Steel Witnesses on Hill Point to Value Under-Reporting as Section 232 Weakness

The Steel Caucus held the "State of Steel" hearing earlier this week.

The question of valuation has become more salient as the tariffs were expanded to steel-containing products, and CBP has been silent on how to implement the instructions for paying those tariffs (see 2601150018 and 2512120049).

Even for wholly steel or aluminum items, the proclamation's language is vague enough to raise questions on how to follow it. It said in June that Section 232 tariffs apply "only to the steel content of articles in Chapter 73 of the HTSUS and only to the aluminum content of articles in Chapter 76 of the HTSUS."

That could lead importers to seek to declare only the cost their suppliers paid for the metals before they did their processing (and took their profit margin).

CBP's base metals Center of Excellence and Expertise has said that processing and overhead costs cannot be backed out, but there has been no CSMS message or customs ruling on the topic, and when asked for rulings, CBP has declined to issue them.

Nucor Executive Vice President Ben Pickett also told the panel that Section 232 tariffs are vital to protecting domestic production "as long as they remain robust and comprehensive. The president's decision last year to revoke exclusions and alternative arrangements, increase tariffs to 50% and expand coverage to additional derivative articles was the right move."

The chairman of the Committee on Pipe and Tube Imports, Steve Robbins, vice president of Atkore, also pointed to what he characterized as holes in the Section 232 action. The CPTI represents companies with 40,000 employees.

"CPTI supports fixed rate tariffs as an alternative tool to enhance the effectiveness of trade policy and eliminate loopholes in the process," Robbins said.

He elaborated on that position in response to a question from Vice Chair Frank Mrvan, D-Ind.

"We think that there's still opportunities to modify your customs entry, and we think an option is the fixed rate tariff in order to protect the industry."

Robbins complained that 85 steel pipe and tube products are covered by antidumping and countervailing duties. In the past year, "pipe and tube imports have not fallen off as expected, and actually have increased by 300,000 tons." He said imports cover one-third of domestic demand. He said Atkore has lost 10 percentage points of market share in electric conduit.

He also called for Congress to pass the Manifest Modernization Act, to make public manifest data for air, rail and truck entries.

The witness who spoke most bluntly in favor of government intervention to help the steel industry was Cleveland Cliffs CEO Lourenco Goncalves. Goncalves said Canadian steelmakers think they have a right to sell their production to the U.S., and when he bought Stelco, Canada's largest steelmaker, he halted those exports.

"I am glad that there's a good chance that the USMCA will not survive the 2026 review," he said. "We need manufacturing in the United States, not in Canada, not in Mexico."

Most witnesses didn't call for an end to USMCA, but said that its rules of origin should change so that all steel-intensive products made in Mexico or Canada only qualify for duty-free entry if the steel they were made from was melted and poured in North America.

Mrvan said the steel caucus will be focused on making sure that imported steel from Canada and Mexico under USMCA isn't just transshipped Chinese product.

Rep. Chrissy Houlahan, D-Pa., asked Goncalves what the biggest breakdowns are in U.S. trade laws.

He replied: "Don't allow for Section 232 tariffs to be used as a bargaining chip when negotiating trade agreements. That's a good start. The second thing is not to allow for end users, that lobby so hard here in this city, to win concessions, that, at the end of the day, plant the seed of the destruction by starting small and then growing, growing and growing. One exception will enable the next one. One exemption will create another three or four exemptions and the system falls apart when these things start to happen. So that's what I expect members of both sides of the aisle to continue to do. Protect the basis of the system."

Rep. Beth Van Duyne, R-Texas, one of the lead co-sponsors of a bill to make it easier for domestic complainants to bring AD/CVD cases, asked Goncalves how passing the Leveling the Playing Field 2.0 Act would influence his decisions to invest in U.S. steelmaking.

Pickett had just explained why Nucor supports the bill, because it would make it easier to show harm, shorten the timeline and talk of litigating cases, and address the problem of a dumping country switching to another country. "What Level[ing] the Playing Field Act 2.0 will do, [is it] will start to shut that down," Pickett said.

