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While the trade group supports the United States-Mexico-Canada Agreement – signed in late November to replace the existing North American Free Trade Agreement – it is against having that deal tied to the removal of the Section 232 tariffs against the two nations, Washington-based law firm Wiley Rein LLP said on Tuesday March 26. The association claims that the “trade-distortive” behaviors of Canada and Mexico disqualify the countries from receiving trade relief.
In particular, it pointed to a final US Commerce Department determination last month that Canadian large-diameter welded pipe producers were dumping the product into the domestic market at a rate of 12.32%, down from the previous dumping rate of 24.38%.
South of the border, the Mexican large-diameter pipe market is closed to American producers, the association noted.
“Mexico’s most recent WTO Trade Policy Review indicates that current tenders for oil and gas pipeline projects issued by Mexico’s National Hydrocarbons Commission require 25% local content… This requirement will reach 35% by the end of 2025,” it added.
“It is imperative that Section 232 tariffs relief be maintained on both Canada and Mexico in order to uphold the president’s goal of increasing US steel capacity, including domestic [large-diameter welded pipe] capacity, to support US national security needs,” the association said. “The failure to do so will directly undermine [large-diameter welded pipe] production in the United States and increases the possibility of Canada and Mexico becoming platforms for circumvention by China and other countries.”
But should the tariffs be rescinded in lieu of quotas, the quotas should abide by the stated intent of the Section 232 measures to protect US national security in addition to the domestic steel industry, it added.
“Such a quota should be well below the 2016 to 2018 average volumes for US imports from Canada – any quota set at historic levels would improperly reward Canada for its surge of [large-diameter welded pipe] imports at dumped prices,” the group added.
The United Steelworkers union had called on the Trump administration early last month to lift the Section 232 measures against Canada, with former US Trade Representative employees anticipating that the tariffs would be removed prior to the ratification of the USMCA. The agreement requires approval from each countries’ legislatures in order to take effect.
Fastmarkets AMM’s assessment for US domestic X65 line pipe currently stands at $1,365-1,405 per short ton fob mill, down by 12.2% from $1,550-1,605 per ton when the Section 232 tariffs went into effect for Canada and Mexico on June 1 of last year.