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The Department of Commerce released both the process and requirements for the submission of exclusions for the steel and aluminum Section 232 proclamations made public on March 8, 2018.

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As published in the Federal Register, the Secretary of Commerce has the authority to grant exclusions from the duties, “if the steel or aluminum articles are determined not to be in a sufficient and reasonable available amount or of a satisfactory quality or based upon specific national security considerations.” (Editor’s Note: Italics added by MetalMiner for emphasis.)

The interim final rule went into effect on March 19, 2018.

Key Points About the Exclusion Process

Some of the key highlights of the interim rule include who can file for exemptions and who can file objections to exclusions.

First, according to the interim rule, “only individuals or organizations using steel articles in business activities or supplying steel to users in the U.S. may submit exclusion requests with respect to the Proclamation.” In other words, any non-metal-buying individual or organization can not argue nor ask for an exclusion.

However, any individual or organization in the U.S. can file objections to exclusions, but the Department of Commerce will only consider information directly related to a specific exclusion request. In other words, the DOC will ignore trade associations, lobbying groups, and media objections to an exclusion unless that objection is specifically tied to an exclusion request.

Exclusions apply on a product basis and can only be requested (and granted to) by the individual or organization that submitted the specific exclusion request. To clarify, unless the DOC approves a broader application of the specific request, each company will have to file its own exclusion request.

Taking that one step further, if additional companies seek exclusion requests for the same product, the company applying for the exclusion will not need to reference a previously approved exclusion, but can do so for its own exclusion request. Moreover, the interim rule allows for organizations and individuals to re-submit for a product exclusion, even if an earlier request is denied.

Buying organizations should note that all information included in an exclusion request is subject to public disclosure. This may prove challenging to buying organizations as some of the questions on the exclusion form appear quite detailed. For example, “all such physical properties must be defined based on actual rather than nominal measurements references to specific dimensions,” a requirement which may in fact begin touching on “secret sauce” types of information. This portion of the rule will likely receive negative market feedback during the open comment period for the interim rule.

Meanwhile, those that object to the exclusion will have 30 days to submit their objections.

Country-specific exemptions are not included in this interim rule.

Burden of Proof Appears to Lie With the Buying Organization

Companies purchasing more commodity-grade materials (i.e., standard forms, grades, alloys, sizes, etc.) need not bother with the exclusion process. However, MetalMiner sees several sub-segments of the market that will likely challenge the proclamations, particularly the markets for: grain-oriented electrical steel; tinplate; raw materials (slab, wire rod); some advanced, high-strength steels and ultra-high-strength steels, tire cord quality wire rod, etc. These individual companies purchasing these materials will each need to put their case forward.

“These requirements are much worse than trade case requirements,” said one company pursuing an exclusion to MetalMiner.

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Key Resources

The interim rule, comment and form to file a steel exclusion request or objection can be found here:

The interim rule, comment and form to file an aluminum exclusion request or objection can be found here:

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U.S. Trade Representative (USTR) Robert Lighthizer, speaking before the House Ways and Means Committee Wednesday morning, addressed a wide range of issues regarding the Trump administration’s trade policy agenda, including steel and aluminum tariffs exemption negotiations with a number of countries.

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In the recently announced steel and aluminum tariffs of 25% and 10%, respectively, the administration formally announced an exemption process. As part of the tariffs announcement, fellow North American Free Trade Agreement (NAFTA) partners Canada and Mexico were granted temporary exemptions, “subject to a successful NAFTA renegotiation,” Lighthizer said. In addition, he said the U.S. is in discussions with South Korea, which is currently engaging the U.S. in talks vis-a-vis “refurbishing” the U.S.-Korea Free Trade Agreement (KORUS).

In addition, the USTR is talking to Australia, Argentina and the European Union about potential exemptions, Lighthizer added. A number of other countries have come forward with exemption requests, he added, with Brazil being one with which talks could soon commence.

