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US lawmakers hold hearing on Section 232 exemption process

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US lawmakers hold hearing on Section 232 exemption process

Pittsburgh — A panel of US steel end-users on Tuesday voiced concerns over the way in which the Commerce Department has been handling product exclusion requests related to the Section 232 tariffs on metals imports, with steel buyers and lawmakers calling for more transparency.

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The House Ways and Means Trade Committee on Tuesday held a webcast hearing on the product exclusion process for the Section 232 tariffs on steel and aluminum.

In his opening statement, Representative Dave Reichert, a Republican from Washington and chairman of the trade subcommittee, said the exclusion process is "bogged down in red tape and is moving far too slowly."

Reichert noted Commerce's resources are stretched thin due to the influx of trade action the US has undertaken with regard to tariffs, but he said the issues with the 232 exclusion process go beyond being short staffed. The US began implanting a 25% tariff on steel imports and 10% tariff on aluminum imports March 23.

"Four months have passed since the steel and aluminum tariffs were imposed, and less than 700 out of the 27,000 requests have resulted in determinations by the Commerce Department, with only 266 accepted and 421 denied," Reichert said. "The problem is not lack of resources. The fact is that the process is burdensome, unwieldy, and inefficient."

Reichert called on the Trump Administration to streamline the exemption process by allowing trade associations to apply on behalf of member companies, which could help to cut down on duplicate applications. Additionally, when a product exclusion is granted for one company, the item in question should be available for any US company, he said.

Commerce also should allow companies whose petitions have been denied an opportunity to refute objections or appeal the decision without starting the process all over again, Reichert said.

"One significant flaw is that the current 232 exclusion process does not allow for an applicant to effectively engage in the Department of Commerce?s exclusion review process," Willie Chiang, executive vice president and COO of Plains All American GP, said in his testimony. "It also provides limited due process or transparency for applicants. Due to the opaque nature of the process, we can only assume that Commerce?s determination is based on a review of a combination of the objectors? submissions, which appear to not be required to be substantiated, and other undisclosed data by staff -- without interaction with the applicant."

Earlier this month, Commerce denied a request filed by Plains to exclude 155,535 mt of steel line pipe from Greece it is importing to construct its 550-mile Cactus II pipeline, which will connect the Permian Basin production region in Texas to Corpus Christi, Texas.

Reichert and a number of panelists also said Commerce should allow companies to use the product exclusion process for products that are coming from countries that have agreed to a hard quota, which includes South Korea, Argentina and Brazil.

Brian Semcer, president of MICRO, a New Jersey-based precision medical device contract manufacturer, testified that his company has faced issues trying to get the steel tubing it typically sources from South Korea as a result of the quota. MICRO's imports were capped at approximately 60% of the total shipments it received in 2017, and it does not have the ability to import above that level, even if it were willing to pay the tariff, according to Semcer.

"The tubes are the only raw materials we purchase from a foreign supplier, and we do so because, quite simply, there isn't a suitable domestic alternative," Semcer stated in his testimony. "On top of that, while the tubes are an essential element to the medical devices we manufacture, they are one of the least expensive parts of our supply chain. We spend only about $4 million a year to purchase less than 100 tons of tubing. So, it?s been difficult to generate interest among potential American suppliers who would have to go through a long and expensive conversion and approval process just to start working on a product line that isn't all that lucrative."

Roy Houseman, a representative of the United Steelworkers union, agreed there needs to be additional transparency in the Section 232 exclusion process, but warned lawmakers that too many exclusions could water down the effect of the tariffs.

"Tariffs alone cannot be the solution to illegal dumping and global excess capacity," Houseman said. "However, until we can devise a comprehensive plan to address these problems, we must not undermine the benefits that these tariffs are already providing. Rather than granting unnecessary exclusions, the government should encourage domestic production so that the United States truly can meet its own needs in these vital sectors."

--Justine Coyne, justine.coyne@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com