Goncalves said that while the exporter harming domestic producers changes, "What never rotates is the importer." He suggested policymakers consider legislation to penalize importers who "continue to bring imported steel into the United States, no matter from China, Vietnam or Indonesia or Mexico, whatever. This is the part that we're missing and that's what we need."

Rep. Darren Soto, D-Fla., told the witnesses that "there's bipartisan support for targeted steel tariffs to ensure sufficient domestic capacity," but blamed reciprocal tariffs for nine months of declining manufacturing employment.

"Something no one has mentioned so far," he said. He asked Pickett, "What do you think is the right balance on tariffs to stop this disastrous manufacturing decline?"

Pickett said steel capacity utilization has ticked up because imports are more expensive. He said the expansion to derivatives helps, too. "So that they can actually make these products again from steel in America versus having them shipped and dumped already made here, and not actually having the ability to make those manufactured products here."

He said policymakers should expect the reset to take some time to be reflected in national data.

Rep. Mike Turner, R-Ohio, asked Goncalves how Congress can support the health of the Middletown, Ohio, mill. While there have not been layoffs there this year, the company has laid off hundreds of workers in other plants as demand for its steel by automakers dropped. The company also abandoned plans to open a transformer plant in West Virginia in 2026.

Goncalves replied that automakers should not make cars in Mexico and Canada, because producing cars in the U.S. will drive demand for domestic steel.

"I think that the most relevant thing that the Trump administration has already implemented and continues to work on is to keep the Section 232 tariffs going down to derivative products. Just protecting steel doesn't do much if the consumers are not also under the same rules of engagement. So you can't allow for end users to be importers."

He complained that one of the top-selling cars for General Motors, the Chevy Trax, is made in South Korea.

"That's ridiculous. That's absurd. That's obscene," Goncalves said.

The Trax is GM's second-best selling SUV, and the second-cheapest new car available in America, with a list price for the base model at $23,495.

U.S. Steel CEO David Burritt was more upbeat about the state of the industry than Goncalves, saying demand is solid, "and tariffs on steel-intensive goods expanded just last year are game changers. They protect jobs, preserve domestic capacity, and support the investments we're making for customers across automotive, energy, construction, and manufacturing."

Goncalves said the steel industry's utilization level is still unacceptable, though he said imports were at 16% of the market in October, down from 25%-30% levels in the recent past.

Several witnesses and one member of Congress talked about the International Trade Commission. Pickett asked that they push the president to nominate people to fill the three vacancies.

Rep. Riley Moore, R-W.Va., complained that the ITC found there was no injury to domestic tin-plate producers. Cleveland-Cliffs closed its West Virginia tin-plate plant after that decision.

Goncalves said, "All that lobbying was done by consumers of tin-plate, that celebrated in the press that they had won ... . Now with the Section 232 tariffs in place for real under the Trump administration, they are begging for tin-plate that no longer exists. So they created the issue for themselves."

Rep. John Joyce, R-Pa., asked Goncalves if his company, the only domestic producer of grain-oriented electrical steel needed for electrical transformers, has the capacity to meet growing demand as the grid needs to add capacity.

He said Cleveland-Cliffs could add more production of GOES. "That said, that's another case of an industry that is always prone to import the cheapest material available around in the entire world. No matter if it's from China or from Japan or from Korea or from Europe, if it's available, if it's cheaper, they will try to buy and that's where the problem starts."

He said if exporters are selling cheaper than he is, he won't deploy capital to expand production.

Goncalves unsuccessfully sought Section 232 tariff protection on transformer cores during the first Trump administration, because imports of those cores from Mexico and Canada surged after GOES was tariffed.

"You protect the steel with Section 232 steel tariffs," he said. "But if you don't protect the appliance industries with the same type of Section 232 protections, we're going to have the ability to produce the steel, but our clients will not be able to compete against imported refrigerators, imported stoves, imported dishwashers, and then the problem is the same. So the entire supply chain has to be protected."