“Our hope is by the end of April to have this part of the process resolved,” Lighthizer said in response to a question about the timeline of the exemption requests. “Having said that, the president has the authority at any time during the course of the program to let people out if he thinks its in the national economic interest.”

Lighthizer outlined a series of trade policy goals during his opening statement, including: supporting the president’s national security strategy; working to make U.S. companies and workers competitive in overseas markets; negotiating trade deals “that will work for Americans”; enforcing and defending U.S. trade laws; and reformation of the multilateral trading system, with Lighthizer calling out the World Trade Organization (WTO) in his remarks.

“For too long, the WTO has failed to promote trade liberalization,” he said. “Too many members remain committed to an outdated Doha Round Agenda that is incapable of addressing modern issues like digital trade. Too many members also think that they can get their way through litigation, rather than negotiation.

“Perhaps most worryingly of all, the WTO has proven to be wholly inadequate to deal with China’s version of a state-dominated economy that rejects market principles.”

U.S Rep. Kevin Brady (R-TX), chairman of the committee, initiated the hearing with some comments on trade and other topics.

“I am hopeful we will be able to vote on and pass a new, modern NAFTA for America by year end,” Brady said. “That said, the road ahead isn’t easy. Congress wants strong protection for intellectual property, increased market access for our dairy farmers, and an end to Canada and Mexico’s harshly restrictive customs barriers, such as unreasonably low de minimis levels.”

Brady continued: “We need workable solutions on rules of origin and and procurement, that recognize how Americans benefit from global supply chains — otherwise, we lose out to China.”

Brady also addressed Chinese steel oversupply, which has “put many Americans out of work,” he said.

“It’s a blatant theft of our companies’ technology and intellectual property, and it can’t be tolerated,” he said.

NAFTA and the ISDS Debate, Proposed Sunset Clause

Regarding NAFTA, which recently underwent a seventh round of renegotiation talks, Brady, citing supporting from more than 100 Congressional Republicans, touched on the importance of strong investor-state dispute settlement (ISDS) provisions in any renegotiated iteration of NAFTA.

“This is a key part of passing a strong NAFTA agreement that we’re convinced you’ll negotiate well for us,” Brady said to Lighthizer.

Lighthizer enumerated reasons for skepticism regarding ISDS, including questions of sovereignty.

“Why should a foreign national be able to come in and not have the rights of Americans in the American court system but have more rights than Americans have in the American court system?” he asked. “It strikes me as something that at least we ought to be skeptical of and analyze.”

Committee member U.S. Rep. Sam Johnson (R-TX), meanwhile, expressed concerns regarding a proposed sunset clause put forth by U.S. negotiators — by which all three NAFTA nations would have to periodically reapprove NAFTA every five years — citing businesses’ need for “certainty.”

“The idea is if it’s such a good agreement, we’ll naturally roll it over,” Lighthizer said. “If it’s not a good agreement, we won’t.”

During the lifespan of NAFTA, which is now 24 years old, Lighthizer said the economy has changed and the U.S. has gotten “way out of whack” with what its deficits are.

Committee member and U.S. Rep. Sander Levin (D-MI) addressed the impact of Mexican labor policies, citing low take-home pay for Mexican workers as having a negative impact on the U.S. Lighthizer agreed that wage increases in Mexico are in the U.S.’s interest.

Section 301 Probe and Intellectual Property Rights

Media reports early this week indicated an announcement would soon be coming regarding the imposition of new tariffs against China — which could amount to about $60 billion — in response to what the U.S. perceives as intellectual property theft by China.

Last August, the USTR launched a Section 301 probe under the Trade Act of 1974, which sought to  “determine whether acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S. commerce.”

“Our view is that we have a very serious problem of losing our intellectual property, which is really the biggest single advantage of the American economy, in my opinion,” said Lighthizer, adding that the U.S. is losing that intellectual property in ways that are “not reflective of the underlying economics.”

In response to the problem, Lighthizer said, potential remedies include actions on the tariffs and investor fronts.

