Washington Insider: Dealing With the New Trade Policy Bureaucracy

The New York Times this week is describing a new U.S. trade snarl. It says that for several weeks this spring, a handful of employees at a Texas steel manufacturer stopped producing pipes used to drill thousands of feet below the earth’s surface to concentrate full time on another task: trying to win the company an exemption from President Trump’s metals tariffs.Borusan Mannesmann Pipe U.S. filed 19 separate requests with the Commerce Department asking it to exempt the multiple shapes, sizes and forms of steel pipes that it imports from its parent company in Turkey and then finishes at a plant in Baytown, Tex. Until it gets an answer, the 60-year-old business is paying significantly higher prices for imports of the raw material and is putting off any major projects.In the two months since the Trump administration’s steel and aluminum tariffs went into effect, the Commerce Department has been deluged with more than 8,200 exemption requests from companies that import foreign metals.With just a handful of countries temporarily exempted from Trump’s steel and aluminum tariffs, companies are scrambling to win exemptions for every screw and spring they import, with each width and length requiring stand-alone filings. One company alone has submitted 1,167 of the filings, according to government officials.Those affected by the steel and aluminum tariffs say the administration’s aggressive approach could backfire on American companies and workers. “It’s hard to predict what could happen to us and these families if the exemption process doesn’t go in our favor,” said Joel Johnson, the chief executive of Borusan Mannesmann’s United States operations, which employ 264 people. “I don’t have a crystal ball, but for sure we won’t be hiring more people. We might have to reduce our existing base because we won’t have that material coming in.”The Commerce Department has yet to grant any company an official exemption. A department official said that the agency was making “an unprecedented effort to process the requests expeditiously” and that companies with a valid need for foreign products should rest assured that their needs will be met.To deal with the flood of applications, the department has added about a dozen workers dedicated to processing the applications, bringing the total number to 19. So far, the department says it has reviewed most of the filings, but only 1,700 had been posted online as of May 8 — and that is just an early step in a lengthy process. Domestic steel and aluminum companies have 30 days to file an objection to any application. Government officials then have 60 days to make a final decision.A few countries have been granted blanket exemptions for all their products. The European Union, Mexico and Canada have been given a temporary reprieve from the tariffs until June 1 as the Trump administration tries to reach a deal to limit their steel and aluminum exports to the United States. But countries like Japan, Turkey and Russia have not been exempted, leaving companies that use their metals anxious and uncertain.Industry vendors are already worried, NYT said. Automation Engineering Company, a South Carolina company that provides equipment to Borusan to move pipes within its factory, sent a letter to the Commerce Department on Tuesday saying that Borusan’s business helped support 75 jobs in its own factory.The tariffs’ most ardent proponents, including some domestic steel and aluminum makers, have argued against granting many exemptions, saying they will create loopholes that ultimately make the measures less effective at defending American industry. The administration, in imposing the tariffs, said national security was at risk from foreign metals that were weakening American manufacturers.However, Wilbur Ross, the Commerce Secretary, has said the department will grant exclusions that “further hone these tariffs” to protect national security while also minimizing the impact on American industries.For example, Union Pacific, the railroad giant, filed an exemption for a specialized longer steel rail from Japan that it says is not available in the United States. Greenfield Industries, a drill manufacturer that employs more than 330 people in South Carolina, claimed that it will pay more under a tariff to bring in unfinished components for its factories in the United States than competitors who have offshored entirely will pay to bring in finished goods. “This gives offshore manufacturers an unfair advantage over domestic manufacturers,” the company said.In April, Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee, and Ron Wyden, D-Wash., ranking member, sent a letter to Ross urging him to improve the process, saying it has lacked “basic due process and procedural fairness for stakeholders, especially American small businesses.” They also expressed concern about whether the Commerce Department was taking steps to prevent the program “from being abused for anticompetitive purposes.”The Federal Reserve’s April “Beige Book” included a report from the Federal Reserve Bank of Minneapolis about impacts of rising material costs. And the Federal Reserve Bank of Boston reported that a local toy manufacturer said that tariffs had raised threefold the price of a type of thin-gauge foil produced only in China. “These tariffs are now killing high-paying American manufacturing jobs and businesses,” the company said.So, we will see. Clearly, the new tariffs are complex and difficult to administer equitably and the time it will require will be yet another hurdle for business managers in both the U.S. and in the exporting countries. And the building bottlenecks appear to be raising questions about whether the new case by case trade administration can achieve the efficiencies and impacts being claimed—and should be watched closely as it emerges, Washington Insider believes.