congress considering action to limit the President’s authority to impose tariffs.  Chairman Chuck Grassley (R-IA) of the Senate Finance Committee is working with Senator Rob Portman (R-OH), Senator Pat Toomey (R-PA) and others on legislation to curtail the President’s ability to impose 232 tariffs. The entire auto industry supports these efforts to reassert Congressional authority on trade. Under Article 1, Section 8 of the U.S. Constitution, Congress has the power to “regulate Commerce with foreign Nations.”  

In the meantime, the auto parts sector faces increasing uncertainty caused by the tariffs that are already in place. Of course, production and sales of motor vehicles in the U.S. peaked a year and a half ago, as part of a general economic cycle. New auto 232 tariffs could start the process toward greater economic difficulties.

The automotive industry provides jobs, investment, and the vehicles consumers love to drive. While the industry strongly supports the President’s goal of a fair-trading system for all Americans, tariffs will weaken our domestic supply chain, decreasing jobs and investment, and increasing consumer costs while limiting choice. We know there is a better way.



U.S. Boating Bears the Brunt of the Trade War

by Nicole Vasilaros, Senior Vice President of Government and Legal Affairs
for the National Marine Manufacturers Association

An America first trade policy shouldn’t be putting one of our country’s core industries last. Yet the ongoing global trade war continues to wreak havoc on the recreational boating community, an industry that builds 95 percent of boats sold in the U.S. and has been a net exporter for many years. What’s more, boats are the only recreational product facing retaliatory tariffs from several top trading partners, including Mexico, the European Union, and China.

That’s why the National Marine Manufacturers Association (NMMA) and the broader manufacturing industry have made trade policy a top priority and worked tirelessly over the past year to urge the administration and members of Congress to reach commonsense solutions.

For more than a year now, the industry has been facing a range of compounding tariffs – antidumping and countervailing duties on aluminum sheet, Section 301 tariffs on hundreds of commonly used marine products and materials, and worst of all, Section 232 tariffs on aluminum and steel, which have resulted in retaliatory tariffs on U.S. boats from our industry’s top export markets. These tit-for-tat tariffs are hitting the recreational boating industry on multiple fronts, causing the price of marine materials and parts to rise and decimating U.S. boat exports.

Section 232 tariffs on all aluminum – coupled with the effects of the administration’s antidumping and countervailing duties on Chinese aluminum sheet – have caused the price of the material to spike, even for domestically produced aluminum. Since nearly all marine manufacturers source their aluminum domestically, there’s nothing they can do to offset these additional costs. Aluminum boats represent 44 percent of new boat sales each year and account for $3 billion in retail sales – a lack of recourse from these harmful tariffs negatively impacts our industry’s bottom line and jeopardizes our economic contributions.

Not only have these tariffs hurt the economy, they have also threatened the livelihoods of 22,000 Americans whose jobs are tied to the aluminum sector of the marine industry. These products are manufactured across the U.S., with heavy concentrations in states such as Arkansas, Florida, Indiana, Michigan, Minnesota, Missouri, and Washington.

To add insult to injury, Canada, the European Union, and China, which collectively account for 70 percent of U.S. boat exports each year, responded to the global aluminum tariff by retaliating against boats. These punitive tariffs have essentially closed off markets that purchased a combined $2 billion in U.S. boats and marine engines last year, and several manufacturers have seen millions of dollars of orders canceled as a result. Put simply, it now costs significantly more to manufacture boats, and there are fewer global customers able to buy them.

Fortunately, Canada removed its retaliatory measures on U.S. boats last month, marking the most positive development our industry has seen since the trade war began. But there is still more work to do on the retaliation front.

With the administration considering new Section 232 tariffs, NMMA and a coalition of manufacturing partners sent a letter to President Trump last month, urging him to refrain from imposing automobile tariffs using Section 232 of the Trade Expansion Act of 1962 – the same authority the president exercised to impose tariffs on aluminum and steel. If the administration chose to levy Section 232 tariffs on automobiles and vehicle parts from Japan, Europe, and other nations, it would subject even more marine and engine parts to these detrimental tariffs.

