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Improper Influence in Tariff Exclusion Request Reviews Suggested in DOC Alert

Thursday, October 31, 2019
Sandler, Travis & Rosenberg Trade Report

The Bureau of Industry and Security may have allowed improper influence in its consideration of requests for exclusions from the Section 232 additional tariffs on steel and aluminum products, according to an Oct. 28 alert from the Commerce Department’s inspector general. The alert comes as Rep. Jackie Walorski, R-Ind., continues to raise similar concerns.

Additional tariffs of 25 percent on steel and 10 percent on aluminum have been in place since June 1, 2018, for almost all countries following a Section 232 determination that imports of these products pose a threat to U.S. national security.  BIS assesses requests for exclusions from these tariffs for completeness and accuracy in a pre-clearance process and posts accepted requests online for public review. Requests then go through a three-stage process: (1) allowance for rebuttal and surrebuttal by objectors and requesters, (2) evaluation and recommendation by the International Trade Administration’s Enforcement and Compliance unit, and (3) a BIS final decision that is made publicly available.

The OIG states that in the course of its audit of this exclusion request review process it found several issues that warrant immediate attention.

- Despite the fact that applicable regulations do not provide for appeals of final decisions on exclusion requests, there is evidence that BIS officials reconsidered several approved and posted requests (for which there were no procedural errors) at the request of an objector.

- BIS revised an internal criterion for reviewing a specific attribute in the exclusion request form template within days of receiving a communication from an objector regarding the criterion, and this change will likely result in an increase in the number of requests rejected during pre-clearance.

- Off-record discussions between interested parties and DOC officials are not documented, raising the possibility that pending exclusion requests may have been discussed outside of the official record.

The OIG therefore recommends that BIS consider taking the following actions: (1) regard all decisions as final once they are posted online or amend the rules to allow for appeals, (2) create a formal process for modifying the internal criteria used to review exclusion requests to ensure such criteria are properly vetted and approved prior to implementation, and (3) document all discussions with interested parties, and direct all emails concerning specific exclusion requests to BIS’ official organizational email addresses, to ensure that the correspondence becomes part of the official record.

The OIG alert coincides with an ongoing effort by Rep. Walorski to get a response from the DOC concerning allegations that the Section 232 tariff exclusion request process “continues to be plagued by a glaring lack of transparency, fairness, efficiency, and consistency.” In an Oct. 17 letter to Commerce Secretary Wilbur Ross, Walorski highlighted BIS determinations that “seem to run counter to the facts presented by both sides” and instances in which BIS has “bent or ignored its own regulations” and stated that both circumstances are “usually to the detriment of the requester.” Her letter also noted that BIS has accepted objections submitted after the deadline, denied requests due to apparently inadequate objections, and failed to issue decisions within the required timeframe.  An Oct. 24 reply from Secretary Ross included no response to these allegations.

Please contact trade consultant Nicole Bivens Collinson at (202) 730-4956 or trade attorney Kristen Smith at (202) 730-4965 if you have questions about Section 232 safeguards or exclusions.

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