Trade Cases
Leibowitz on Trade: JSW USA Files First Challenge to Exclusion Request Denials
Written by Sandy Williams
August 11, 2019
Trade attorney and Steel Market Update contributor Lewis Leibowitz offers the following update on events in Washington:
JSW Steel USA, an affiliate of a major Indian steel producer, is the first company to challenge the Section 232 steel product exclusion procedure. The company filed a lawsuit July 30 naming the Department of Commerce as the principal defendant agency.
JSW produces steel products in the United States at facilities in Baytown, Texas. The company makes steel plate and large-diameter welded line pipe, which require steel slab as the raw material.
JSW’s exclusion requests claim the company cannot obtain slab with the necessary characteristics and quality from domestic sources. When it filed exclusion requests, several domestic companies objected. JSW claims that the objections were without merit.
Commerce denied the exclusion requests more than a year after they were filed. This means that tariffs paid by JSW USA for a year prior to the denial cannot be recovered.
The company filed suit asking the Court of International Trade, which has jurisdiction, to declare that the denials were contrary to law and should have been granted. This would mean that JSW USA could obtain millions of dollars in the Section 232 tariffs that were paid.
The steel exclusion process administered by the Department of Commerce has come under strong criticism ever since the program was established. For the first several months, exclusion requests were filed and sat undecided. When objections were raised, especially in cases involving semifinished products, domestic producers claimed that they had the ability to produce semifinished material in greater quantities than their advertised capacity. Commerce has never publicly examined whether the domestic companies could actually meet domestic demand for slabs. The lawsuit calls into question this procedure and alleges that Commerce had no substantial evidence that domestic steel producers could actually make what JSW or other slab consumers required. The frustration has boiled over in the JSW case.
Members of Congress have not been silent either. The product exclusion shortcomings have been pointed out by a number of members of Congress, led by Jackie Walorsky, Republican of Indiana, who has written extensively to the Commerce Department about the program’s deficiencies. She points out that objections from domestic steel producers claim their ability to meet domestic needs to an extent that totals several times the capacity of these companies. Objections to slab exclusion requests seem to suffer from a similar shortcoming.
In analyzing exclusion requests, objections and denials, it has appeared to many observers that denials are based on whether objections are made, rather than the merits of those objections. Again, the JSW USA lawsuit gives voice to these frustrations.
It remains to be seen whether the lawsuit will succeed for JSW. Commerce claims broad discretion to approve or deny exclusion requests. The government may claim that denials are immune from judicial scrutiny and that, if they are subject to review by the Court, Commerce has broad discretion to deny requests without giving detailed analysis of evidence.
The government is due to respond to this complaint by the end of September.
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
Sandy Williams
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