Trade Cases

Leibowitz on Trade: Steel and Aluminum Exclusions—Is Reform in the Air?

Written by Lewis Leibowitz

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

Today, the Commerce Department’s Bureau of Industry and Security published a notice in the Federal Register entitled “Notice of Inquiry Regarding the Exclusion Process for Section 232 Steel and Aluminum Import Tariffs and Quotas.” The notice asks for comments on numerous issues relevant to the steel and aluminum product exclusion process. I have written about exclusions a number of times before in this space. This is the fourth major event since March 2018. First, the original regulations implementing the steel and aluminum product exclusions were published that month. In September 2018, significant reforms were announced by BIS. Then, in June 2019, BIS announced the launch of a new and different “232 Exclusions Portal,” featuring a new method of filing and some revised questions. This notice asks the public for comments on several issues, some indicating that BIS is thinking about tightening the exclusion standards for requesters and others suggesting increased scrutiny of objections to exclusion requests.

This could mean a rethinking of the entire product exclusions regime. Many companies seeking exclusions have complained about unfairness in the process, including objections that have little or no merit; inordinate delays in decisions being made; unsubstantiated allegations of capability to produce products; inadequacies in the Commerce Department Exclusions Portal; refusal to consider aberrational pricing of products as evidence of practical unavailability; and many other issues.

The BIS notice asks for comment from the public about “the appropriateness of the factors considered, and the efficiency and transparency of the process employed, in rendering decisions on requests for exclusions from the tariffs and quotas imposed on imports of steel and aluminum articles.” That is a very broad request that will give all sides the ability to post comments about what is wrong and what is right about the process.

In addition, BIS posted some particular questions for the public to comment on. These are also fairly broad, such as: the information required on request forms, objection forms, rebuttal and surrebuttal forms; changing the eligibility requirements for requesters and objectors; comments on the Section 232 Exclusions Portal; and factors considered in deciding requests. Because most Commerce decisions on exclusion requests contain little or no actual analysis, commenters are likely to critique classes of denials and approvals in general.

As a frequent user of the 232 Exclusions Portal, I can comment that the site is very difficult to use and crashes often, taking work with it. As for the requirements, the standards apparently applied by BIS in exclusions seem to weigh the fact of objections very heavily—perhaps the existence of objections weighs more heavily than what the objections say.

A third set of issues includes proposals that BIS appears to be considering, including: creating a one-year blanket approval for requests for “product types” (i.e., tariff classification numbers) that have received no objections as of a certain date; one-year blanket denials for product types that always receive objections; limiting requests to certain periods of the year, rather than permitting requests to be filed at any time (this is analogous to the Section 301 China tariffs, with modifications); requiring factual evidence from objecting parties that they “can actually make” the product subject to the exclusion request; requiring requesters to provide documentation that they actually have orders for a product that is subject to an exclusion request; and other issues.

Recent analyses of exclusion requests for steel and aluminum indicate that BIS is not deciding requests that receive objections. The Mercatus Center at George Mason University has done several periodic reports on exclusions. The latest one suggests that if BIS receives objections to an exclusion request, normally it is never decided. That is no different from a denial, because the importer has to pay tariffs or adhere to quotas whether the request is pending or denied. Legally, a requester will have trouble getting into court if a request has not been denied. However, BIS did not ask for specific comments on all the cases that have not been decided.

Of a total of 179,128 exclusion requests, 157,983 were for steel products and 21,145 for aluminum. Of those requests, 34,970 were rejected and 33,297 received objections. BIS has posted 114,009 decisions, with 78,569 exclusions being granted and 25,440 exclusion requests being denied.

The Law Office of Lewis E. Leibowitz
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Lewis Leibowitz, SMU Contributor

Lewis Leibowitz

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