On March 1, 2018, The White House announced sweeping tariffs on steel (25%) and aluminum (10%) imported into the United States (read related blog entry HERE). Shortly thereafter, the Administration outlined a tariff exemption process whereby the Department of Commerce would receive, review and process requests within 90 days. According to one source, now four months into the program, just 700 of the 27,000 requests have been fully reviewed with only 266 requests granted.
Virtually everybody involved agrees with Representative Dave Reichert, a Republican from Washington and chairman of the trade subcommittee, who said the exclusion process is "bogged down in red tape and is moving far too slowly."
The exemption process is open to businesses or individuals using steel or aluminum for business activities only. A separate filing must be made for each tariff classification number, meaning a manufacturer of a complex assembly may have to file many different exemption requests.
To begin the process, applicants submit a five-page electronic form detailing their planned usage and offering statements as to how or why U.S. produced alternatives are either unavailable or otherwise unable to be substituted. Beyond basic business information, the forms require detailed product descriptions, contributing suppliers and expected quantities as well as detailed information on the applicant's import partner, country of origin and port of entry. There is also an area for statements to help determine if the products in question have any related national defense or security concerns that need to be considered.
The sheer number of applications, 27,000 and counting just a few months into the program, is clogging the system and preventing the DOC's ability to process in a timely manner. Reichert suggests that "the process is burdensome, unwieldy, and inefficient."
But the issues don't stop solely at quantity. So far it's unclear how the DOC is basing its decisions and no clear review factors have been offered. The DOC employees making these decisions have little time for the review process and perhaps little expertise in the particulars of the products involved. Compounding the problem, applicants have no ability to track their request status nor to interact with their DOC reviewers to address issues and answer questions.
The Washington Post cited a senior Commerce Department official saying, "it's going to be so unbelievably random, and some companies are going to get screwed."
Last, exemptions are only given for up to a one-year period. For those companies that successfully navigate the process - only 266 of them so far – they’ll have to begin the process anew as soon as their exception expires.
Reichert called on the Trump Administration to streamline the exemption process by allowing trade associations to apply on behalf of member companies, which would dramatically reduce duplicate applications. Additionally, when a product exemption is granted for one company, a trade association could help ensure that the item in question become available for any US company, he said.
The DOC needs to create a more transparent process whereby the specific review factors are offered to allow potential applicants insight as to how decisions are made. Extending the exemption time frame for successful applications and implementing an appeal process for those who are denied would also be beneficial enhancements.
Of course, having your legal counsel involved in the application process is critical to your success. By some accounts, applications that have a single blank or inaccuracy led to a rejection or denial, casting the applicant back to the end of the very long, very unpredictable line. The attorneys at Warner are tracking the exemption process closely and can help clients stay ahead of the curve.
For legal questions regarding tariff exemptions or how the tariffs may be affecting your business, please contact attorneys Laura You or Homayune Ghaussi.