Pittsburgh — The Aluminum Association has submitted recommendations to the US Commerce Department to improve recent changes to the Section 232 steel and aluminum tariff exclusion process, with a focus on modifying blanket exemptions for products covered under the new category of "general approved exclusions", or GAE, the association said Feb. 19.
"Reflecting member feedback, we urged the department to revisit the newly created GAEs that took effect in December, and we highlighted a need to ensure that new certification requirements for exclusion requestors can effectively rein in exclusion requests for volumes that vastly exceed their historical consumption," Aluminum Association CEO Tom Dobbins said in a newsletter.
The industry association included its recommendations in comments to Commerce filed in response to the department's "interim final rule" that introduced updates to the tariff exclusion process in December.
"We will be watching the exclusion portal closely over the coming weeks to see how these new changes are playing out," Dobbins said.
The exclusion process allows importers to request duty exemptions for specific steel and aluminum products that are currently subject to tariffs under Section 232. The exclusions may be granted if the domestic industry cannot produce the subject product in sufficient quality or quantity, or for national security purposes.
Domestic producers may object to exclusion requests that are submitted to Commerce.
The GAE was established to grant indefinite tariff exemptions for certain products if previous exclusion requests were not blocked by objections.
In its comments to Commerce, the Aluminum Association said the initiation of the GAE was "a surprising and unexpected action, implemented without any opportunity for formal or informal input by domestic producers, that we find to be troubling."
"The absence of objections should not be taken to mean that the imposition of a tariff on such imports pursuant to Section 232 is unimportant generally to domestic producers of aluminum articles," Lauren Wilk, the Aluminum Association's vice president of government relations and international programs, said in the letter to Commerce on behalf of the association.
Wilk said the GAEs encourage US aluminum purchasers to source foreign supply over domestic supply.
"We urge that the Commerce Department undertake a wholesale review of the GAEs while the agency evaluates additional changes to the Section 232 exclusion process to ensure the program is benefitting the US aluminum industry it was designed to support," Wilk said.
"If the new GAE mechanisms remain in place, the department should establish a process for stakeholders to request a rescission of the GAEs."
Placing limitation on exclusion requests
Wilk said the tariff exclusion process has created an administrative and cost burden on domestic producers that must object to excessive exclusion requests to maintain "a level playing field". As such, the ability to submit requests should be limited, she added.
"Only requestors that are transforming, processing or further manufacturing the imported aluminum product should be eligible for an exclusion," Wilk said in the letter.
Wilk said the need to limit eligibility stems from the Aluminum Association's concern that other industry participants have abused the exclusion process, which has "created a market dynamic with an inherent disadvantage for domestic aluminum manufacturers."
Currently, an exclusion requester must certify that it does not intend to use an exemption solely to hedge or arbitrage the price and instead plans to consume the entire volume of product listed in the exclusion request, a provision which the Aluminum Association supports.
Among other changes, Wilk said Commerce should adopt a policy that will deny exclusion requests involving products from non-market economies like China, with exclusions only granted in extraordinary circumstances.
"If the Department does not presume denial for exclusion requests involving products from non-market economies, the Department should allow stakeholders to oppose requests on the basis that the product originates from a designated non-market economy or is the likely result of transshipped non-market production," she said.
Steel industry joins in GAE opposition
The American Iron and Steel Institute also sent comments to Commerce Feb. 12 outlining its opposition to the GAEs.
"We have requested the revocation of the 108 GAEs until a thorough review process can take place," AISI CEO Kevin Dempsey told S&P Global Platts in an emailed statement.
"Once the review process can ensure exclusions are limited to products that the domestic industry truly is not capable of producing, we could accept a more stringent version – if the criteria we have outlined in our comments to Commerce are met."
The GAE currently exempts steel articles classified under 108 HTS codes and aluminum articles classified under 15 different HTS codes from the Section 232 tariffs.
"Many of the exclusion requests that have been filed to date would undermine the effectiveness of the Section 232 remedy, as importers requested exclusions for products that the domestic industry can and does produce," Dempsey said.
Conversely, Dempsey said the AISI did support the institution of a volume certification requirement to limit excessive and redundant exclusion requests, as well as other provisions to ensure domestic steelmakers are not held to a higher standard than foreign suppliers in exclusion decisions.