Some recent developments have been encouraging, such as the elimination of Canadian countermeasures, the completion of the U.S.-Mexico-Canada-Agreement (USMCA), and negotiations with Japan, the European Union, and the U.K. And the industry is advocating strongly for the ratification of USMCA, negotiations with top trading partners, and a resolution to the conflict with China.

Congress has stepped in to alleviate some of these negative impacts, and recently introduced three pieces of legislation intended to curb the effects of the global trade war for American businesses. The Bicameral Congressional Trade Authority Act of 2019 and Trade Security Act of 2019 would provide Congress with a renewed mandate to review tariffs that pertain to national security. Additionally, the proposed Import Tax Relief Act of 2019 would create an exclusion process for companies that have been affected by the 10 percent tariff on $200 billion in Chinese goods on the third Section 301 list.

However, despite this progress, more must be done to ensure the recreational boating industry can continue to bolster America’s economy. In its seventh consecutive year of growth, our $39 billion industry supports 35,000 business and 691,000 American jobs in every state. All of this could be at risk without swift solutions to all trade related issues. 

If the trade war continues to persist, marine manufacturers could be forced to consider scaling back operations, including jobs, and some have already frozen plans for expansion. For the sake of our industry – and the broader American economy – we will continue to encourage the U.S. government to drop its tariffs first policy and strike free- and fair-trade agreements with our valued trading partners. U.S. trade policies shouldn’t hurt one of our most uniquely American industries.


What to expect if you are thinking of filing a Section 232 Product Exclusion Request?

by Evelyn M. Suarez, Esq., The Suarez Firm, PLLC and Past WIIT President

At a recent trade conference, White House officials described the Administration’s trade policy as “bold, creative and disruptive.”President Trump’s use of Section 232 of the Trade Expansion Act of 1962 to impose tariffs and quotas based upon national security concerns is one example of this new approach. Using this tool, on March 8, 2018, President Trump fulfilled a promise and imposed, effective June 1, 2018, a 25% duty on imports of steel products from all countries of origin except Argentina, Brazil and South Korea, which capitulated to quotas. He also imposed a 10% duty on imports of aluminum products from all countries, except for Argentina which also agreed to quotas. Australia was the only country spared tariffs or quotas on their metals. Details on the 232 tariffs appear on Customs & Border Protection (CBP) website. https://www.cbp.gov/trade/remedies/232-tariffs-aluminum-and-steel.
There is a process to ask for an exemption from these onerous taxes. It is neither quick nor easy but it is an available avenue of relief. The Bureau of Industry and Security (BIS) at the Commerce Department set forth rules on March 19, 2018 (83 Fed. Reg. 12106) for requesting product-specific exclusions and for filing objections to such requests. The process was revised on September 11, 2018, to permit rebuttals to objections and surrebuttals. (83 Fed. Reg. 46026). These changes were made after various members of Congress and industry expressed concerns. For example, on April 19, 2018, then Senate Finance Committee Chairman Orrin Hatch (R-UT) and ranking member Ron Wyden (D-OR) wrote a letter to Commerce Secretary Ross demanding changes to the process claiming that it lacked “basic due process and procedural fairness for stakeholders.” 
Only individuals or organizations using steel and aluminum articles in business activities (e.g., construction, manufacturing, or supplying steel/ aluminum to users) in the United States may make requests. That may mean that the requester is not the importer of record. If a non-importer user is the requester, the user will have to work with the actual importer, often the supplier or distributor, to collect the information, regarding the importation of the product, such as tariff classification, country of origin, ports of entry. Sometimes, the product description details are proprietary to the customer or supplier. This poses special challenges for the requester, not usually privy to such information.In such situations, a general description can be given with a notation that the details are proprietary and unavailable to the requester.
Generally, exclusions will be made on a product basis and will be limited to the individual or organization that submitted the specific request. The regulations were also revised on September 11, 2018, to allow for requests based on size ranges within the same Harmonized Tariff Schedule (HTS) code to reduce the unanticipated volume of requests experienced by BIS. (83 Fed. Reg. 46026).  This has been a useful change reducing the need to make multiple requests. The revised regulations also provide a “streamlined review” for requests with no objections. Unfortunately, there is still a huge backlog of requests. It also provided criteria for evaluating U.S. product availability to meet the requester’s product need. For example, it defined “immediately” as meaning whether a product is currently being produced or could be produced “within 8 weeks” in the amount needed in the business activities of the user.
BIS forms must be used for requests. They are available on BIS’s website. https://www.bis.doc.gov/index.php/all-articles/224-232-investigations/1449-232-faq. Requests are filed on www.regulations.gov referencing BIS-2018-0006 for steel and BIS-2018-0002 for aluminum.  Requests are made public on the website but the requester may provide additional proprietary information separately in support of the request. BIS lists in its FAQs the most common errors companies make in submitting exclusion requests that result in requests not being posted for public comments. https://www.bis.doc.gov/index.php/all-articles/224-232-investigations/1449-232-faq

