Is Our Trade Policy Undermining National Security?

While Americans have heard plenty about the war in Ukraine, one trade policy issue with Russia which also has troubling national security implications is mostly flying under the radar.

Steel trade policy is inextricably linked to national security and it has been in the news lately.

Last month the U.S. Supreme Court “decided not to decide,” declining to hear the bid of an American steel importer to invalidate tariffs on certain steel products. Texas-based PrimeSource Building Products sought to appeal a lower court decision to uphold a 25 percent tariff on some steel derivatives, arguing that former President Trump exceeded his authority by imposing them.

By turning away the appeal, the “Supremes” let stand a February ruling from the U.S. Court of Appeals for the Federal Circuit. Interestingly, the Biden Administration had urged the Supreme Court not to consider the appeal—agreeing in essence with President Trump’s tariff imposition.

But the White House and a Cabinet-level agency seem to have “pulled a 180” in a similar case with the Russians. The Department of Commerce has decided to negotiate a settlement with the Russian-owned company NLMK, despite the clear contradiction with its earlier position in the PrimeSource appeal.

Section 232 of the Trade Expansion Act could not be clearer: steel imports constitute a national security threat that lead to trade sanctions. It only allows three exemptions—Canada, Mexico and the EU.

While NLMK is the largest steel company in Russia, it also owns U.S.-based subsidiaries NLMK Indiana and NLMK Pennsylvania, therefore company lawyers maintain that the Russian exporter should be exempt from the 25 percent tariff.

Their dubious reasoning rests on the claim that since NLMK’s Indiana and Pennsylvania operations are wholly U.S. owned entities that hire American workers, a tariff exemption should be granted. This ignores the simple fact that NLMK imports its own products, made in Russia.

Even more difficult to ignore is the economic windfall NLMK would reap, should Commerce move forward with a settlement. Cash refunds from the 232 tariffs paid for Russian steel imports since 2020, with interest, would flow back into NLMK’s coffers.

This is troubling given its unfairness to other law-abiding U.S. steel importers who have been paying the required tariffs. Even more galling is that the entire process would be “turned on its head” by apparently giving preferential treatment to Russia.

In late 2021, NLMK Pennsylvania filed suit against the Commerce Department, challenging the agency’s denial of its request to exempt 4 million megatons worth of Russian steel imports from due tariffs. That litigation currently resides in the U.S. Court of International Trade (CIT).

That initial NLMK legal maneuver of two years ago prompted American companies such as Nucor Corporation, U.S. Steel, and Cleveland-Cliffs to submit their own legal objections. Now, with NLMK apparently close to settling with Commerce, those aforementioned American businesses are again standing up for themselves.

Specifically, U.S. Steel hopes to submit an amicus curiae brief to CIT, explaining why the federal government should not settle with NLMK, nor refund its paid tariffs. In its request to submit the brief, U.S. Steel explains that NLMK is a prime example of foreign companies using stateside subsidiaries to exploit tariff exclusion processes like those found in Section 232.

The U.S. Steel request also mentions that the potential settlement “contravenes” and risks harm to our national security by allowing “duty free” imports of products such as steel slabs that are readily available from American manufacturers.

That’s why the presiding CIT judge should allow the filing of amicus briefs, so that the voices of concerned stakeholders can also be heard and considered.

Should the Biden Commerce Department move forward with a settlement, it risks setting a dangerous legal and regulatory precedent that will only further expose an increasingly fragile American economy to foreign companies. The White House should reconsider—and reassure the American People— that our collective security remains a supreme concern.

J.D. Hayworth represented Arizona in the U.S. House from 1995-2007, and was the first Arizonan ever named to the Committee on Ways and Means. His decade of service on that panel included membership of the Subcommittee on Trade.