An Update on KORUS

Lighthizer updated the committee on the progress of KORUS talks, explaining that negotiators are down to “the last few issues.”

“In the opinion of many people, Korea is a particular problem in the area of steel primarily,” he said. “We’re trying to work our way through all of those things and we’re hopeful that we can make headway on it. [My] objective would be … to have amendments to the agreement that will satisfy this committee.”

Committee member and U.S. Rep. Dave Reichert (R-WA) expressed concerns regarding the Section 232 tariffs exclusion process and the possibility of tariffs stemming from the Section 301 probe, saying that American manufacturers and consumers would be hurt by an ineffective exclusion process and new tariffs on other imports. He also questioned Lighthizer regarding the transparency of the KORUS process, also asking if the USTR could publish a list of negotiation objectives.

Lighthhizer said it’s unlikely that such a list would be published, but said he would be open to talking privately with committee members and reaching an agreement in principle “fairly quickly.”

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“My objective is to try to do this as quickly as possible with as little disruption as possible,” Lighthizer said regarding the KORUS talks.

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This morning in metals news, the U.S. is in talks with several nations regarding possible exemptions from its steel and aluminum tariffs, Shanghai copper hits a six-month low Wednesday and the U.S. drops a bargaining point in the ongoing North American Free Trade Agreement (NAFTA) renegotiation talks.

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Countries in Talks With U.S. Over Exemptions from Metals Tariffs

U.S. Trade Representative Robert Lighthizer on Wednesday said the U.S. is in negotiations with the E.U., Australia and Argentina regarding potential exemptions from the recently announced steel and aluminum tariffs, Reuters reported.

Lighthizer, addressing the House Ways and Means Committee, added he expected a decision soon from President Trump regarding potential tariffs on Chinese imports, which media reports earlier this week indicated could be valued at $60 billion.

Shanghai Copper Slides

Shanghai copper dropped to a six-month low Wednesday, Reuters reported, marking the fourth consecutive day of price drops.

U.S. Ditches Auto Content Request in NAFTA Talks

According to a report by Reuters citing The Globe and Mail, the U.S. has dropped its auto content rules request vis-a-vis the ongoing NAFTA renegotiation talks.

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The U.S. has been pushing an auto content benchmark that calls for at least 50% of materials sourced from the U.S. for all vehicles made in Canada and Mexico that are exported to the U.S.

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This morning in metals news, a report indicates the U.S. plans to impose new tariffs on China this week, the E.U. looks to pin the blame for global steel oversupply on China and the U.A.E. wants to gain an exemption from the U.S. tariffs on steel and aluminum.

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New Tariffs on China?

The Trump administration plans to announce new tariffs on China as early as this week, according to a Bloomberg report.

According to the report, the tariffs would amount to as much as $60 billion in response to what the U.S. says is intellectual property theft by China.

According to the report, the sweeping tariffs could take aim at a wide range of products, including consumer electronics, clothing and shoes from China.

E.U. Hopes to Join Forces with U.S. to Tackle Global Steel Oversupply

E.U. Trade Commissioner Cecilia Malmstrom is in Washington today to argue that the E.U. should be exempted from the recently announced tariffs on steel and aluminum, the Financial Times reported.

On Monday, she said she wants to work with the U.S. and other partners to address the “root cause” of the issue, according to the report.

The tariffs are set to go into effect on Friday.

U.A.E. Looks for Tariffs Exemption

Included among the long list of countries and business entities lobbying for exemptions from the U.S.’s steel and aluminum tariffs is the U.A.E., Reuters reported.

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The country is the third-largest exporter of aluminum to the U.S., after China and Russia, according to the report.

According to weekly data reported by the American Iron and Steel Institute (AISI), domestic raw steel production for the week ending March 10 hit 1,813,000 net tons.

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The production for that week produced a capacity utilization rate of 77.8%. The numbers for that week were up year over year, compared with 1,716,000 net tons produced in the same week last year (which had a 73.6% capacity utilization rate).

