Metal tariffs leave industry facing thicket of red tape

WASHINGTON — After losing the fight to forestall U.S. tariffs on steel and aluminum imports, the auto industry has another fight on its hands: navigating the process to win exemptions for certain specialty products that are critical to the supply chain.

The tariffs on imports from Canada, Mexico and the European Union became effective June 1 after President Donald Trump, impatient with the pace of negotiations with the three trading partners, declined to grant them permanent relief. Companies that depend on those raw materials can still avoid paying the duties by applying for exemptions — company by company, product by product — but many complain the process is too complicated.

Automakers producing vehicles in the U.S. fulfill most of their basic steel needs through domestic sources. But to varying degrees, they also rely on alloys with specialty steels and aluminum that are not available in the U.S., or not produced in sufficient quantity. In most cases, direct importation of the metals is handled by a broker or component manufacturer, which is the party eligible to apply to the Department of Commerce for an exclusion.

Ford Motor Co., for example, hasn't applied for any exemptions, spokeswoman Christin Baker said.

"You can't get an exclusion unless you are an importer or working with an importer, because the exclusion has to be put onto your customs documents," said Les Glick, a trade attorney at Butzel Long who counts many auto suppliers as clients. "A lot of people don't know who their importer is, maybe because they're two or three parties down the chain. If you buy from a steel service center, there's thousands of pieces of steel from different providers."

The Commerce Department has received 16,680 exclusion applications for steel, and posted 6,985 of them online for public comment. There are 2,186 applications for aluminum, of which 1,128 have been posted online. Each request has a 90-day deadline for a decision, but no determinations have been made so far, according to data provided by the department.

Trade experts and manufacturer representatives say the department appears overwhelmed by exclusion requests, partly because companies must file separate applications for each unique product, including identical metals that might have a different width or gauge.

With the end of temporary exemptions for Canada, Mexico and the EU, "you're going to see people who thought they didn't need to get an exclusion start applying, so there's going to be an even bigger backlog," Glick said.

Some companies, concerned that the public review exposes proprietary information regarding specialty alloys to competitors, are trying to figure out how to provide supporting materials safely, said Nicole Bivens Collinson, who heads the international trade and government relations practice at Sandler, Travis & Rosenberg.

Granted exclusions could shift the tariff cost burden to companies that don't get them, because the administration might opt to raise the tariff rates to meet its target of collecting $10.8 billion per year.

U.S. Customs and Border Protection will play a large role in enforcing the tariffs, and companies that use imported steel will need extra internal controls to ensure they comply with the rules, according to customs attorneys.

Importers, for example, will need to include special tracking numbers associated with the steel and aluminum tariffs on their customs entry. Customs will use the code to enforce the country quotas and make sure the metals aren't trans-shipped through a third country.

Glick said he is advising clients to file protests with Customs for each entry, to preserve their right to claim a refund in the event the tariff is struck down by federal courts.

One suit already filed on behalf of an importer argues the president overstepped his authority by using an obscure trade law provision that allows tariffs and quotas to protect industries vital to national defense, rather than using a safeguard action permitted under World Trade Organization rules.

In May, several congressmen and senators wrote Commerce Secretary Wilbur Ross expressing concern that the review process is moving too slowly, and urged changes in the process.

The tariffs, which have provoked retaliatory actions from the three big trading partners, also apply to Japan, Turkey, Russia and India. Australia received a permanent exemption and South Korea, Argentina and Brazil agreed to quotas.

The action was ostensibly aimed at China flooding the global market with low-priced metals and dragging down prices. The Trump administration has said a global tariff is necessary because China ships its steel through other nations.