Domestic tubing industry cheers court decision on conduit misclassification

The issue under scrutiny in these cases is the reclassification of certain conduit imports by Customs and Border Protection (CBP) and an importer’s protest of that decision.

Background

In 2018, Shamrock Building Materials imported steel conduit from Mexico manufactured by Conduit SA de CV dba RYMCO. As the product had an interior coating primarily made of epoxy, melamine, and silicone additives, Shamrock classified it under heading 8547 of the Harmonized Tariff Schedule (HTS) as “electrical conduit tubing lined with insulating material.”

However, CBP reclassified the conduit as articles of iron and steel under HTS heading 7306. The reclassification meant that Shamrock then had to pay Section 232 tariffs on the imports.

Shamrock protested the reclassification, but Customs rejected its complaints, so the company took its protests to the CIT. However, the CIT sided with Customs last year, finding that the interior coating didn’t significantly impede electrical current and thus didn’t meet the criteria of “insulating material.”

Shamrock then appealed the CIT’s decision, but the Federal Circuit Court of Appeals agreed with CIT’s interpretation and affirmed the ruling.

Eugene, Ore.-based Shamrock could not be reached for comment.

Zekelman Industries responds

Zekelman Industries has long called attention to the ‘misclassification games’ being played by conduit importers.

Therefore, the Chicago-based pipe and tube manufacturer applauded the ruling, saying the Appeals Court “soundly and rightly rejected” Shamrock’s appeal.

Despite the court’s ruling confirming Zekelman’s misclassification assertions, “Many Mexican steel conduit manufacturers and brokers continue to defy the rules of the USMCA trade agreement,” Chairman and CEO Barry Zekelman said in a statement sent to SMU.

He said the misclassification of imports continues, with companies misclassifying products made using steel melted outside of Mexico in order to skirt paying US tariffs.

“It’s obvious that brokers have figured out how to game our system as we are seeing a real uptick in steel conduit tons wrongly classified under chapter 85 from various countries in South America and Asia,” Zekelman stated.

Battling this issue for years, his company has “paid unfortunate consequences,” including having to shut down two manufacturing facilities.

“The failure of the government to enforce trade agreements is destructive to the industry, our communities, and the families that rely on fair trade,” Zekelman stated. That’s why his company took legal action against the Republic of Mexico last month, he noted.

Steel Tube Institute applauds ruling

The Steel Tube Institute (STI) also lauded the appeals court decision.

“We commend the court’s decision, which will ultimately safeguard the integrity of US buildings and infrastructure well beyond this case, helping to establish clear parameters for identifying products imported into the US from foreign manufacturers,” STI Executive Director Dale Crawford said in a statement.

“The court set a clear precedent that will protect American jobs and ensure all manufacturers, both foreign and domestic, are playing by the rules,” he added.

Chicago-based STI brings manufacturers together to advance the growth and competitiveness of North America’s tubular product industry. Among its producer members are Nucor Tubular Products, Bull Moose Tube, ArcelorMittal, Maruichi Leavitt Pipe and Tube, Maruichi American Corp., as well as others. Zekelman Industries’ Atlas Tube, Wheatland Tube, and Western Tube are also members.