Meanwhile, production for the week ending March 10 was down 1.1% from the previous week, when production was 1,834,000 net tons and the rate of capacity utilization was 78.7%.

Year-to-date production through March 10 was 17,187,000 net tons, good for a capacity utilization rate of 74.8%, which was down 0.2% from the 17,221,000 net tons during the same period last year, when the capacity utilization rate was 74.6%.

According to the data, production by region broke down as such (in thousands of net tons):

  • North East: 214
  • Great Lakes: 681
  • Midwest: 163
  • Southern: 686
  • Western: 69

Late last month, when the Department of Commerce’s Section 232 reports to the president were made public, the administration expressed the the goal of raising the capacity utilization rate for both steel and aluminum up to 80% — “the minimum rate needed for the long-term viability of the industry,” according to the Department of Commerce.

“The U.S. domestic industry is more than capable of producing at a sustained 80% or more capacity utilization rate (the report points to the 2002-2008 period, in which U.S. mills operated at an 87.4% capacity utilization rate),” MetalMiner Executive Editor Lisa Reisman wrote last month.

“When steel factory utilization falls, costs per unit of steel product rises, reducing profit margins and product pricing flexibility,” the department’s analysis stated. “Higher capacity utilization usually results in lower per-unit product costs and higher overall profit.”

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According to the Department of Commerce’s analysis, only two countries produce at the 80% capacity utilization rate: Japan and South Korea. The U.S., on the other hand, between 2011 and 2016 had an average capacity utilization rate of 74%.

The U.S. Department of Commerce. qingwa/Adobe Stock

This morning in metals news, the U.S. Department of Commerce announced its tariff exclusion process for steel and aluminum, world leaders announce the intention to work together on steel overcapacity, and bank accounts have been seized in connection to a corruption probe involving Rio Tinto’s Mongolia mine.

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DOC Publishes Tariff Exclusion Procedure in Federal Register

Entities looking to obtain exclusions from the newly passed steel and aluminum tariffs received some clarity on how to do so recently when the Department of Commerce posted the procedures for tariff exclusion.

“These procedures will allow the Administration to further hone these tariffs to ensure they protect our national security while also minimizing undue impact on downstream American industries,” Secretary of Commerce Wilbur Ross said in a DOC statement Sunday. “Starting tomorrow, domestic industry will be able to apply for exclusions through a fair and transparent process run through Commerce’s Bureau of Industry and Security.”

The DOC posted the procedures in a Federal Register notice.

According to the DOC, “Only individuals or organizations using steel or aluminum articles identified in Presidential Proclamations 9704 and 9705 and engaged in business activities in the United States may submit exclusion requests. Exclusion requests will be posted for a 30-day comment period on”

Merkel, Xi to Work Together on Steel Overcapacity

German Chancellor Angela Merkel and Chinese President Xi Jinping plan to work together to tackle global steel overcapacity, the Financial Times reported.

The comments, on the heels of the newly announced U.S. steel and aluminum tariffs, came ahead of Group of 20 meetings scheduled for today and Tuesday, according to the report.

Bank Accounts Seized in Probe Involving Rio Tinto’s Mongolia Mine

Switzerland’s highest court upheld the seizure of $1.85 million in bank accounts as part of a corruption probe related to a Mongolia finance minister and a mine operated by Rio Tinto in the country, Reuters reported.

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According to the report, anti-graft authorities in Mongolia are looking into a 2009 agreement with the miner, which eventually led to the startup of the miner’s copper-gold project in the Gobi Desert.

The U.S. International Trade Commission (USITC) issued a final affirmative determination in the ongoing anti-dumping and countervailing duty investigation of Chinese aluminum foil.

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The Department of Commerce made its own final affirmative determination Feb. 27.

“The United States International Trade Commission (USITC) today determined that a U.S. industry is materially injured by reason of imports of aluminum foil from China that the U.S. Department of Commerce (Commerce) has determined are subsidized and sold in the United States at less than fair value,” a USITC statement said.

