Steel Products

Leibowitz on Trade: May 1 Deadline Fast Approaching

Written by Tim Triplett

Trade attorney and Steel Market Update contributor Lewis Leibowitz offers the following update on recent events in Washington:

• By my count, the Bureau of Industry and Security at Commerce has posted 82 exclusion requests for steel and aluminum combined. The Washington Post reported that 1,200 requests had been submitted to BIS. The NPR program Marketplace yesterday reported their sources said 2,200 had been filed. Who’s right? No    more than one. The point is that the system is overloaded. Sources at Enforcement and Compliance (the antidumping and countervailing duty shop at Commerce), said some analysts were detailed to BIS to work down the backlog.  This is likely to be a frustrating process until they get it down to a routine.

• A spot check of steel and aluminum exemption requests suggests they are posted online 10 days to two weeks after being received by the BIS. Shippers are nervous about shipments arriving before exclusion requests can be ruled on by Commerce. In general, Commerce has committed to issue a ruling within 90 days after the requests are posted. They have not said they will rule within 90 days after receipt. Importers should add two weeks to be safe. The department has said that shipments entering the United States after a request for that product has been posted will be excused from the tariffs if the exclusion is ultimately approved. However, this means several weeks of angst. Importers can defer entry by admitting goods to a bonded warehouse or foreign trade zone (FTZ) while waiting. There are procedures for obtaining a refund of duties if an exclusion is eventually granted.

Steel using manufacturing companies, importers and distributors have been complaining about the product exclusion review process to Congress. So far, Commerce is rejecting the criticisms. And this is before the first objections have been posted. Objecting parties will start filing objections on or before May 3.

• Rumors abound concerning the fate of country exemptions as of May 1, the date that exemptions for Australia, Argentina, Brazil, Canada, the EU, South Korea and Mexico are due to lapse. NAFTA discussions are continuing. The trade ministers of the three countries met in Washington on Thursday, but sources expect no big announcement. European Trade Commissioner Cecilia Malmstrom is still uncertain what the United States may ask for in exchange for a permanent exemption. Korea has announced a deal for an exemption from tariffs, but the deal requires a quota analogous to the steel VRAs of the 1980s. Other countries, including India, are asking for an exemption, too. And May 1 is fast approaching.

Countries are interested in negotiating exemptions but do not want to appear to put substantive issues on the table in exchange for removing tariffs that many of them (perhaps all) regard as a violation of global trading rules. A lapse of all exemptions (other than Korea and possibly NAFTA) is a realistic possibility. (ARTICLE CONTINUES BELOW)

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• On April 16, the European Union requested consultations with the United States to discuss the steel and aluminum tariffs. As was the case with China, the EU treated the U.S. tariffs as safeguard measures. The Safeguards Agreement in the WTO gives countries the right to request immediate consultations about compensating concessions to offset safeguard trade restrictions. China has requested safeguard consultations, as well. Today, the U.S. agreed to consult with China on the safeguard measures. An earlier request by China to consult preparatory to a dispute settlement panel on the Section 232 tariffs still awaits a U.S. response. The United States claims absolute discretion to enact trade barriers in the name of national security, a position it advanced in a recent dispute settlement case between Russia and Ukraine. The WTO has not ruled on this question previously.

• The EU announced this week that it would not negotiate with the U.S. on any trade matters until the EU received an “unconditional” exemption from the steel and aluminum tariffs. No reaction from the U.S. on that point. In the meantime, Prime Minister Abe and President Trump are huddled at Mar-a-Lago talking trade (and North Korea). Japan may secure an exemption. India has asked for an exemption, as has Hong Kong. Don’t count on those. In the meantime, the May 1 deadline is fast approaching. Those whose supply chains include exempt countries could find that coming to an end in 10 days. Because President Trump likes to keep people on edge, we may not know until April 30 (perhaps later).

• The action brought by Severstal Export against the Section 232 tariffs continues before the Court of International Trade in New York. Plaintiffs’ motion for a preliminary injunction was denied on April 5. Last Friday, the Court denied the motions of Nucor and Steel Dynamics to intervene in the case. Judge Restani held that intervention was not appropriate because the two companies were raising arguments already advanced by the government, which is the principal defendant. The Court pointed out that, if intervention of these two companies were permitted, any steel company claiming a benefit from the Section 232 tariffs could also intervene. In the interests of efficiency, the motions were denied. No other suits have been filed in the Court of International Trade to date.

Lewis Leibowitz

The Law Office of Lewis E. Leibowitz

1400 16th Street, N.W.

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Washington, D.C. 20036

Phone: (202) 776-1142

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Cell: (202) 250-1551

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