Chinese Metals Win U.S. Tariff Waivers With Little Resistance

https://www.nytimes.com/2018/11/28/us/politics/china-tariff-exclusions.html

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WASHINGTON — When Mandel Metals, an aluminum distributor outside Chicago, found its business threatened by President Trump’s tariffs on foreign metals, it filed hundreds of requests with the administration to exclude its imports from the levies.

Again and again, the administration said yes, allowing Mandel to import — if it wanted to — up to 600 million pounds of tariff-free aluminum from Greece, Italy, France, Norway and, perhaps most surprising, China.

Mr. Trump imposed sweeping tariffs on steel and aluminum to prevent China and other countries from flooding the American market with cheap metals, which he said posed a national security threat by “degrading” the industrial base. But his administration has granted nearly 3,000 requests that could exempt Chinese-made metal products from the tariffs, according to a congressional analysis shared with The New York Times.

Since March, when the tariffs of 25 percent on steel and 10 percent on aluminum went into effect, the Commerce Department has approved a higher share of exclusion requests that include imports from China than it has from American allies like Japan and Canada.

The approval rate stems largely from the success of two companies. Mandel has won 400 aluminum exclusions — nearly half of all the exemptions granted to companies seeking relief from the aluminum levies through early November. Those exclusions allow Mandel to import six times the amount of metal it sells every year, and company officials say they will not come close to using all of that allowance.

Greenfield Industries, a South Carolina maker of saw blades and other cutting tools, has won 1,000 exclusions from the steel tariffs. Greenfield is owned by China’s Top-Eastern Group.

The exclusions stem from the Commerce Department’s process for determining whether companies can win tariff relief for imported metals. The requests are generally granted as long as no American producer formally objects and says it can provide the metals.

Both supporters and opponents of the tariffs have criticized the process as haphazard and ineffective. Aluminum trade groups — including some that have criticized the tariffs — say the fact that Mandel received approval to import more metal, including aluminum from China, than it can use highlights the program’s flaws. Others have criticized the process for giving large domestic producers, like Nucor and Century Aluminum, outsize power to block exemptions by claiming they can provide the metals.

“Generally, it seems the department is not evaluating whether there is actually demand in the market for these large volumes and has granted the requests based simply on the absence of any objections,” Heidi Brock, the president of the Aluminum Association, wrote in a letter to the Commerce Department this month. She cited Mandel and another set of exclusions, to Ta Chen International, for potentially one billion pounds of imports from China.

The department has struggled to process the flood of requests, even with more than 100 employees and contractors reviewing them.

According to department statistics, companies filed 51,059 steel exclusion requests and 6,701 aluminum requests through early November. It had ruled on 18,137 of the steel requests, about 36 percent, and 981 of the aluminum requests, about 15 percent. Three-quarters of the steel decisions were approvals, compared with 85 percent for aluminum.

The approvals contrast with the exclusion process for the tariffs that Mr. Trump imposed on $50 billion worth of Chinese products. That process, which is being run by the Office of the United States Trade Representative, has denied 1,300 requests and approved none.

Perhaps no one is more puzzled by the process than Mandel’s executives, who say they don’t intend to import Chinese aluminum this year.

“Our intent was not to shoot the moon here and gobble up exclusions,” said Mike Ward, the company’s president. “We didn’t know any better. They seemingly greenlighted everything we sent them.”

Mandel doesn’t forge aluminum products in its headquarters facility in Franklin Park, Ill. “We take aluminum,” Mr. Ward said, “and cut it to a size our customers can use.”

The aluminum it buys is low end — and not what American producers specialize in these days. “There is a shortage of the common alloy being produced in the United States,” said Rick Mandel, the chairman and chief executive officer.

When Mandel officials called the Commerce Department this year for guidance on filing exclusion requests, they were surprised at how little information the government could offer. So they filed requests for every product they import. To date, 443 of them have been approved, or 45 percent of all aluminum exclusions issued by the department.

A Commerce Department spokesman said requests without objections, such as Mandel’s, were expedited in the review process.

“Exclusions are granted only when U.S. producers do not make the product in sufficient and reasonably available amount, in satisfactory quality, or for a specific national security consideration,” the spokesman said. He added that the tariffs “have led to significant restarts in the steel and aluminum industries in facilities across the country.”

Commerce Department statistics show steel imports are down 11 percent for this year. Census statistics show aluminum imports are down about 9 percent.

But the drop in foreign metal has not mollified Democrats, who say Mr. Trump’s approach is simply sowing uncertainty among American companies while allowing China to continue sending its metals into the United States.

“Trump talks tough but carries a flimsy stick,” said Representative Lloyd Doggett, a Texas Democrat, who is in line to chair a Ways and Means subcommittee when Democrats assume control of the House next year. “He doesn’t have a trade policy, just a series of contradictions — claiming national security justifies imposing the same tariffs on allies and adversaries alike, yet granting so many Chinese aluminum exemptions from these very tariffs.”