GAO report cites U.S. failure to collect some aluminum and steel tariffs

A recent report from the U.S. Government Accountability Office suggested that a significant amount of imported steel was allowed into the U.S. without being subjected to tariffs when the material actually should have been. Taitai6769/iStock/Getty Images Plus

Two federal import enforcement agencies are considering how to react to a report that they are too lax in enforcing steel and aluminum tariff exclusions.

Some imported steel and aluminum products are excluded from the President Trump era respectively, up to certain quantities. (In 2018, Trump imposed a 25% tariff on imported steel and a 10% tariff on imported aluminum.) Above those agreed-upon limits, the Department of Commerce’s Bureau of Industry and Security (BIS) and the U.S. Customs and Border Protection (CBP) are supposed to collect the tariffs.

But the Government Accountability Office (GAO) reports that isn’t always happening. It issued a report in July titled “Steel and Aluminum Tariffs: Agencies Should Ensure Section 232 Exclusion Requests Are Needed and Duties Are Paid.” Following an investigation analyzing import entry data from March 2018 through September 2021, the GAO published the 66-page report about the usage and administration of the Section 232 steel and aluminum exclusion program and cited shortcomings in enforcement at the two agencies administering the Section 232 exclusion programs.

The GAO issued the following recommendations for the two agencies:

1. CBP should take additional steps to recover the duties owed by importers as a result of invalid use of Section 232 exclusions.
2. CBP also should take steps to ensure that controls are implemented to prevent importers from exceeding the approved quantities of their Section 232 exclusions.
3. BIS should evaluate the results of the certification requirement.
4. BIS also should develop a more consistent data transfer process.

Both agencies concurred with these recommendations. However, when spokesmen for both agencies were queried by The Fabricator as to their current or future plans to crack down on unpaid tariffs for unjustified exclusions, neither responded.

“In light of the GAO report, importers of steel and aluminum should expect BIS to conduct additional quantity certification reviews and more closely scrutinize the data points included in exclusion requests. Importers may also face increased scrutiny from CBP, who will more closely examine and deny 232 exclusion claims that are not properly filed,” John Brew, a Washington lawyer for Crowell & Moring, wrote in a blog post.

The GAO report estimates importers might owe about $32 million in duties because of invalid use of Section 232 exclusions as of Nov. 10, 2021. The analysis showed that during the period of review, importers properly utilized 61,243 exclusions to avoid paying Section 232 duties. However, there were 3,959 instances of invalid use related to certain exclusion criteria, such as a wrong exclusion identification number, the wrong country of origin, or the wrong product quantity. Of those 3,959 instances of incorrect use, 3,884, or 98%, were related to quantity.

White House Issues Final “Made in America” Guidance

On Aug. 14, the White House Office of Management and Budget published final guidance on “Buy America” requirements associated with infrastructure projects funded with money through the Infrastructure Investment and Jobs Act, which includes the Build America, Buy America Act (BABA). The earlier draft guidance from April 2022 had been somewhat controversial, with importers of steel concerned about losing access to their sources for inexpensive metal or not being able to buy overseas when a particular kind or grade of steel was not available from a U.S. supplier.

The final guidance doesn’t make many changes from the May 2022 draft. The BABA’s iron and steel requirements apply to products that are “predominantly” iron and steel. The final guidance states that “predominantly” means that the cost of the iron and steel exceeds 50% of the total cost of all components. For iron and steel products, all manufacturing processes, from the initial melting stage through the application of coatings, must occur in the U.S.

Waivers from those requirements are available on the basis of public interest, unreasonable cost, and nonavailability. Specifically, an agency might find that a waiver is needed because of unreasonable cost if compliance would increase the price of the overall infrastructure project by more than 25%.

The final guidance does make one significant change, however. It changes the entity that may request a waiver from a “non-federal entity” to a “recipient.” What that means is that only entities—mostly state and local governments—can apply for a waiver. Their private sector contractors cannot.