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Trump's tariffs spark outcry from companies denied relief

Bloomberg logoBloomberg 7/17/2018 Mark Niquette
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Video by CNBC

Todd Adams won what he thought was a career-defining order last summer for his small, family-owned stainless steel manufacturer. Now, he’s paid “several hundred thousand dollars” from President Donald Trump’s tariffs that have cut deeply into that sale.

Adams is the vice president of Stainless Imports Inc. and the 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 Trump administration. Adams was told his application was rejected for being incomplete, but he said he had to wait almost three weeks for an answer about what was wrong and still has questions about his 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, like Adams, 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 Trump started to impose in March on national security grounds.

“He’s fighting this trade war with my money,” Adams 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 27,600 requests had been filed as of Monday, with 452 denied and 267 approved so far, according to the Commerce Department. Some companies are filing dozens and even hundreds of requests because a separate application is required for each product, even one of a different size.

Total Confidence

Adams said he was “100 percent” confident he would get an exclusion because he had to 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, he said.

The Commerce Department posted its decision June 22 that the company’s request “has not met the requirements for consideration as a ‘complete submission.”’ But Adams said it wasn’t clear what was incomplete, and it took repeated calls and emails before he was told his application had the wrong product code -- a code he’s been using on imports for years, including on the order in question.

Not Knowing

Arrow Gear Co. in Downers Grove, Illinois, also hasn’t gotten an explanation why four of its applications were rejected for being incomplete, and it still has 10 applications pending, said John Waller, the company’s material manager.

The firm with 200 employees wants duty relief from steel imported from the U.K. to make gears and pinions for aircraft, and 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 in a statement it hasn’t received requested funds to add needed staff, but that virtually all inquiries had received a response as of Monday. Matters 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.

Rejected, Accepted

Schick Manufacturing Inc. is trying to get answers from the Commerce Department because different requests involving the same material were both rejected and accepted, spokeswoman Lauren Medina said.

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.

To drum up support for its requests, the company collected 4,500 postcards from its 275 employees and their relatives sent to Trump and other officials, offering cash prizes for the best written cards.

But the administration rejected the company’s exclusion requests, after other companies including U.S. Steel Corp. objected on grounds that the product Borusan Mannesmann wants to import is available from U.S. sources.

Bootstrap Argument

U.S. Steel said in an objection posted online that Borusan was trying to “bootstrap” an argument related to national security by promising to build the new factory.

“There is no national security interest in drawing further foreign Turkish investment into the United States to produce a product that is already produced in the United States, and for which substantial excess capacity exists,” the company said in its filing.

The Commerce Department agreed in its decision memo that there’s enough U.S.-made product for Borusan to use. 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.”’

Companies have been told to contact objecting businesses and request a quote on the steel or aluminum they want to buy, and if they are refused or can’t get the product, Commerce will reconsider their applications, the department said in its statement.

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 said at a June 20 Senate Finance Committee hearing 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.

Adams, of Stainless Imports, said he’s considering legal action, and losing the money paid in tariffs would be “crippling” to a small business that doesn’t operate with a high profit margin.

“We are the actual people who are feeling the real effects,” he said.


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