June 22, 2017 12:30:46 AM
Falls Church, VA (AIIS) - The American Institute for International Steel, flanked by other steel-consuming industry groups, is calling on Commerce Secretary Wilbur Ross to hold an additional public hearing on the department's Section 232 investigation into the national security implications of steel imports.
During a June 20 event in Washington, DC, executives from the downstream industry and an international trade lawyer argued that an additional hearing would allow for a deeper dive into the potential consequences of any trade restrictions resulting from the study. They contend that any imposition of duties will harm steel consumers more than it benefits producers, citing a 232 investigation conducted in 2001that concluded U.S. national security is not dependent on steel imports. Commerce held two public hearings during the 2001 investigation.
Richard Chriss, president of AIIS, is calling on Ross to decelerate the Commerce Department's investigation to more thoroughly examine the impact that restrictions on steel imports could have on consumers and manufacturers, adding that an additional hearing would “allow us to step back, and take a deeper, more careful look at what we ought to do, and what the consequences of implementing section 232 trade restrictions will likely be.”
Under the Section 232 statute, Commerce has until mid-January to complete the investigation. However, both President Trump and Ross have indicated the report will be completed this month.
“Congress recognized this fact when it provided for a maximum 270-day investigation period. Because these dimensions are so significant and far-reaching, their consideration deserves far more time and care than the truncated process that is apparently now underway,” he said during the event.
The Section 232 law does not require public hearings, instead it states that hearings may be held if “deemed appropriate” by the Commerce Department.
The international steel group, which bills itself as a pro-free trade association composed of more than 100 members in the steel supply chain, held the event as part of a multi-pronged approach to convey its concern about the expedited approach the Commerce Department is taking in the investigation. AIIS also plans to execute an impact study and multiple congressional visits.
John Foster, chairman of AIIS, referenced the 2001 investigation into iron ore and semi-finished steel imports -- the last 232 attempt by the U.S. -- and said that the findings conveyed the “military accounted for only 0.3% of the U.S. steel demand."
Lewis Leibowitz, international trade attorney at the office of Lewis E. Leibowitz, called the Section 232 investigation “uniquely inappropriate” and said that in order for duties to be imposed on imports as a result of the investigation, they must “undermine the ability of the domestic industry to supply goods to the defense establishment” and threaten the “economic health of a domestic industry.” He argued that “no evidence” exists for this to be the case because “steel production for national defense is one percent or less of domestic production.”
Stuart Speyer, president at Tennsco Corp., said during the event that he is “hopeful” Ross will consider the effect on downstream manufacturers before taking action. Tennsco Corp. is storage manufacturing company in Tennessee with over 650 employees.
“U.S. hot rolled [steel] is 39 percent higher and cold rolled [steel] is 47 percent higher than the world export market,” Speyer said, referencing a June 2017 report conducted by SteelBenchmarker -- a global steel pricing system.
AIIS' Foster urged the administration to spare the downstream manufacturers and to “not unnecessarily look to protect the few at the expense of many.”
The National Foreign Trade Council made a similar argument in public comments submitted to the Commerce Department on May 31, arguing that steel imports fill a limited but important gap in the supply chain and urged the administration to consider the impact on steel users -- which they claim comprise a far greater share of total manufacturing and GDP than steel.
As evidenced by the comments submitted to the Commerce Department following the public hearing – auto manufacturing groups, construction companies, oil and petroleum associations and others are among the downstream industries that could be hit the hardest by trade restrictions resulting from this initiative.
Bill Reinsch, a fellow at the Stimson Center and former Commerce Department official, said the downstream users have been particularly quiet for this stage in the investigation.
“While [downstream users] have not often succeeded in blocking relief entirely, their efforts have had a mitigating effect on the outcome,” he said in in a June 21 blog. “There have been some signs of that opposition this time around, but it does not appear to have reached the critical noisy mass necessary to have a significant effect on the outcome.”
He added that the opposition is usually “well underway” by this point in the investigation.
“I’m not sure why this time is different. It may be because steel users are distracted with other problems of their own, or it may be because they are reluctant to get into a debate over national security, which is harder for companies to address than economic impact. The result may well end up being less opposition to further industry relief than usual and thus a freer hand politically for the administration,” he said.
An industry source told Inside U.S. Trade that while downstream groups “clearly oppose” the imposition of tariffs, they may fear that President Trump could retaliate further on their individual companies if they “make a fuss.”
The Precision Metalforming Association, a trade association representing the North American metalforming industry, told Inside U.S. Trade that they would “certainly participate” in additional hearings and that they were highly in favor of supporting such an initiative.
During the June 20 event, Chriss contrasted the Section 232 statute to the global safeguard mechanism – known as Section 201. He said unlike the safeguard tool, a Section 232 action “could stay in place for years and beyond.” Section 201 permits the president to grant “temporary relief” to an industry by imposing tariffs. No such language regarding the time line of imposed relief is included in Section 232.
Leibowitz did not discount the idea of bringing the administration to court if duties resulted from the investigation, adding the 232 statue is “less limited” in determining plaintiffs than other anti-dumping or countervailing duty laws -- so “plenty of companies” would likely have a keen interest in pursuing litigation, he said.
“The limitations on who can be a plaintiff in 232 are much less restrictive,” he said. “There is no requirement that you need to be importer, domestic producer, foreign producers etc. in order to be plaintiff.”
Asked if he thinks other countries would sue the U.S. at the WTO or employ similar national security measures in response to any trade restrictions, Leibowitz predicted “both would be applied” and not in a “mutually exclusive” manner.
Chriss argued that the imposition of duties on imports of steel “will most likely result in damaging retaliation, targeting our highest-value products, particularly in agriculture.” He said that if other countries justify closing key markets to U.S. exporters under the World Trade Organization's broad national security exception -- contained in Article XXI of the General Agreement on Tariffs and Trade -- then “the United States has a terrible conundrum: either challenge this action in the WTO or take the huge risk of letting these actions stand as precedent."
“Bringing a challenge we have no reasonable certainty we will win, because there is no precedent, is also a huge problem,” he said, adding that there is no WTO jurisprudence on Article XXI.
Earlier this week, Ross said that the Section 232 probes -- referring to the concurrent investigations on both steel and aluminum imports -- will “probably” face legal challenges both domestically and at the WTO.
“In terms of the legal pitfalls, we assume that if there’s any affirmative action that comes out, there probably will be either a domestic legal challenge and/or a WTO challenge,” Ross told reporters on the sidelines of the SelectUSA investment summit on June 19. “So we obviously have that very much in mind.” During an April 27 meeting at the WTO, China expressed concern over the Section 232 investigations into steel and aluminum imports for national security reasons, calling on the U.S. to further explain its intent.