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President Donald Trump’s plan to shore up the U.S. steel industry by slapping steep tariffs on imports is turning out to be a major headache for many U.S. manufacturers.
While companies may petition the Commerce Department to exempt their imports from the tariffs, there is a huge backlog in processing the applications, industry representatives and analysts say.
Instead of providing help and less red tape, they say, the plan has resulted in the administration’s picking winners and losers, and has created chaos for some of the very companies Trump promised to support.
Because of rising costs due to tariffs, Mid-Continent Nail Corp. laid off 185 employees, the company’s General Manager Chris Pratt told Bloomberg Law. Mid-Continent filed 25 requests for exclusions on June 18 and is no closer to knowing when a decision will be made, he said. “Time is of the essence for manufacturers.”
“It’s a very opaque process. I don’t think anybody—from the people applying it to the people being subjected to it—had any clue how this was going to work,” Independent Can Co. President and Chief Executive Officer Rick Huether told Bloomberg Law.
Independent Can filed 38 requests for exclusions with four denied so far and others pending, Huether said. Independent Can’s clients include 1-800-Flowers and Ghiradelli Chocolate, which use steel cans to package products.
Steel users will face months-long delays in getting a decision and an opaque process that allows domestic steel producers to sink companies’ requests for exclusions from the tariffs. “There is a lot of concern that the U.S. [steel] industry is getting something close to a veto power,” trade lawyer Gregory Husisian of Foley & Lardner LLP, told Bloomberg Law.
Trump imposed 25 percent tariffs on steel and 10 percent on aluminum, citing national security concerns. Commerce will grant exclusions if companies can’t get the steel product domestically and if no national security concerns exist. U.S. producers can object to the requests.
The tariff exclusion process has pitted big steel firms such as Nucor Corp . and U.S. Steel Corp . against smaller ones who argue that they can’t get needed steel from domestic sources. As of Sept. 26, there were approximately 13,645 objections to requests for exclusion. Nucor leads with 3,097 and U.S. Steel is next with 2,033, according to a Bloomberg Law data analysis.
Steel-using companies, such as Peerless Steel and Stanley Black & Decker , must file separate submissions for each steel product they want excluded. Companies can’t appeal the decisions to Commerce if they are denied exclusions—they have to repeat the steps of filing new requests.
Companies are saying the resulting costs of the denials and delays are causing them to lose money and some are being forced to cut jobs.
As of Sept. 26, a total of approximately 30,365 requests from steel users were posted. The following breakout numbers are also estimates:
These findings are part of a Bloomberg Law data analysis that examined Commerce Department average response times to exemption requests as well as the numbers of requests, objections, denials, and approvals.
Voestaine High Performance Metals Corp. had the most requests for exclusions from the steel tariffs, filing some 2,568 as of Sept. 26, according to figures obtained by Bloomberg Law. Primrose Alloys and Greenfield Industries followed with approximately 1,448 and 1,168 requests respectively, the data showed.
The same process is playing out for manufacturers who use aluminum inputs, although on a smaller scale. As of Sept. 26, Commerce had posted 3,852 requests for exclusions from the aluminum tariffs on regulations.gov. There is a lag time between a company filing the request and Commerce posting it. For the steel exclusions, the average wait time is 23.2 days, according to the data.
“It takes about 12 hours per exemption submittals,” Independent Can’s Huether said. The company has spent between $50,000 to $100,000 in internal costs to file the requests, he said. Every steel specification requires a different exemption request, he said. Between June and December, Independent Can estimates it will spend about $1.5 million more because of the tariffs, he said. “It’s picking winners and losers,” he said.
“It’s definitely been chaotic,” a congressional aide told Bloomberg Law. The aide welcomed a Commerce Sept. 11 interim rule that he said made some needed fixes, including providing for retroactive relief from the date of filing. At the same time, he said the rule will delay relief where domestic companies object. The rule is expected to speed up decisions when no domestic company objects.
“They are going to be overwhelmed with the number of these [requests] no matter what,” Husisian told Bloomberg Law. “I haven’t seen any slowdown,” he said when asked about the rule.
Trade attorney Les Glick, with Butzel Long, told Bloomberg Law he filed some 40 requests on behalf of clients, mostly in April, and that they were just posted in August. “It’s moving too slowly,” he said, adding that Congress is pushing back amid widespread dissatisfaction with the delays.
As of Sept. 26, there were approximately 13,645 objections to steel tariff exemption requests. Nucor Corp. and U.S. Steel Corp. filed the most objections with approximately 3,097 and 2,033 respectively, and AK Steel Corp. filed an estimated 1,314 objections.
Commerce did not respond to a request for comment. But, in touting the Sept. 11 rule, Commerce Secretary Wilbur Ross said his department made an unprecedented effort to make sure businesses are not unduly harmed by the tariffs. The rule, which allows exclusion requesters to respond to objections, “will help perfect the process to ensure a fair hearing for all parties involved,” Ross said.
At a Sept. 6 Senate hearing, Nazak Nikakhtar, assistant secretary of commerce for industry and analysis, said 65 members of her staff have been deployed on a part-time basis to assist with processing tariff exclusions to help clear the backlog.
The new Commerce interim rule provides opportunities for companies seeking exclusions to rebut objections to those requests, Bernd Janzen, a partner in Akin Gump’s trade practice, told Bloomberg Law. “The record in each case for each individual product will be a lot longer, but will Commerce’s actual decisions still say nothing [about its rationale] as they do now?” he said.
Unless Commerce provides the reasoning behind its decisions, “it’s hard for me to see that as a substantial improvement,” he said. Commerce denials say that sufficient domestic supply exists or that the application was incomplete ,but fail to disclose its analysis.
As thousands of determinations stack up over the next six months, many aggrieved parties will consider legal action, and those efforts will unfold on a significant scale, he said.
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