The Problem of Steel and Aluminum Imports
Acting on promises made during the 2016 presidential campaign, President Trump announced in April two far-reaching trade investigations on the potential national-security impacts of imported steel and aluminum. The investigations were filed under Section 232 of the Trade Expansion Act of 1962, which authorizes the Secretary of Commerce to conduct comprehensive investigations to determine the effects of imports of any article on the national security of the U.S.
The investigations are being conducted on an expedited schedule (the report from the steel investigation is reportedly drafted and under agency review at this writing), and, depending on the findings, could result in tariffs or other restrictions on imports of steel and aluminum. Producers of steel and aluminum have been supportive of the investigations, although they have urged the secretary to consider downstream impacts of any proposed actions based on the investigations.
The Forging Industry Association (FIA) participated in the public comment process as well, arguing that downstream users of steel and aluminum, such as forgers, could be negatively impacted unless any proposed actions were carefully and narrowly crafted. FIA’s comments recognized the importance of strong domestic steel and aluminum industries and called on the administration to work to reduce global overcapacity in both industries. However, FIA also noted that the U.S. forging industry supplies critical parts to the defense industry and is a basic building block for all manufacturing.
Specifically, FIA pointed out that forgings are used in combat vehicles, weapons, ordnance, airplanes, helicopters, ships and submarines – all of which are vital to national security. FIA argued that the underlying purpose for any proposed remedy stemming from these investigations, which is to ensure that the U.S. continues to have strong domestic steel and aluminum industries, could be mitigated or negated if the proposed remedy harms the domestic customer base of those industries, such as forging. That is true because, without a strong domestic forging industry, the U.S. would be forced to rely on forgings from other countries to produce the products needed for national security. The situation is even more difficult for the forging industry because, for the most part, forgers are not able to avail themselves of other trade-remedy protections, such as antidumping and countervailing duties (AD/CVD).
AD/CVD remedies are available for domestic producers of products who believe they are being harmed or threatened by imports that are being sold at less-than-fair value or less than in their home market. The process involves investigation and analysis of import data to determine whether injury to the domestic industry is occurring or threatening to occur. These remedies are available to both the steel and aluminum industries. In fact, there are already more than 150 AD/CVD duties in place on various steel products.
The problem for forgers is that most forgings are not specifically called out in the Harmonized Tariff Schedule (HTS). Thus, tracking imports of forgings is difficult, if not impossible. That makes the filing of AD/CVD petitions equally difficult since the analysis to determine injury relies on import data.
But forgers know there is an impact. When duties or other trade restrictions are placed on raw materials such as steel or aluminum, foreign manufacturers often simply move down the supply chain, producing forgings or other value-added products that can be shipped into the U.S. duty-free. This has the effect of making the U.S. forging industry less competitive since its raw-material prices go up at the same time that imports of forgings increase.
In the end, U.S. national security depends on healthy domestic producers of steel and aluminum and a healthy downstream customer base for those industries, including forging. That’s why FIA urged the Secretary of Commerce to consider all potential impacts of any proposed remedies pursuant to these investigations and to avoid any action that would negatively affect the competitiveness of the consumers of steel and aluminum, including the forging industry.