American Oil and Gas Reporter - June 2018 - 28

U.S. Steel Tariffs

Associations Seek Easier Exclusions
If the Trump administration's tariffs on
steel and aluminum must exist at all, the
rules for obtaining exemptions need to be
fairer and simpler, and the relief provided
more extensive, argue oil and gas trade associations in comments filed in May with
the U.S. Department of Commerce's Bureau
of Industry and Security (BIS).
Simply put, writes Rufus Yerxa, president of the National Foreign Trade Council
on behalf of the Alliance for Competitive
Steel and Aluminum Trade (ASCAT), "We
remain opposed to the Section 232 tariffs
and will actively seek their removal."
ASCAT's comments are endorsed by
48 member associations "representing
thousands of businesses across the United
States," ranging from agriculture and
food to manufacturers of everything from
household products to heating and air
conditioning equipment to automobiles,
as well as general contractors and equipment distributors. Included in ASCAT's
membership are the Independent Petroleum Association of America, American
Exploration & Production Council, American Petroleum Institute, International
Association of Drilling Contractors, Petroleum Equipment & Services Association, and the American Fuel & Petrochemical Manufacturers.
But if they go forward, "U.S. natural
gas and oil companies should be granted
relief from tariffs and quotas on imported
steel, which will harm U.S. businesses,
our economy and American consumers,"
states API Vice President for Regulatory
and Economic Policy Kyle Isakower in
announcing comments filed on behalf of
API, AXPC, IPAA, PESA, the American
Gas Association, Association of Oil Pipe
Lines, GPA Midstream Association, Interstate Natural Gas Association of America, and the U.S. Oil & Gas Association.
Reflecting that steel typically accounts
for 10-20 percent of the overall cost of
developing crude oil and natural gas, in
comments filed by the Texas Alliance of
Energy Producers, President John Tintera
notes that while the tariffs themselves
will lead to cost increases, "Beyond that,
shortages of oil field steel products will
develop-and already are developing-further driving up costs to producers."
In a third set of comments filed separately from ASCAT and the API group,
IPAA observes that independent producers
began to see steel prices rise when Commerce initiated its review of steel imports.
"For example," the association says, U.S.
prices for oil field tubular goods soared
28 THE AMERICAN OIL & GAS REPORTER

by 14-18 percent in March, and line pipe
prices jumped 7-23 percent."
Potential For Shortages
In general, the industry comments
argue for:
* A simpler and more inclusive product exclusion process;
* More extensive relief-both retroactively and prospectively-than that proposed
by Commerce in its interim final rule
published March 19; and
* Assurances of confidentiality for
proprietary business information.
But IPAA and the Texas Alliance say
they are at least as concerned about limits
to OCTG supply as about rising costs.
IPAA's individual comments note President Trump's April 30 announcement of
specific country exemptions allowed the
option of addressing his concerns through
quotas negotiated as part of bilateral trade
agreements. "This is more threatening to
American oil and natural gas production,"
IPAA warns. "It creates the potential for
severe shortages of OCTG and line pipe
if quotas are poorly designed."
As an example, the association cites
the framework announced with South Korea, under which that nation volunteered
to cap its steel exports at 70 percent of the
average tonnage it sent to the United States
in 2015-17. That, IPAA calculates, would
limit South Korean exports to 460,700
tons annually, or merely 44 percent of its
2017 exports and only 32 percent of the
2014 volume-the last year of robust activity
before the U.S. drilling downturn.
"If the same percentage limitations are
included in future bilateral agreements,
such as those with Australia, Argentina
and Brazil, the total steel supply for OCTG
and line pipe for the United States could
be limited significantly," IPAA worries.
The Texas Alliance's answer is to exempt all countries supplying steel goods
to the U.S. oil and gas industry, "most
notably Canada, Mexico, the European
Union, South Korea, Argentina, Brazil
and Japan."
Product Exclusion Process
The industry comments universally
condemn a product exclusion process that
requires each individual user to apply.
IPAA says, "Creating a process that requires
duplicative submissions for the same product serves neither the users of steel nor
the staff of BIS, which must replicate its
process repeatedly for no reason."
ASCAT points out that the interim

rule excludes trade associations as potential
applicants, hurting small- and mediumsized enterprises, which "routinely rely
on their trade associations to assist them
with advocating for their issues."
API urges Commerce to accept petitions from contractors and distributors
"from whom companies buy steel."
IPAA suggests BIS exclusion approvals
for a particular product apply to all users
without requiring separate exemptions.
The Texas Alliance simply says, "Product exemptions (should be) granted across
the entire industry."
Another problem is Commerce's restrictive definition of products for which
exclusions must be requested. ASCAT
notes that separate requests are required
"for each variation of a product, even
those with only minor differences such
as width or length."
"Further," it says, "products encompassing
more than one 10-digit HTSUS (Harmonized
Trade Schedule of the United States) statistical reporting number must submit a
separate request for the same product under
each of the reporting numbers."
ASCAT suggests the regulations be
amended "to allow exclusion requests to
cover ranges of dimensions within the same
HTS code." It also asks that, once the exclusion period ends, "If no facts or circumstances have changed, a company not be
required to file a new exclusion request."
The API group also seeks a categorical
exclusion for any product "not manufactured in the United States, or manufactured
in such small quantities as to be incapable
of meeting demand."
Relief Period
ASCAT observes that the presidential
proclamations on tariffs provide retroactive
relief for products granted exclusions,
"but only to the date BIS posts the exclusion request." The Section 232 tariffs became effective March 23, but "to date,
no exclusion requests have been granted,"
ASCAT said in its May comments, meaning companies "will be unable to recover
duties paid from March 23 until the date
on which their comments are posted."
Further, "The time between filing an
exclusion request and its posting appears
to be taking weeks," the alliance complains.
It suggests that successful requests be
entitled to a refund of duties retroactive
to March 23, and that BIS be required to
post requests within a finite period.
API urges relief be retroactive to the
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