Leibowitz on Trade: Mercatus Report on Steel Exclusions Process Finds Worrisome Trends

Clearly, if the exclusion process is intended to permit steel users to use imported steel, tariff- and quota-free, when domestic producers are unable to produce sufficient quantities, some method of verifying the ability of objecting producers would be desirable. Trade associations of steel users and their supporters in Congress are increasing their criticism of the exclusion process. A recent article in the newsletter Inside U.S. Trade detailed their complaints.

The process is characterized by delays (most exclusion requests that receive objections remain undecided for months, costing steel users in tariff payments and uncertainty) and minimal analysis. A typical denial decision recently stated, as the sole basis for decision, “ITA recommends finding, based on all of the evidence presented, that the product referenced in the above-captioned exclusion request is produced in the United States in a sufficient and reasonably available amount and of a satisfactory quality, and recommends denying the request for an exclusion.”

In some instances, requests are considered “not complete” because U.S. Customs claims that the tariff classification claimed is incorrect. There is minimal analysis of these claims, as well. For example, one denial stated that the dimensions claimed for the product were not consistent with the requirements of the particular ten-digit classification. Others have been denied because Customs claims the product is “non-alloy” steel rather than “alloy” steel. These are often details that are not relevant to the ability of domestic producers to make the product.

There has not been a legal challenge yet to the process or the legality of some denials. The amount of discretion claimed by Commerce in making these decisions is almost unbounded, making a legal challenge based on abuse of discretion difficult. However, particularly in semifinished steel cases, which have been denied in virtually every case, members of the steel industry itself are being rendered uncompetitive. I expect there will be more complaints about exclusions.

Lewis Leibowitz

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