Trade Cases

Leibowitz on Trade: More Change, More Disarray

Written by Lewis Leibowitz

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

New developments cascaded on us in the past week. I will focus, as is my habit, on those related to international trade and commerce. Trade-related developments called into question a number of initiatives in Congress and the administration.

Impeachment looked more likely last week than the week before. By impeachment, I am referring to the proceeding before the House of Representatives, which sends articles of impeachment to the Senate for trial. Impeachment by the House looks more likely now. For the president to be removed from office, a two-thirds vote of the Senate is required. That still looks unlikely, but the “needle” may be moving a bit on that front as well—the Turkey situation attracted a lot of criticism from Republican Senators. The situation bears watching.

In addition to the Ukraine situation, the House impeachment inquiry is now looking at the withdrawal from Syria of American troops, which gave Turkey a clear path to attack Kurdish forces. On Thursday, Vice President Pence announced a five-day cease fire in Syria, which seems to have held for the most part. 

One tangible effect of the cease fire is that the renewed 50 percent tariffs on Turkish steel under Section 232 has not gone into effect. The threat of increased tariffs remains, however. Next week we will see what decisions follow the resumption of hostilities in Syria.

The news shows this weekend focusing on the heated meeting between congressional Democrats and President Trump prompted many commentators to note that “normal” initiatives are not likely to go anywhere. This includes the congressional consideration of the USMCA. The question is what will happen to the existing NAFTA if impeachment takes all the air out of the room.

The steel and aluminum tariffs under Section 232 remain in force, of course. But this week saw evidence that the Commerce Department, which administers these tariffs, is under increasing pressure. 

Representative Jackie Walorski (R-Ind.) wrote a 13-page letter to Commerce Secretary Wilbur Ross detailing examples of apparently arbitrary decisions on steel and aluminum product exclusions. Rep. Walorski has been a leading voice complaining about the lack of transparency in the Commerce exclusion process. In her Oct. 17 letter, she cited 12 different issues that suggest arbitrary rulings in exclusion cases. A couple of examples:

* Over the last 13 months, over 7,500 exclusion requests were denied because U.S. Customs ruled that the wrong tariff classification code was used. This should be dealt with quickly, because U.S. companies need the material and cannot obtain it from domestic sources. Yet in many cases the denials occurred months after submission. The only remedy for a denial by Customs for using the wrong tariff code is to start the process over again. 

* In other cases, Customs claimed that the requested tariff code “does not exist.” But Representative Wolarski’s office found that one company received exclusions for products under the same tariff number that Customs claims does not exist. Obviously, there is a lack of consistency.

* Objections to exclusion requests are required by rule to show that domestic product can commence “immediately,” which means within eight weeks. Yet the Representative’s letter cited more than 3,000 objections stating that production would take more than eight weeks; nearly 7,000 objections did not give a time at all. These failings could result in objections not being considered. Yet Commerce denied many of these requests even though the requirements were not met. 

At a minimum, the decisions of the Commerce Department appear inconsistent and largely unexplained. The Trump administration may have to answer for these inconsistencies as the lawsuit in the Court of International Trade by JSW USA continues. The government did not file a motion to dismiss the complaint in that case, but filed an answer. The record of decision in the JSW cases will be before the court shortly. That case could be enlightening.

China and the United States continued to spar over the significance of the “Phase One” trade deal announced about a week ago. China insists that all tariffs must be eliminated to secure a comprehensive agreement, and that the current agreement is a stopgap measure only. That seems to be accurate. American farmers are not pleased as yet because the retaliatory tariffs imposed by China still prevent meaningful sales by farmers into the Chinese market. 

The Court of International Trade threw out the “suspension agreements” on Mexican sugar on Friday because the Commerce Department failed to keep adequate records of meetings with the private sector during the negotiations. This is another example (along with the steel and aluminum exclusions) indicting the department for failing to take adequate care to comply with legal requirements. This could be a trend worth watching. 

Lewis Leibowitz

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Lewis Leibowitz, SMU Contributor

Lewis Leibowitz

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