Ways and Means Trade Subcommittee Says Product Exclusion Process Fixes Needed

Reichert called for:

• automatic product exclusion approval if no company objects to the request
• industrywide product exclusions once a product has gotten an approval from one requester
• a way to rebut objections to a request
• a way to appeal exclusion denials
• allowing exclusions for products imported from countries that have quotas, such as Korea and Brazil.

Most of the subcommittee members suggested that the application of steel and aluminum tariffs or quotas on almost every country in the world was misguided. Reichert said "our allies like Canada, Mexico and Europe are not the problem, China is." But the witness from the United Steelworkers said China is not the only country that sells unfairly traded steel or aluminum. He said that Vietnam, India, Turkey, Russia, Brazil and Saudi Arabia also have state-directed companies.

Rep. Jackie Walorski, R-Ind., said, "We're not asking Commerce to grant every request. We're saying the deck seems to be stacked toward one side right now, and it needs to be rebalanced."

Two companies that testified complained about paying tariffs on shipments already on the water or already under contract, because of exclusion denials or because of a delay in posting an exclusion request. But Brian Semcer, president of MICRO, a medical device manufacturer in New Jersey, said the fact that he cannot get any more supply from South Korea doesn't just dent his profits, it will cripple his production.

MICRO buys 93 percent of its steel from domestic suppliers, but buys stainless steel tubing needed in every project from South Korea. It used to source the tubing from a domestic supplier, but stopped after delivery and quality issues made his customers ask him to find a new supplier a dozen years ago. On July 10, the Korean industry organization managing the quota told him he would get no more shipments through the end of the year. That means he only received 60 percent of what he used last year -- the country quota is 70 percent of the last three years' average.

By the end of October, the lack of supply will affect every product his 460-person company makes. Semcer was so desperate to maintain supply that he looked into buying domestic steel strip, sending it to the Korean mill, and shipping the tubing back to America. But he was told it would still be subject to the quota. Any new supplier would have to undergo FDA certification, which cannot be done in time to save his production. "For MICRO, this quota is catastrophic," he said. "I'll be in Washington, D.C., until this gets fixed -- it's my new home."

Rick Heuther, CEO of Independent Can Company, said he is frustrated because a domestic tin plate mill entered an objection to his exclusion request, saying it could make the metal. Heuther said he used to be a customer of that mill, but its product was so inconsistent he was having more than 50 percent of the material rejected. He now sources that product from Europe, and has had no problems for the last two years. If there was a way to rebut rejections, Heuther said he would share three years' of documentation about the problems from that mill.

Heuther has five factories, two in Maryland, two in Ohio and one in Iowa, and said he has invested heavily in automation so that he can compete with Chinese companies that make food tins. He employs 415 people. "We lost an order for $2 million in tins to China, just in anticipation of these tariffs," he said. He has been able to get more supply from one of the two domestic mills that makes tin plate, but given that he buys 70 percent of his metal from outside the U.S., he is not getting enough domestically to avoid tariffs. Besides, even the domestic mill has raised its rates to match the cost of the imported steel including the tariffs. He will spend $1.5 million in additional steel costs from June to December.

Rep. Ron Kind, D-Wis., noted that he's a co-sponsor of a bill that would give Congress the ability to roll back the steel and aluminum tariffs. He also noted that no one from the Commerce Department was testifying, and said that Commerce Secretary Wilbur Ross's responses to questions have been inadequate and very opaque. He criticized the announcement July 24 that there would be $12 billion in reimbursements to farmers hurt by retaliatory tariffs. No such money is forthcoming for manufacturers, though one witness said his Canadian customers won't be buying from him while retaliatory tariffs on steel are in place. "This is the definition of crony capitalism," Kind said. "I don't see a safe landing zone for any of this. We have an administration addicted to tariffs."

President Donald Trump tweeted early that morning, "Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It's as simple as that -- and everybody's talking!"