Nov 13, 2018

US Steel Manufacturers Claim Unrealistic Quantities of Production in Objections

Christine McDaniel Senior Research Fellow, Danielle Parks Research Assistant

Since the Section 232 steel tariffs went into effect, over 659 US manufacturers have filed tariff exclusion requests with the US Department of Commerce. These tariff exclusion requests reflect the need of US manufacturers to access steel at globally competitive prices in order to remain competitive domestically and abroad. If a US steel producer believes they can produce that specific type of steel domestically, however, then they can object to the exclusion request. A look at the objections data calls into question whether US steel producers can produce what they say they can produce. 

Under Commerce’s objection process, a US steel producer can file an objection to an exclusion request within 30 days of its posting if they believe they can meet the demand within a reasonable time period.

As of November 1, 2018, there have been 14,492 objections against 8,730 exclusion requests. US steel manufacturers have objected to tariff exclusions on 144.14 million metric tons (mmt) of imported steel. Last year, US domestic production was 81.6 mmt. In other words, US steel producers are claiming to be able to produce 144.14 mmt of steel above and beyond their current 81.6 mmt production. 

This matters because the objections appear to make a difference—while most requests are denied due to incomplete information, so far, just one out of 8,730 exclusion requests that received an objection has been approved. 

Top Three Firms' Objection Volume Dwarfs 2017 Steel Production  

Three steel producers account for nearly half the objections: Nucor Corporation (3,296), US Steel Corporation (2,220), and AK Steel Corporation (1,269). Together, these three firms filed 6,785 objections, or 47 percent of the 14,492 objections. Nucor Corporation is the top manufacturer of US steel and produced 24.39 mmt of steel last year. Cumulatively, the firm is objecting to tariff exclusions on 41.20 mmt of imported steel, claiming they could produce that themselves. In other words, they claim, they could nearly triple their production to meet the demand of these US manufacturers, and so Commerce should not grant the exclusion.

US Steel Corporation reportedly produced 14.43 mmt of steel last year, yet the firm claims they could produce an additional 45.98 mmt. Similarly, AK Steel had 5.6 mmt of production last year, yet they claim they could produce an additional 29.72 mmt.

Each objection form includes information on current production, the capabilities of the plants, and the time it would take to produce the needed steel.

Table 1 reports the 66 companies that have filed these 14,492 objections and the total quantity of steel each firm claims to be able to produce. We report the quantity both in terms of what was reported in the objection and in the corresponding exclusion request. Technically, these quantities should be the same but sometimes they differed, most likely due to human error; the overall differences were very small. The total volume of steel that corresponds to the exclusion requests was 144.57 billion kilograms or 144.57 mmt, and the total volume noted specifically in the objections was 144.14 billion kilograms or 144.14 mmt.

Firms That Submitted Objections to Section 232 Steel Exclusion Requests

Click here to download the data for all 66 companies that filed objections. 

Many of the exclusion requests are for specialty steel that is unavailable domestically. Figure 2 summarizes the responses to the question regarding the domestic availability of the product. Seventy-five percent of the exclusion requests indicate that the product is 100 percent unavailable in the United States. 

Vast Majority of Exclusion Requests Are for Products Completely Unavailable in the US

Some US manufacturers use specialty steel in their production process and the only place they may be able to source from is abroad.  Below are three examples in which a US manufacturer filed a complete tariff exclusion request for steel that is 100 percent unavailable in the United States; the request was followed by an objection from a US steel producer claiming they could produce it themselves; and, then Commerce denied the request citing “domestic availability of the product.”

The first example is Arrow Shed, LLC, a US shed and outdoor steel storage manufacturer based in Breeze, IL, which filed an exclusion request (BIS-2018-0006-0531) asking for tariff relief for “light-gage, low carbon, cold-single-reduced black plate” steel. The request claimed that the product is 100 percent unavailable in the US. US Steel and ArcelorMittal USA LLC objected to Arrow Shed’s request. In the end, Commerce denied Arrow Shed’ request and cited “domestic availability of the product”. 

Another example is Seneca Foods Corporation from Janesville, Wisconsin, one of the largest US processors of fruits and vegetables. The firm filed an exclusion request (BIS-2018-0006-0770) for prime electrolytic tinplate and claimed that 100 percent of the product is unavailable in the US. This request received an objection from US Steel Corporation, and Commerce denied the request, citing “domestic availability of the product.”  

The third example is American Trim from Lima, Ohio, a manufacturer of special metal coatings including those used in the automotive industry. American Trim filed a tariff exclusion request (BIS-2018-0006-0804) for tin mill black plate. The request noted 100 percent of the product unavailable in the US. More specifically, American Trim claims no US steel manufacturer can produce the steel that meets the “surface brightness/finish, thickness, and drawn requirements for [their] application.” They tested products from several US steel producers, including US Steel Corporation. Nevertheless, their request was followed by an objection from US Steel Corporation, which, in turn, was followed by Commerce denying the request.

Starting September 11, Commerce allowed “rebuttals” to the objection, and “surrebuttals” to the rebuttals. Within seven days of each objection against the exclusion request, the firm may file a “rebuttal”; and within seven days of that “rebuttal”, the objecting steel firm may file a “surrebuttal”. As of November 1, 4,311 exclusion requests are in the “rebuttal” period and 4,224 exclusion requests are in the “surrebuttal” period.

Total product volume in the objections filed to date (144.14 mmt) is far above and beyond US steel producers’ current 81.6 mmt of production. These objections data call into question whether US steel producers have the ability to meet the demand of US manufacturers. Meanwhile, US manufacturers are being denied access to needed product.

Either steel corporations need to provide factual information on how long it would take to produce the specialty steel given the amount they previously have submitted in other objections, or the Commerce Department needs to consider the cumulative volume of steel in a firm’s objections to-date. Otherwise, US manufacturers will continue to face unnecessary obstacles in their production process and commercial viability. 

Photo credit: Getty Images North America

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