Washington Insider: Trade War Bureaucracy

While the several rounds of international meetings in the last few days have dominated the press, yet another development is being highlighted in some areas. For example, Bloomberg says the administration earlier argued that trade wars were easy—but efforts to equitably grant relief from new tariffs to those who qualify is leading to widespread criticism.Bloomberg highlighted the confusion and disappointment of one family-owned stainless steel manufacturer who says he must pay "several hundred thousand dollars" as the result of the administration's new tariffs and wonders why.The Bloomberg report describes the position of a vice president of Stainless Imports Inc. and president of Sanitube LLC in Lakeland, Florida--one of the more than 40 initial U.S. companies whose requests for exemptions from tariffs on steel and aluminum imports were denied by the administration recently. The company was told its application was rejected for being incomplete, but says it had to wait almost three weeks for an answer about what was wrong and still has questions about the denial.While more than 30 companies have had their requests for relief from the duties granted so far, some businesses that were rejected say they weren't given adequate consideration after other companies objected. Others are still trying to get a complete explanation for why they were turned down. They're weighing how to respond and deal with added costs from duties that the administration began to impose in March on national security grounds."[The President] is fighting this trade war with my money," a company official said. "It's a gut punch."Companies can request exclusions from the duties if the imports they need are not produced in the required quantity or quality in the U.S. or for national-security considerations. More than 26,400 requests had been filed as of July 9, with 719 decisions so far, according to the Commerce Department.Another company told Bloomberg they were "100 percent" confident of receiving an exclusion because they must use a Chinese mill to get the unusually sized tube product needed for the order to supply a Midwestern dairy factory. There were high fives at the company with 15 employees because the contract was for more than $1 million, when the firm's average order is $20,000, it said.The Commerce Department decided in June that the company's request "has not met the requirements for consideration as a 'complete submission."' But company officials said it wasn't clear what was incomplete, and it took repeated calls and emails before they were told his application had the wrong product code -- a code that it has been using on imports for years, including on the order in question.Arrow Gear Co. in Downers Grove, Illinois, also said it hasn't gotten an explanation why four of its applications were rejected for being incomplete—although it still has 10 applications pending, said John Waller, the company's material manager.The firm has 200 employees and wants duty relief from steel imported from the UK to make gears and pinions for aircraft. It doesn't have a "Plan B" besides resubmitting corrected applications, Waller said."For me, the whole not knowing is worse than anything else," Waller said.The Commerce Department said it hasn't received requested funds to add needed staff but that virtually all inquiries have received a response as of Monday. However, mistakes such as submitting incorrect product codes are beyond its control, the department said, adding that companies should contact U.S. Customs and Border Protection for help before refiling.Kyle Isakower, vice president for regulatory and economic policy at the American Petroleum Institute, said the administration's process is arbitrary and lacks transparency. "It's not clear how and why certain exclusion petitions are granted or denied," Isakower said in a statement.Joel Johnson, chief executive officer of Borusan Mannesmann Pipe U.S. Inc., said he made what he thought was a good offer to the deal-making president: grant his Texas pipe maker's exclusion on importing steel from its parent company in Turkey to finish in Baytown and he'd build a new mill and hire 170 people.But the administration rejected the company's exclusion requests, after other companies including U.S. Steel Corp. objected.U.S. Steel said that Borusan was trying to "bootstrap" an argument related to national security by promising to build the new factory and the Commerce Department agreed. Johnson said he's reviewing his options--but the duties will cost his company between $25 million and $35 million a year."I think it's just they didn't maybe understand our offer," Johnson said. "'No' is a lot easier to say than 'yes."'Commerce Secretary Wilbur Ross has promised changes to address criticisms of the exclusion process, including immediately granting a request if it's properly submitted and no objections are received.But Ross told the Senate Finance Committee in June that based on what officials have seen, "there is a high probability that relatively few of those will be granted" because many lack substance or face well-grounded objections. Ross also has suggested that some companies are "gaming the system" by filing requests they know don't qualify.So, it looks like the administration's management of its tariffs is leading to self-inflicted wounds on U.S. producers—and probably is yet another government intervention that is much, much harder to administer than expected, in spite of the long history of such unanticipated problems. This is a fight farm product producers should watch closely as well, Washington Insider believes.