Commerce Recommendation Expected By End Of June

The Department of Commerce held a public hearing on its Section 232 National Security Investigation of Imports of Steel on May 24. The hearing was chaired by Commerce Secretary Wilbur Ross, who stayed for the majority of the 37 witnesses' remarks. The balance of the panel included representatives from Commerce's Bureau of Industry and Security, Commerce's International Trade Administration, the Department of Defense, and the Office of the U.S. Trade Representative.

Congresswoman Marcy Kaptur from Ohio's 9th District was the first witness. In her testimony, she urged the panel to stop the "flood" of dumped and subsidized steel imports entering the U.S. market and recommended relief in the form of (1) bridge financing to allow the industry to modernize; (2) "addressing" overcapacity in general and Chinese overcapacity in particular; and (3) exploring ways to "neutralize" the Value Added Tax (VAT) prevalent in steel-producing countries.

In closing, she reminded Secretary Ross of President Trump's request that the investigation be handled expeditiously. In response, the Secretary indicated he had "no intention" of taking the full 270 days permitted by statute for the conduct of the investigation, but rather expects to issue a recommendation by the end of June.

The Congresswoman's remarks set the tone for much of the remainder of the proceeding. Of the 36 speakers who followed, only about a half dozen expressed any opposition to relief. Notably, most of this group were not expressing opposition to relief in principle, but rather were arguing for the exclusion of specific products not domestically available. For instance, the U.S. Tire Manufacturers’ Association witness testified that no U.S. producer has the technology to produce the high-quality tire cord currently sourced from Japan, and that as such it should be excluded from any relief the government ultimately grants.

That testimony prompted one of the few remarks from the panel, as one of the Commerce representatives requested that the domestic producers comment on whether they do or can produce the products for which exclusion is sought.

Aside from the handful of witnesses seeking carve-outs, and the few opposing relief entirely, the balance of speakers were steel company executives requesting relief from imported steel. Although they represented discrete industry segments, as a group they sought to address two potential analytic vulnerabilities.

  • In anticipation of the argument that the industry has already been granted significant relief in the form of dozens of Antidumping and Countervailing Duty (AD/CVD) orders over the last several years, the executives made a point of saying that “the trade remedies laws aren’t enough” because the rates are too low to lock out imports effectively and because foreign producers "cheat" by circumventing existing orders and/or moving production to non-subject countries.
  • In anticipation of the argument that everything sold to the Department of Defense already must be of U.S. origin as a matter of law, the executives argued that actual defense sales are only a small portion of their overall customer base, and that it is not sufficient to offset the impact of imports on their base businesses. They also made a concerted effort to include non-defense sectors within the rubric of “national security” – they variously argued critical infrastructure, food packaging (which consumes tin mill products), energy (which consumes oil country tubular goods and line pipe), power generation and transmission (which consumes grain-oriented and non-oriented electrical steels), and the automotive sectors all contribute to U.S. “national security.”

The executives repeatedly pointed out that there is significant global overcapacity, and that over half of that overcapacity is in China alone. For the most part they did not provide specifics on the type of relief, although a few suggested that if quotas are to be established then they should be indexed to 2010-2011 import volume levels.

Comments, which were due on May 31, may be found here.

The next step is waiting to see what action, if any, the department will recommend to the president.