A product exclusion will be granted if the product is not made in the U.S. (1) in a sufficient and reasonably available amount; (2) satisfactory quality; or (3) there is a specific national security consideration warranting an exclusion. Many requests are based on the grounds that the product is not made in the U.S. in a sufficient and reasonably available amount of satisfactory quality.
A common reason for denial of request is the use of the wrong HTS code. In such case, the requester should ascertain the correct HTS classification because it is important that they classify their merchandise properly for customs compliance. However, in cases where the user is not the importer of record the requester does not control the tariff classification. This can pose an obstacle to obtaining relief.
There have been various concerns raised by industry groups and members of Congress about the fairness of the process, especially to U.S. manufacturers and small businesses. The costs of the tariffs themselves as well as the time, effort and professional services needed to make exclusion requests has even been covered in the mainstream press. https://www.npr.org/2018/07/22/631254971/missouri-nail-factory-manager-on-steel-tariffs https://www.nprillinois.org/post/exemptions-steel-tariffs-are-still-limbo#stream/0
Timeliness in rendering decisions has been a nagging problem and so has the process itself, which is clunky and difficult to use. For example, on March 11, 2019, Congresswoman Walorski (R-Ind.) sent Commerce Secretary Ross a second letter about the product exclusion process, stating” it has been a master class in government inefficiency and plagued by maddening inconsistency.” She raised a myriad of issues “in hopes of working with you to improve its fairness, transparency, and efficiency for all participants.”
The current portal for filing requests on www.regulations.gov makes it difficult to track requests and comments thereto. There is no unitary docket for such filings. Each filing is given a different tracking number, which is followed by a BIS identification number. The posting of filings, whether initial requests, objections, rebuttals or surrebuttals is not immediate so timing of the posting is unpredictable, making it even harder to track requests and determine deadlines. 
In response to a request made by Senators Toomey, Jones and Carper, the Government Accountability Office (GAO) is reviewing the steel and aluminum tariff exclusion process. In a December 19, 2019 statement, Senator Toomey specifically noted the flawed product exclusion process. https://www.toomey.senate.gov/?p=op_ed&id=2316

BIS tested a new portal in December that it said “will streamline the process for external parties” by allowing them to view all documents for a given request in one place. This would be a much welcome change. Unfortunately, the new portal for filing requests is still not up and running. The latest word is that the portal will go live 15 days after a Federal Register notice is posted. It is anticipated that this might happen within the next 90 days.

You may ask why bother given all these problems? While not quick or easy, it is still important that companies make the effort to avoid these onerous duties. Exclusions are in fact granted. Even if not granted the first time, corrections can be made and requests refiled. Given the Congressional oversight and industry pressure, hopefully there will be improvements. It is thus important to keep your representatives in Congress informed as to your experience. There are also resources to benchmark your company’s experience. For example, George Mason University Mercatus Center has been collected data on the exclusion process. https://www.mercatus.org/bridge/commentary/growing-backlog-inconsistent-rulings-cast-doubt-over-tariff-exclusion-request  

Finally, companies that have been granted exclusions should be mindful of the need to seek renewals since approvals are only good for a year. 

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