Metals Industry Tells Government Stronger ROO Needed for Mexican, Canadian Products

Trade groups, companies and a union that represent the aluminum and steel sectors told the Office of the U.S. Trade Representative that they need more protection from import competition, by expansion of the scope of Section 232 tariffs, and by re-negotiation of the rules of origin in both trade agreements and the Section 232 exclusion for Canada and Mexico.

Elliott Gibbs, vice president of raw materials and general procurement for Outokumpu Stainless, the second-largest producer of stainless steel in the U.S., said Section 232 allowed his company to reach a profit in 2021 for the first time in more than a decade, but that the Section 232 duty exclusion for Canada and Mexico needs to be revisited to ensure its effectiveness.

U.S. Steel didn't appear at the hearing last week, but in written comments for an investigation on resilient supply chains, the company said that rules of origin for steel -- and country of origin marking rules -- must be stricter. The USTR should negotiate rules of origin for non-alloy steel products so that only products that are melted and poured in the free-trade-agreement partner country qualify as originating.

"Currently, the majority of U.S. trade agreements, including the United States-Mexico-Canada Agreement and the United States-Korea FTA, allow 'semifinished products of iron or nonalloy steel' melted and poured in non-party countries to claim preferential origin through comparatively minor rolling operations within a party country," the company wrote.

The company said the U.S. should negotiate that all steel-intensive goods -- appliances, metal roofing and building panels, machinery and the like -- should also have to be melted and poured in FTA partner countries, and that those goods also should face heightened regional value content and be subject to labor value content, as autos are.

Steel Manufacturers Association President Philip Bell told officials that 232 tariffs should cover fabricated structural steel and PC strand. He said an adjustment to the scope six years after the provision was implemented is not a hurdle, since the U.S. Court of Appeals already affirmed the Commerce Department's authority to make changes once before.

Aluminum Association CEO Charles Johnson told officials that Mexico needs to implement its aluminum tracing regime.

Jennifer Knight, deputy assistant USTR for critical minerals and metals, asked Johnson to elaborate on the Mexico request.

He said Mexico has not honored its commitment to implement an aluminum tracking system that would include country of last cast and country of last smelt. (Cast and smelt is the aluminum equivalent of melted and poured). Johnson said last year, Mexico stopped reporting even its regular aluminum trade data, and therefore 60% of the aluminum in Mexico has no country of origin. He said he's worried that goods protected by Section 301 and Section 232 are being processed in Mexico and evading the tariffs.

The Aluminum Association originally opposed the 10% tariff on aluminum under Section 232; Century Aluminum was the force behind it.

Century's senior vice president for strategy, Matt Aboud, told the panel that due to unfair competition and energy costs, primary aluminum production in the U.S. is declining. "We must reverse this industry trajectory," he said, though he said Section 232 duties "have stabilized the industry for now."

He asked that Canadian and Mexican aluminum exports, which currently enter tariff-free, should only maintain that status if the aluminum was smelted and cast in North America. He said a smelt and cast standard should also be in the USMCA auto rules of origin.

Not all the requests from the industry were about trade restrictions. Bell and Gibbs both told the panel that the USTR needs to talk to allies about their export restrictions on ferrous scrap, which is used by electric arc furnaces (EAF) to make steel.

Bell said the EU recently imposed restrictions on its export, and the U.K. is considering them; China imposes a 40% export tax on that scrap. He said such restrictions threaten the U.S. steel industry.

Gibbs said the domestic supply of stainless scrap is at risk. He told Irene Ezran, a Treasury Department international affairs economist, that high-nickel stainless steel scrap is needed. Gibbs, Bell and U.S. Steel said there need to be government subsidies for transporting scrap from the coasts inland to EAF sites; Outokumpu also suggested there be warehousing subsidies, and incentives to sell scrap domestically.

Bell said that the U.S. has more scrap than the industry needs, and exports 20 million tons annually, to Asia and to Turkey. But it needs prime scrap, which has lower residuals of unwanted metals, such as copper. He said as China moves from blast furnaces to cleaner EAF production, that drives up demand for scrap.

Outokumpu said there should be a temporary elimination of duties on ferroalloys that are not produced in the U.S., which are used to create strength, heat resistance or corrosion resistance in stainless steel. The company said those duties range from 1.4% to 10%.

Perryman Company CEO Frank Perryman also asked for a lifting of tariffs -- on titanium sponge. His company melts titanium ingots and manufactures titanium mill products. He noted there is no domestic titanium sponge production.

Deputy Assistant USTR for Industrial Competitiveness Rebecca Gudicello asked the speakers what should be done about global excess steel capacity, the problem that originally led to Section 232 tariffs and quotas.

Aboud told the panel that Century received $500 million in government grants to reduce its emissions, and said the country must implement tariffs against aluminum with higher emissions.

Bell said he'd like to see the global arrangement on steel and aluminum talks with the EU restart, but said the International Trade Commission's investigation on carbon intensity in steel and aluminum production, which is due to be released in January (see 2306060003), needs to come out on time. "Without this data, we can’t negotiate from a position of strength or clarity," he said.