JSW sues US Commerce Department over Section 232 exclusion denials

JSW Steel (USA) has filed a complaint against the United States government, acting by and through the Commerce Department, for denying its requests for exclusions from the Section 232 tariffs and quotas on imported steel.

Unlike a challenge by the American Institute for International Steel (AIIS), which targeted the constitutionality of the Section 232 quotas implemented by President Donald Trump’s administration, JSW USA’s challenge focuses on the administrative process and manner in which the Commerce Department’s Bureau of Industry and Security reviews and determines product exclusion requests.

The guiding principle of an exclusion request is that if the domestic industry does not or will not produce a given steel or aluminium product of the quality needed by users in the US, then the companies that rely on those products will not pay duties on them, JSW USA said in its complaint to the US Court of International Trade (CIT) on Tuesday July 30.

Commerce’s denials of the company’s requests that steel slab be excluded from the Section 232 tariffs were “arbitrary and capricious or otherwise unlawful, in violation of the [Administrative Procedure Act],” JSW USA alleged in its petition .

JSW USA submitted six exclusion requests for slab imports from India in April 2018 and another six for slab imports from Mexico in June 2018, noting that slabs in the sizes it requires “are not available in the US market in the quality and quantities that JSW requires.”

The exclusion requests were denied by Commerce in April and May of this year respectively after objections were filed by three domestic mills: U.S. Steel Corp, AK Steel and Nucor Corp.

Market participants were somewhat surprised by the denials at the time, given that the US steel industry – a key sector of Trump’s campaign for US presidency in 2016 – has in fact benefitted from the substantial investments that JSW Group has made over the years.

JSW Group purchased a steel mill in Mingo Junction, Ohio, in March 2018, where it is investing hundreds of millions of dollars to upgrade the facility.

Mingo Junction’s melt shop, commissioned in December 2018, can make 1.5 million tons of crude steel per year while the mill’s rolling capacity at its hot-strip mill is more than 3 million tons per year, JSW Steel (USA) chief executive officer John Hritz told Fastmarkets AMM during an interview in late January.

JSW USA’s exemption request targeted slabs of 8-, 10-and 12-inch thicknesses, which are needed to feed its Baytown, Texas, mill. Mingo Junction’s slab caster produces slab in thicknesses up to roughly 9.1 inches, which is not thick enough to produce certain plate grades. So imported slabs have been used to make steel plate and pipe at the Baytown plant for use in infrastructure projects, such as oil and gas transmission pipelines, until the company’s planned expansion projects are complete.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US, ended Friday at $29.63 per hundredweight ($592.60 per short ton), down by 0.9% from $29.90 per cwt the prior day but up by 0.7% from $29.42 per cwt a week earlier.

JSW USA alleged in its filing that Commerce failed to verify the claims of the objectors, ignored the conclusive evidence that these companies are unable to produce steel slabs in the required quality or quantity required by JSW USA and “failed even to offer any reasoned basis for its decisions,” adding that it has paid tens of millions of dollars in tariffs as a result of the denials.

“All three objectors failed to provide any evidence that they could produce the imported slab ‘immediately,’ i.e., within eight weeks as required by the department’s rule,” JSW noted.

“Even if AK Steel and U.S. Steel had the capability to produce steel slab suitable to feed JSW USA’s operations, they admit they could only do so by restarting idle facilities,” the company added.

JSW USA is requesting a declaratory judgment indicating that it is entitled to the requested exclusions from the Section 232 steel tariffs, and in turn an order from the CIT that Commerce instruct Customs and Border Patrol to refund the tariffs previously paid by the company.

Alternatively, JSW USA has asked that that the CIT remand the matter to Commerce for “proper treatment and consideration,” and award it such other relief as deemed just and proper.