Minnesota companies join scrum seeking relief from steel, aluminum tariffs

WASHINGTON – BendTec Inc. says no business in the United States makes the kind of large-diameter, thin-walled pipe it sells for power and utility projects.

For that reason, the 100-year-old, 140-worker Duluth company wants an exclusion from President Donald Trump's 25 percent national security tariff on imported steel. The exclusion would allow it to continue buying from an overseas supplier without paying a higher price.

Six other Minnesota companies that make products using steel or aluminum have made similar claims of insufficient U.S. supplies to the federal government.

Trump's national security tariffs on imported steel and aluminum have left hundreds of U.S. manufacturers complaining that they cannot get raw materials they need domestically, government data reveal.

Trump promised that the tariffs would boost U.S. manufacturing jobs and rebuild the country's steel and aluminum industries by making them cost competitive with foreign suppliers. Instead, in many cases U.S. suppliers do not make the specialized steel and aluminum that U.S. companies require.

Now, White House and Department of Commerce officials who said tariffs would have minimal impact on U.S. companies face more than 30,000 requests for tariff exclusions from roughly 800 businesses, said Christine McDaniel, an economist from the Mercatus Center at George Mason University, who has studied the exclusions. The volume of requests grew 25 percent from August to September, she said, and are now arriving at a rate of about 1,000 per week.

"The Commerce Department wildly underestimated the requests for exclusions," McDaniel said. "The only way [tariffs on imported steel and aluminum] could work as the president hopes is if U.S. steel producers ramp up production and productivity with new processes and new technologies. It usually takes months or years to build plants that are capital intensive."

Absent an American supplier or a tariff exclusion, U.S. companies that use certain specialized metals have no choice but to pay 25 percent more for steel products and 10 percent more for aluminum products in order to survive.

The White House referred questions about tariff exclusions to the Commerce Department.

A spokeswoman said the department had granted approximately 4,700 tariff exclusions as of Sept. 26. Each exclusion is specific to the company that applies, the product code of the raw material being used, the amount of raw material being obtained and the foreign country and business from which it will be purchased tariff-free.

U.S. steel and aluminum makers are allowed to protest a company's tariff exclusions by arguing that they have the production capacity and quality material to meet the need.

Roughly 12,000 protests to 30,000 exclusions had been filed by Sept. 10, McDaniel said. U.S. Steel Corp. appears to have filed at least 2,000 of the protests.

"Our company is filing comments only on those tariff exclusion requests that are for products that we make," a U.S. Steel spokeswoman said in a statement to the Star Tribune. "These comments reply to the publicly posted exclusion requests, and our certified comments include public facts and information on our production capabilities.

"The Commerce Department made clear in its 232 Report that exceptions to the tariffs on imports of a particular steel product should be based only on a demonstrated lack of sufficient U.S. production of a comparable steel product or for other national security reasons."

Granting tax breaks company-by-company can create significant competitive advantages for businesses that apply versus those that don't, McDaniel noted.

Manufacturers of similar products who use the same raw materials can end up paying vastly different amounts for the same imported inventory because one got a tariff exclusion and another didn't. This uneven playing field favors big companies over small- and medium-sized companies that may not understand the very complex exclusion process or have the staff to navigate it, McDaniel said.

Big companies have filed hundreds of exclusion requests each, she added, including an Illinois company that has placed more than 2,500.

Clint Zimpel, an engineer for BendTec, filed two tariff exclusion requests for pipe purchased from China for a long-term project that began before the steel tariff's imposition.

In a letter to the Commerce Department, Zimpel said that taxing projects with long lead times was "in [effect] hurting domestic suppliers more than it is hurting the foreign governments it was intended to."

"There's no one in the U.S. who provides what we use," he told the Star Tribune in an interview. "So there's no U.S. company they are protecting."

Meanwhile, the 25 percent tariff on the Chinese pipe has forced BendTec to spend "hundreds of thousands of dollars" extra on the project, Zimpel said.

The Commerce Department denied BendTec's exclusion request but allowed the company to refile using a different product code, Zimpel said. That means another 90 days of submission, review, potential protests and rebuttals.

Zimpel thinks the company will prevail the second time around, although he is not sure how — or when — it will be reimbursed. Having learned how the system picks winners and losers, he is hedging bets on BendTec's future projects. He just submitted an additional 50 tariff exclusion requests.

One Minnesota company, Viking Drill & Tools Inc., a private employer in St. Paul with more than 250 workers, already has 157 tariff exclusion requests on file. All of them are based on insufficient U.S. production capacity and quality.

The company declined to comment.

Other Minnesota companies, including Electric Machinery Co.; Faribault Foods Inc.; Bedford Industries Inc.; Hutchinson Technology Inc., and McNeilus Truck and Manufacturing Inc. made similar supply arguments to the government.

For example, Electric Machinery says no one in the United States makes the nonmagnetic stainless steel retainer rings it uses to construct turbo generators.

Faribault Foods says it needs more and better tin-plate to can its beans than U.S. producers can provide.

The company seeks a one-year exclusion from paying a 25 percent tariff on imports of 6.8 million kilograms of tin-plate as the U.S. steel industry ramps up production and technology to meet the its needs.

Commerce Secretary Wilbur Ross took a tough stance on tariff exclusions before the metal tariffs took effect June 1.

A regulatory rule stated that "an exclusion will only be granted if an article is not produced in the United States in a sufficient and reasonably available amount, is not produced in the United States in a satisfactory quality, or for a specific national security consideration."

Meanwhile, McDaniel said, the way the exclusion system works makes it ripe for companies to receive unfair advantages.

"If [the steel and aluminum tariffs] were really about national security," she said, "we shouldn't be giving any exclusions."

Jim Spencer • 202-662-7432