Industry News

Steel Duty Denials Get CIT Scrutiny

Jan. 27, 2023
By: David G. Forgue

Since March 18, 2018 importers of steel and aluminum into the United States have been trying to manage duties imposed under Section 232 of the Trade Expansion Act of 1962. One important element of that management has been company-and-product specific exclusions from the duties. To date over 300,000 exclusion requests have been filed.

As anybody who has been active in the exclusion request world can attest, the exclusion process has changed over time. In many ways the process is easier for importers. However, the process is definitely not more transparent. This lack of transparency is discussed in detail in the recent Court of International Trade case NLMK Pennsylvania v. United States, Slip op. 23-7. While the Court ultimately remanded the case for Commerce to more completely review and explain its conclusions (or change them to comport with the evidence), there are several elements of the analysis the Court helped clarify. These should be of interest to anyone dealing with 232 exclusions.

First, Commerce has made clear that it has “subject matter experts,” or SMEs who are contracted (Commerce says) to examine the technical information in exclusion requests. The impact of the SMEs has been clear where exclusions that had been renewed several times are suddenly rejected because the physical parameters are “impossible.” However, in NLMK Pennsylvania the Court noted that it was not clear who the SMEs are, so that their alleged expertise could not be challenged by requesting parties. It was also not clear whether the SMEs limited their analysis to purely technical aspects of the requests. Since there was no written record of the SME conclusions on the record, the Court was not able to evaluate anything the SMEs may have said or done, or whether they were qualified to opine on those topics. In an administrative case, this lack of evidence on the record almost always causes the agency to have to reopen the record and explain its reasoning. Commerce has been required to do so here.

Second, the Court discussed the proper analysis when a product identical to the requested product is not available, but the objector claims there is a “suitable substitute” available. The Court noted that the requesting party is the user for which the substitution must be “suitable.” It is irrelevant if the requester’s customer could make the substitute product work if the requesting supplier cannot. This is important both for the arguments made by the requesting party, and in evaluating Commerce’s rationale for denial. The understanding of whether something is a suitable substitute is also an area in which SMEs appear to play an outsized role.

Third, the Court noted that when Commerce determines that a product is “reasonably available” in the United States, it must engage evidence on the record both supporting and disputing this availability. Thus, while U.S. producers may claim they can supply the product (or a suitable substitute) in a reasonable time frame, statements disputing that cannot be ignored. In NLMK Pennsylvania the requesting party included evidence on the record that (1) one of the objectors had not sold the product in ten years, (2) the objectors did not advertise the product for sale, and (3) the objectors had an agreement to supply a different company with 100% of its output. Each of these claims could undermine the claim that the product is reasonably available and Commerce’s failure to engage that evidence is contrary to law.

Taken together, the issues above present a clear roadmap for challenging, and possibly avoiding, exclusion request denials. Furthermore, because the Court remanded the case for further evaluation by Commerce, it is very likely that we will learn more about who the SMEs are and what role Commerce has created for them. It is also likely that we will see how Commerce evaluates evidence of both the suitability and availability record on the evidence. Since neither 232 duties nor exclusions are likely to go away any time soon, these may be very important insights. Watch this space for updates!

If you have any questions about 232 exclusions, or any other questions about the importation of steel or aluminum, do not hesitate to contact any attorney at Barnes, Richardson & Colburn.