A hot mill technician works from an operator pulpit at the Direct Strip Production Complex at Essar Steel Algoma in Sault Ste. Marie, Ontario, on March 14, 2018. (Justin Tang/Canadian Press)

A hot mill technician works from an operator pulpit at the Direct Strip Production Complex at Essar Steel Algoma in Sault Ste. Marie, Ontario, on March 14, 2018. (Justin Tang/Canadian Press)

Metal tariffs remain muddled days before they take effect

Trump has not spelled out in detail what trading partners must do to secure an exemption.

By Don Lee / Los Angeles Times

As the Trump administration barrels ahead with its plan to apply stiff tariffs on imported metals starting Friday, governments and businesses across the globe are in a fog as to what is happening and are bracing for at least a short-term hit because of what many criticize as the administration’s slapdash process.

When President Trump made his official announcement of the tariffs March 8 — 25 percent on steel and 10 percent on aluminum — he exempted Mexico and Canada, at least temporarily, and said that other nations could negotiate with the White House to get out of paying duties on tens of billions of dollars of imports.

But the administration still has not spelled out in any detail what trading partners must do to secure a country exemption. And with just a few days before the tariffs take effect, the void has left many companies and governments frustrated and concerned that the trade action could spiral into a global crisis.

Trade ministers from Europe and other countries have been scrambling to meet with Trump officials in recent days, even as they and business groups in the U.S. and abroad have been waiting for the administration to clarify what it will take for nations to get tariff exemptions. “Clear as mud,” said one diplomatic official in Washington of the process.

“If we want to negotiate something, we need more time,” said Gabriel Felbermayr, director of Ifo Center for International Economics in Munich. Some people in Germany, he said, are so baffled by what’s happening that they hope the whole undertaking by Trump can be postponed.

“The entire process, the tone, time schedules — all these elements — are annoying people here and harming the image of the United States in an unnecessary fashion,” he said.

It isn’t winning fans at home, either. Late Sunday night, Commerce Secretary Wilbur Ross announced procedures on how U.S.-based importers or users of foreign steel and aluminum could apply for tariff waivers on specific products that may not be available domestically. In the past, companies have been able to get product waivers before such tariffs were implemented.

That’s impossible this time around. It was only on Monday that an online form was made available for companies to file for product exclusions, and the Commerce Department said it would take 90 days to review the detailed application — meaning that U.S.-based car producers, appliance makers and other firms will have to pay the hefty tariffs and hope that they will get reimbursed if they later receive exemptions.

“There’s just too many questions on retroactivity,” said Brett Guge, an executive vice president at California Steel Industries, which processes imported steel from Brazil, Mexico and Japan. Guge said his Fontana company will work on the product-exclusion application this week. “It is what it is, as far as the timeline,” he said. “Doesn’t matter what we think. We don’t have a lot of time.”

In issuing the tariffs, Trump moved to fulfill a campaign promise to aid domestic steelworkers and get tough on trade rivals, whom the president blames for America’s industrial and economic troubles. He surprised his own staff in previewing the tariffs March 1, saying they would apply to all countries, only later to temporarily exclude Canada and Mexico on the condition that they renegotiate the North American Free Trade Agreement to Trump’s satisfaction.

Trump charged ahead with the formal tariff orders, which he justified on the basis of national security, even before his administration could prepare the necessary rules and procedures for countries and companies seeking exemptions for steel and aluminum products.

Trump assigned his chief trade official, U.S. Trade Representative Robert Lighthizer, to negotiate requests from other countries for exemptions. But there’s been little information released on what the USTR is seeking, beyond the tariff proclamation’s general clause indicating that a country must provide a “satisfactory” alternative.

On Monday, the USTR office declined to comment on whether such clarifying rules would be forthcoming. Nor would it confirm that Australia had been granted a countrywide exemption. Australia’s prime minister, Malcolm Turnbull, tweeted a week ago that he had received a “commitment” from Trump that the duties would not apply to Australia.

But Australia accounts for only a tiny share of all U.S. imported steel — $380 million, or just 1.3 percent, in 2017. The U.S. imports about triple that amount each from Japan, South Korea and Germany — also countries with military agreements with the U.S.

All three countries, as well as others, have called on Trump to exempt their countries from the tariffs. And many have urged Trump to work cooperatively with other nations to address a steel problem rooted in massive overproduction in China, instead of pushing through blanket tariffs and then looking for bilateral negotiations with countries wanting out of them.

Analysts, however, doubt that wholesale tariff waivers for any single nation will be provided, apart from Canada and Mexico. And what’s more, Germany along with the United Kingdom, Sweden and others in Europe are trying to negotiate an EU-wide exemption.

China accounts for only about 2.5 percent of U.S. steel imports, but Trump administration officials and tariff supporters have argued that Chinese-made steel makes its way to America through other nations. U.S. officials and industry representatives suspect that such circumvention is happening particularly through Turkey, South Korea and Vietnam, but there’s been no definitive study confirming that.

Imports make up about one-fourth of U.S. steel consumption. Trump’s tariff orders affect semifinished steel, such as ingots and slabs, as well as many kinds of finished steel products, including pipe and tubes, cold and flat rolls, bars and rods.

Analysts say it’s hard to know which specific products will qualify for tariff exemptions. Guge of California Steel Industries said the slabs that his company needs are not routinely available or are prohibitively expensive. He reckons the company will seek exemptions for most of what it imports.

The Commerce Department regulations indicate that product exemptions would be based on availability, quality and national security considerations. Dan DiMicco, the former chairman of steel maker Nucor who served as a trade advisor to Trump during the campaign and is familiar with the administration’s thinking, doesn’t see the Commerce Department granting tariff exemptions on many products.

“It’s going to take a lot to get an exclusion,” DiMicco said.

