Commerce Department working on Section 232 investigation report

By: | Issue #653 | at 08:41 AM | Channel(s): Maritime News  Breakbulk News  

Who knew regulating steel imports would be so complicated?

In early April, the United States Department of Commerce started an investigation under Section 232 of the Trade Expansion Act, on whether steel imports represent a threat to national security. A couple of weeks later, President Donald Trump followed up with an executive order directing Commerce to complete the investigation within 50 days rather than the 270 specified in US legislation.
That would have meant completing the investigation towards the end of June, just as the president was heading to Europe for the G20 summit. News reports at that time indicated Trump was postponing the release of the report until after the G20. Yet as of this writing, the report, which will make recommendations to the president for his final decision, has yet to be released.

The Complications of Section 232

It was questionable why the administration chose to start a Section 232 investigation, since complaints regarding steel imports are primarily commercial, relating to overcapacity and dumping. (See sidebar on page 6) One possible answer is that Section 232 allows the issue to be framed broadly, paving the way for the president to impose restrictions on broad swaths of steel imports, if not all of them.

That’s not as far-fetched as it sounds. At public hearings conducted by Commerce in May, Secretary of Commerce Wilbur Ross articulated the issue in sweeping terms and he was echoed by domestic steel producers, for whom broad sanctions against steel imports would be a dream come true.

But Ross soon learned that the issue is more nuanced than he might have wished. For example, what is the definition of national security, and how do steel imports impact it? American Iron and Steel Institute statistics show that just three percent of total US domestic steel shipments go to national defense and homeland security.

Is it reasonable to sanction imports of the many dozens of imported steel products and from all locations? The US imports steel from over 100 countries; Canada is the largest source of imported steel.

What about the effect clamping down on steel imports would have on US manufacturers who rely on them? Who knew regulating steel imports could be so complicated?

States of Steel

Commerce normally investigates and applies antidumping and/or countervailing duties on narrow categories of products from specific locations, as it did in May when it sanctioned imports of steel rebar from Japan and Turkey or in April, when it hit carbon steel flanges from Spain with antidumping duties.

But at public hearings, Ross described the Section 232 investigation as “an evaluation of the current state of the US steel industry, as well as current imports of steel products and raw materials. The purpose of the investigation is to determine if the steel being imported into this country impairs our national economic and military security.”

The oversized scope of the investigation would suggest a broad remedy, which is exactly what some US producers were looking for. In written comments to the Commerce Department, Commercial Metals Company recommended “that the president take comprehensive, broad-based, and effective action. The recommended measures must apply to all steel products, including downstream products…The recommended measures must apply to imports from all countries.”

“National security begins with primary steelmaking,” said John Ferriola, CEO of Nucor Corporation, at the public hearing. “Broad based action is the only way to target all imports and address the root cause of the current crisis, chronic overcapacity in countries that do not operate on a market basis.”

Some US manufacturers pushed back on the notion that restricting all steel imports could be justified. CSN LLC, an Indiana-based manufacturer of flat-rolled steel products, “strongly opposes additional restrictions on imports of steel for national security purposes.” “We believe such action is both unwarranted on national security grounds and would damage the interests of US manufacturers,” the company said, in written comments. “Restricting imports of steel will likely cause economic damage to downstream consuming industries that are vital to national defense and the broader economy.”

Others pointed out that steel imports do not represent a singular product category and that certain imports are essential for domestic operations. Acenta Steel Limited, a UK-based company that produces hot rolled and cold finished bars, flats, hexagons, and squares argued that “it is critical…to focus…on specific steel products that are directly related specific national security uses, and determine whether imports of those products threaten to impair US national security.” Acenta noted that US government investigations typically differentiate among steel products because their markets and uses differ. “Existing US antidumping and countervailing duty orders cover 18 different steel products,” Acenta added, “and the International Trade Commission’s 2001 global safeguard investigation of steel examined 33 different steel product categories. Put simply, there is no one ‘steel’ product – there are dozens of different steel products…”

NSCI, an Indiana-based company, imports wire rod from Japan to produce steel wire for fasteners and auto parts in the US. “The quality of this wire rod produced by the Japanese manufacturers is unavailable in the United States,” said Tim Johns, the company’s vice president of manufacturing, at the public hearing. “If NSCI is not able to import these materials, the company will be forced to shut down…”

Likewise, Joel Johnson, CEO of Borusan Mannesmann Pipe USA, in Baytown, Texas, said the company requires imports from Turkey to produce tubular goods for oil and gas wells. “These imports allow us to be fully competitive in the US market and enhance the volume of our domestic production,” he noted. “Expanding domestic energy production and increasing America’s energy independence has obvious national security implications.”

Finally, there is the question of retaliation against measures the US may impose. “The most obvious target for retaliation is US arms exports,” said Gary Horlick, a law professor who appeared at the public hearing on behalf of AIIS (American Institute for International Steel).

The economics of US defense production depends on foreign sales, Horlick argued. “Without the foreign sales…the costs of the planes goes up,” he said.

The same goes for US agriculture exports. “If you’re looking at the national security of the US,” said Horlick, “please include food.”

Peter Buxbaum's avatar

American Journal of Transportation

More on Peter Buxbaum
Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.