The processes and procedures used to review and adjudicate requests to exclude specific products from the Section 232 additional tariffs on imported steel and aluminum will be subject to an audit by the Department of Commerce. The DOC said the objectives of its audit are to determine whether the processes and procedures in place for reviewing these requests are being adhered to and whether decisions are reached in a consistent and transparent manner.

In September the Bureau of Industry and Security issued an interim final rule modifying the Section 232 tariff exclusion request process in an effort to make it more transparent, fair, and efficient after receiving many more requests than it had anticipated. According to a recent letter to Commerce Secretary Wilbur Ross from Sen. Elizabeth Warren, D-Mass., as of Oct. 22 BIS had posted more than 30,000 steel tariff exclusion requests online for public comment and issued more than 11,000 approvals and close to 4,400 denials.

However, Warren said a review by her staff of the 909 decisions posted by BIS in the first 30 days that responses were made available raised concern that “the majority of the tariff exemptions have gone to foreign-owned companies seeking exemptions for their U.S. subsidiaries.” For example, Warren said, despite President Trump’s repeated complaints about unfair trade tactics by Japanese and Chinese firms, companies headquartered in Japan received nearly 52 percent of the exemptions granted during this period and were successful in 84 percent of their requests, while the numbers for U.S. subsidiaries of Chinese-owned firms were 27 percent and 94 percent, respectively. By contrast, BIS only approved 25 percent of the requests submitted by U.S. companies.

Citing other problems with the exclusion request process, including reports that it is “plagued by political influence and favoritism,” Warren demanded that by Nov. 13 Ross explain these numbers and how they are “consistent with President Trump’s claims that the tariffs and the tariff exemption process were designed to help American steel producers and users.”

According to an Inside US Trade article, the DOC responded that 99.8 percent of the exclusions it has granted to date received no objections from U.S. companies. In addition, the article states, the department said that “only entities located in the United States can apply for exclusions and … we cannot control when a particularly company with particular ownership seeks an exclusion for a product from a given country.”

© [2018], Sandler, Travis & Rosenberg, P.A. Originally published in the [11/06/2018] issue of the Sandler, Travis & Rosenberg Trade Report. Reprinted by permission.