The procedure for obtaining an exclusion may be a hurdle in itself. The five-page online form made available Monday shows companies will have to file a laborious application for each type of product, listing in detail aspects of the imported metal, whether there might be a suitable substitute, and why an exclusion should be granted, among other information.

After a form is submitted and publicly available, any individual or organization also can file an objection to that exclusion request within 30 days.

The Commerce Department said it would take 90 days to review an application, including any objection.

Over the course of a year, the agency said, it expects to receive an estimated 4,500 applications for product exclusions and 1,500 forms filed objecting to them.

The department’s procedures and regulations on product exclusions that were promulgated Monday in the Federal Register were called an “interim final rule” to allow for a 60-day public comment period on these rules. Trade lawyers said that typically, public comment and a final rule are issued before tariffs are implemented. But there wasn’t enough time because the administration bypassed the normal process, and now the duties are set to take effect Friday.

“The key thing is you should have done this in advance,” said a Washington trade lawyer, referring to the rules and process for exclusions, who did not want to be identified criticizing the administration.

He added that it’s going to be very difficult for the Commerce Department to process 4,500 exclusion petitions in a timely manner.

“This is designed to make it hard to get an exclusion,” he said.

Talk to us

More in Herald Business Journal

David Simpson (left) and Scott Murphy.
Port of Everett candidates spar over transparency

An incumbent, David Simpson, is challenged by Everett City Councilmember Scott Murphy.

Rendering of the new terminal that Propeller Airports plans to build at Paine Field in Everett. The terminal, which will serve the general aviation community, will replace Castle & Cooke Aviation's existing building at the Snohomish County-owned airport. (Propeller Airports LLC)
Propeller Airports to acquire Castle & Cooke at Paine Field

Propeller, which owns the nearby passenger terminal, plans a new complex for private aviation.

FILE - In this May 26, 2020, file photo, a sign at the headquarters for the Washington state Employment Security Department is shown at the Capitol in Olympia, Wash. Washington state's rush to get unemployment benefits to residents who lost jobs due to the coronavirus outbreak left it vulnerable to criminals who made off with hundreds of millions of dollars in fraudulent claims. (AP Photo/Ted S. Warren, File)
Washington’s unemployment rate in September was 4.9%

Employers added 17,600 jobs last month, a 7.3% increase over August.

With the Olympic mountains in the background, the first passenger flight by Alaska Airlines Flight 2878 departs for Portland on opening day of the Paine Field Terminal on Monday, March 4, 2019 in Everett, Wash. (Andy Bronson / The Herald)
Alaska Airlines stalls plan for extra flights in Everett

Business has been sluggish, but the airline says it will offer 12 flights a day at Paine Field in the new year.

Hillside homes in Mukilteo are seen from the ferry line on Oct. 20. (Andrea Brown / The Herald)
Mukilteo asks for input on housing density, and it’s complicated

Here’s a guide to what voters should know about the advisory ballot measure. What does it actually do?

People hold signs in protest of the vaccine mandate after Boeing announced it would terminate workers who do not comply on Friday, Oct. 15, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
Some Boeing workers protest in Everett over vaccine mandate

The Boeing Company announced earlier this week that its workers must be vaccinated by Dec. 8.

FILE - In this file photo dated Monday, March 11, 2019, rescuers work at the scene of an Ethiopian Airlines plane crash south of Addis Ababa, Ethiopia.  The number of deaths in major air crashes around the globe fell by more than half in 2019 according to a report released Wednesday Jan. 1, 2020, by the aviation consultancy To70, revealing the worst crash for the year was an Ethiopian Airlines Boeing 737 MAX on March 10 that lost 157 lives. (AP Photo/Mulugeta Ayene, FILE)
Former Boeing test pilot pleads not guilty in 737 Max case

He’s the first person to be charged with a crime in connection with the Indonesia and Ethiopia crashes.

FILE - In this March 14, 2019 file photo, Ethiopian relatives of crash victims mourn at the scene where the Ethiopian Airlines Boeing 737 Max 8 crashed shortly after takeoff killing all 157 on board, near Bishoftu, south-east of Addis Ababa, in Ethiopia. Relatives of some of the passengers who died in the crash will mark the two-year anniversary of the disaster on Wednesday, March 10, 2021, by seeking a reversal of government orders that let Boeing 737 Max jets fly again.  (AP Photo/Mulugeta Ayene, File)
Boeing pilot involved in Max testing is indicted in Texas

He’s accused of giving the FAA false information about systems that played a role in two deadly crashes.

Top (L-R): Kim Daughtry, Steve Ewing. Bottom (L-R): Gary Petershagen, Marcus Tageant.
Developers court Lake Stevens council incumbents with over $20K

Over half of the campaign dollars for four candidates came from people tied to real estate or property development.

Traffic drives in view of a massive Boeing Co. production plant, where images of jets decorate the hangar doors, Friday, April 23, 2021, in Everett, Wash. (AP Photo/Elaine Thompson)
Boeing says workers must get the COVID vaccine by Dec. 8

“Compliance with these requirements is a condition of employment,” says an internal company presentation.

The Boeing 737 Max 10 airplane landing at Boeing Field in Seattle on June 18. (Chona Kasinger / Bloomberg)
Boeing ramps up 737 Max but 787 deliveries are still blocked

Boeing last month maintained its steady trickle of sales as it navigates the aviation downturn.

A handful of Northwest Union Carpenter members picket in front of the new Marysville civic center construction site on the sixth day of a region wide union carpenter strike on Wednesday, Sept. 22, 2021 in Marysville, Wa. (Olivia Vanni / The Herald)
Carpenters strike ends with new contract and a $10 raise

Roughly 500 union members were working on projects in Snohomish County. It was among the largest strikes in 18 years.