October 31, 2018

Warren Questions Commerce Secretary Ross on Trump Steel Tariff Exemptions that Favor Chinese and Japanese-owned Companies Over American Companies

Staff Review Finds Vast Majority of Tariff Exemptions Granted to U.S. Subsidiaries of Foreign Companies, Not U.S.-Based Firms

Text of the Letter (PDF)

Washington, DC - United States Senator Elizabeth Warren (D-Mass.) has sent a letter to Commerce Secretary Wilbur Ross to request information regarding the Commerce Department's tariff exemption process after a staff review found that the overwhelming majority of exemptions from President Trump's steel tariffs have gone to the U.S. subsidiaries of foreign-owned companies rather than U.S.-headquartered firms.

"You appear to be implementing the tariff exemption program in a way that undermines American steel producers - by allowing large tariff-free imports of foreign steel - and harms American-owned steel-dependent companies instead of improving their competitive advantage over companies headquartered in China and other foreign countries," wrote Senator Warren.

In March, the White House announced that it was imposing a twenty-five percent tariff on steel products imported in to the United States.  Following this announcement, the Commerce Department launched a tariff exemption process in order to "further hone these tariffs to ensure they protect our national security while also minimizing undue impact on downstream American industries." 

As of October 22, 2018, the Commerce Department has posted over 30,000 steel tariff exclusion requests, over 11,000 decisions approving requests, and close to 4,400 decisions denying requests. Senator Warren's staff analyzed all 909 decisions posted by the Commerce Department in the first 30 days that responses were made available and found that:

  • The Commerce Department is granting hundreds of waiver requests monthly. The Department granted over 500 requests in the first 30 days that decisions were made available online, waiving tariffs for approximately 170 million kilograms of steel imports.

  • Foreign-headquartered companies received more than 80% of all exemption requests. 81% of the exemptions granted by the Commerce Department in the first 30 days were filed by companies that identified a parent company or company headquarters outside the United States.

  • The majority of steel tariff waivers were given to Japanese-owned companies. Almost 52% of the granted steel tariff exemption requests posted by the Commerce Department in the first 30 days of its decision-making were for companies headquartered in Japan. Overall, subsidiaries of Japanese companies seeking exemptions were successful in 84% of their requests.

  • Chinese-owned companies received more than one in four tariff waivers. Chinese-owned companies received 27% of all waiver approvals through their U.S. subsidiaries. Overall, subsidiaries of Chinese-based companies seeking exemptions were successful in 94% of their requests. Requests for exemptions by American companies, on the other hand, were granted only 25% of the time.

In her letter to Secretary Ross, Senator Warren expressed grave concern that the majority of the first batch of exemptions issued by the Commerce Department from the Trump Administration's steel tariffs have gone to foreign-owned companies - even though these tariffs are purportedly in place to protect American companies. 

The letter noted that despite the President's sharp criticism of trade tactics used by the governments of China and Japan, four out of five tariff exclusions in the first batch of Commerce Department decisions were granted for U.S. subsidiaries of companies headquartered in those countries.  Criticizing the Administration for what appears to be a massive loophole in its tariff exemption program, Senator Warren asked a series of questions about the program's implementation and requested that her staff be briefed on the topic by November 13, 2018.

"This is utterly inexplicable and you owe the American people an answer for why, after President Trump promised that his tariff program would help American companies, the process appears to be favoring foreign-owned firms with U.S. subsidiaries over American firms by allowing them to import foreign steel," the senator continued.

In August, the Commerce Department reversed a tariff exemption given to the U.S.-sanctioned Russian company Rusal PLC after Sen. Warren sent a letter to Secretary Ross asking about the suspicious circumstances under which it was granted.  Senator Warren then called on the Department of Commerce Inspector General (IG) to open an investigation into the Department's implementation of the exemption process for President Trump's steel and aluminum tariffs, which appears to be replete with mistakes and arbitrary, opaque, and subject to political favoritism.