Trade Cases

Reprieve from Steel Tariff May Prove Elusive

Written by Tim Triplett

Washington attorney Lewis Leibowitz offers the following trade update:

Several countries have arrived in Washington seeking exemption from the Section 232 steel and aluminum tariffs. The Trump administration surprised the market with its announcement Thursday that five other nations will join Canada and Mexico on the list of those exempt from the tariffs: the European Union, Australia, Argentina, Brazil, and South Korea. While those nations account for more than half of U.S. steel imports, others (notably Turkey, Russia and Japan) are still left to plead their cases.

Product exclusion procedures are getting a lot of attention now that the rules are out. The five-page exclusion request form is extensive and requires release of highly sensitive commercial information. However, many companies seem to lack a viable alternative to trying for an exclusion. One newsletter estimated that 4,500 requests for exclusion would be filed in the first year of the tariffs (a highly speculative number). There is no guarantee that any will be granted.

Commerce has yet to announce details of the tariffs’ administration. Customs bonds for much higher duty liability could be adjusted to much higher levels. An analysis of the possible bond increases was featured on the Avalon Risk Management website.

How can exclusions possibly be administered? All requests must be filed by individuals or companies. At least at first, Commerce will grant exclusions (if any) to each individual company that requests it. The exclusion will be limited to that company’s supply chain (foreign producer, trading company, U.S. importer, end-user, etc.). This raises the possibility that identical steel products could be subject to the tariffs if imported by Company A but not subject if imported by Company B. U.S. Customs will have to sort all this out, assuming exclusions are granted.

No immediate exclusions are likely because companies have 30 days in which to file objections. This does not allow any time for exclusions to be granted before the tariffs take effect on Friday.

In Geneva, statements have been filed by WTO members in the first case adjudicating an action (by Russia, ironically) invoking Article XXI of the GATT, which is the “national security” provision we have heard so much about.

The United States, in its third-party submission to the WTO, argued that the national security exemption is not reviewable in any meaningful sense by the WTO. If a country invokes “essential security interests,” the United States argues, the WTO cannot evaluate whether the national security claim is supported by evidence or is legitimate.

The European Union argues that the WTO can examine whether the action taken is legitimately necessary to “essential security interests.”

Not surprisingly, Russia agrees with the U.S. position. Russia is in the midst of a dispute with Ukraine, which few deny is a real conflict. It could be several months before the WTO panel rules in the Russia-Ukraine dispute. In the meantime, a dispute settlement case could be under way over the Section 232 tariffs.

Another trade-related development this week informs our thinking about Section 232. The Section 337 action brought by U.S. Steel almost two years ago came to an end with the decision of the International Trade Commission to dismiss antitrust allegations against Chinese steel producers. The action contained three main claims:(a) theft of trade secrets; (b) transshipment of steel to evade antidumping and countervailing duty actions; and (c) a conspiracy to set low prices in violation of U.S. antitrust laws. The first two claims were terminated in 2017; the last was dismissed March 19. The case could still be appealed to the U.S. Court of Appeals for the Federal Circuit. This ends the only steel-related trade case other than the Section 232 case and many antidumping and countervailing duty cases.

For more information, contact the Washington law office of Lewis E. Leibowitz at (202) 776-1142.

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