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The U.S. Department of Commerce. qingwa/Adobe Stock

Before we head into the weekend, let’s take a look back at the week that was and some of the headlines here on MetalMiner:

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MetalMiner’s Annual Outlook provides 2018 buying strategies for carbon steel

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This morning in metals news, Canadian Prime Minister Justin Trudeau is confident in the ability to reach a North American Free Trade Agreement (NAFTA) deal, West Coast ports are preparing for the imposition of the Trump administration’s steel tariff, and Tokyo and Seoul are seeking exemptions from the tariffs.

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After Winning Tariff Exemptions, Canada Aims to Navigate Toward NAFTA Deal

Canadian Prime Minister is touring his country’s steel and aluminum country on the heels of exemptions gained from the newly approved U.S. tariffs.

Despite that victory, another big policy items remains on the docket: renegotiating NAFTA.

“The president has said as long as there’s a Nafta there won’t be any tariffs. We have a Nafta now, we will have a Nafta once we improve it. That sounds to me like we’re pretty good on not getting tariffs,” Trudeau said Wednesday in an interview with Bloomberg Television’s Michael McKee at a steel mill in Regina, Saskatchewan. “I’m very optimistic we’re going to be able to get to a win-win-win.”

Ports Prepare for Tariffs

West Coast ports, like the Port of Vancouver, are preparing for the impact of the U.S. tariffs set to go into effect March 23.

Abbi Russell, communications manager for the Port of Vancouver in Washington state, told NPR steel is tied to approximately a third of the port’s revenue.

The port is the second-largest importer of steel products on the West Coast, according to the report.

Japan, South Korea Angling for Exemptions

After Canada and Mexico secured temporary exemptions from the steel and aluminum tariffs announced by the U.S., other countries are seeking exemptions of their own.

Among those, according to the Nikkei Asian Review, are Japan and South Korea. Japanese Deputy Prime Minister Taro Aso called the tariffs “very regrettable” during a news conference earlier this month, according to the report, and Paik Un-gyu, South Korea’s minister of trade and industry said, during a March 9 meeting with steelmakers, “I am sorry that the U.S. government made this decision.”

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According to the report, the South Korean minister added the country plans to seek exemptions from the steel tariff and is also considering taking a case to the World Trade Organization (WTO) with other countries.

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This morning in metals news, the Brewers Association issued a statement expressing qualms about the Trump administration’s steel and aluminum tariffs, one analyst says U.S. Steel might actually be worse off after the tariffs, and copper miners are looking to the Mongolian dunes.

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Brewers Association Says Canada, Mexico Tariff Exemptions Represent ‘Step in the Right Direction’

The Brewers Association released a statement in which it expressed concerns about the Trump administration’s steel and aluminum tariffs.

“The Brewers Association is concerned about both the aluminum and steel tariffs and the potential implications they will have on small and independent brewers,” the association said in the statement. “Though we think the more targeted tariffs exempting Canada and Mexico are a step in the right direction, we do not believe that can sheet aluminum or the steel used to make brewing equipment poses a threat to national security.”

Tariff’s Impact on U.S. Steel?

According to one analyst, the recently announced 25% steel tariff might not be a good thing for U.S. Steel.

Gordon Johnson, an analyst with the Vertical Research Group, told CNBC that U.S. Steel was “significantly, fundamentally, worse off “after the tariffs, which were intended to help the domestic steel industry.

Mining in Mongolia

Miners are always looking for the next source of valuable materials — according to Reuters, the dunes of Mongolian might be the next big source of copper.

Despite risks associated with work in the country, including extreme weather, miners are turning to Mongolia in search of copper, which is increasingly in demand (particularly in electric vehicles).

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According to the report, Rio Tinto has been the sole copper miner in Mongolia for a while, but that could change as copper demand is on the rise vis-a-vis electric vehicles and copper sources in Chile are drying up.