A number of pipe and energy companies are complaining that the Trump steel tariffs are costing them millions of dollars and the process to obtain exemptions from the tariffs is unfair and slow moving.  Reuters photo by Leah Mills.

Plains All American CEO calls Trump’s steel tariffs a “$40 million tax”

A number of US energy, pipeline and pipe companies are complaining that the Trump administration’s steel tariffs are unfair and that the process for obtaining exemptions from the 25 per cent tariffs on imported steel is unfair and slow moving.

A small staff tasked with deciding the fate of applications for exemptions has resulted in a limited number of decisions, protests from rejected applicants and disputes between US steel mills and importers who purchase products from foreign competitors.

To date, the Department of Commerce has received over 37,000 exemption requests, far more than it expected.  With only 130 employees and contractors working the files, Reuters reports the agency has ruled on only 2,871 of the requests as of Aug. 20.

So far, the department has approved 1,780 of the applications and denied 1,091.  Over 6,000 of the requests have been returned to the applicants for “filing errors”.  The companies can fix and re-submit their requests.

Reuters reports that a number of rejected applicants are criticizing the department.  They say sometimes domestic suppliers offer misleading objections and the department accepts them at face value and does not allow importers an opportunity to rebut the claims.

“The Commerce Department is now hard-pressed to spend more than a few minutes reviewing each application,” Bernd Janzen, a partner in Akin Gump Strauss Hauer & Feld LLP told Reuters.  His firm is working with companies pursuing tariff exclusions.

The department is revising its evaluation process and asking Congress for more money to accelerate the review process.

“The Department fully acknowledges that the information provided in an objection may not be correct,” Reuters reports the agency said.

According to the Commerce Department, twenty exemptions have been approved over objections from US steelmakers.  With that, the department argues that the process is “balanced, fair and transparent”.

But companies seeking exemptions complain that Commerce offers little detail on why applications are denied beyond saying that the product that a company is looking to import is available from a US supplier.

“We don’t know for sure why they denied us, but we did have objections from our competitors who also make pipe,” said Joel Johnson, chief executive of Borusan Mannesmann Pipe, a US subsidiary of a Turkish steelmaker.

Joel Johnson, chief executive of Borusan Mannesmann Pipe, a U.S. subsidiary of a Turkish steelmaker, said the department did not explain how it came to reject its application.

“We don’t know for sure why they denied us, but we did have objections from our competitors who also make pipe,” said Johnson, adding that letters of support from its suppliers did not appear to influence the decision.

US Steel objected to Borusan’s request.  “We stand ready to assist both new and longstanding customers” hit by tariffs, spokeswoman Meghan Cox said in a written statement to Reuters.

Johnson says he sees his company’s operating costs rising by $25 million to $35 million annually because of the Trump steel tariffs.

Borusan is supplying Kinder Morgan steel for its $1.75 billion Gulf Coast Express pipeline which will transport natural gas from West Texas to the US Gulf Coast.

Kinder Morgan has also submitted a request to be exempted from the tariffs on the Borusan order, but has yet to hear from the Department of Commerce.

Adding to Borusan’s concerns is a recent announcement from the Trump administration saying it plans to double the tariffs on steel imports from Turkey.  This would add between $60 million and $80 million to the project, according to analysts for Tudor, Pickering Holt & Co.

Incoming Chief Executive Officer at Plains All American, Willie Chiang said his company has had an application denied.  Chiang calls the denial a “$40 million tax” on its $1.1 billion Texas oil pipeline project.

Speaking at a congressional hearing last month, Chiang said his company asked Commerce for analysis from the International Trade Administration explaining why Plains’ request was denied, but he says he has not received any information.

The Commerce Department says it does not disclose these internal analyses as they are “predecisional”.

According to Reuters, steel pipes usually make up about 20 per cent of the cost of a pipeline.

Speaking to a US House of Representatives panel last month, Chiang called the process “flawed” because it relies heavily on steel-industry objections that are not given enough scrutiny.  He added that his company was not given much time to counter objections from US steel makers because they are sometimes filed at the last minute.

According to Plains All American, only three steel mills in the world can produce the pipe the company needs for its 550-mile Cactus pipeline.  US steelmaker Berg Steel filed an objection to the Plains application, arguing it could make alternate products to meet the pipeline company’s needs.

However, Plains says US pipe manufacturers suggest using pipe that is created through a different process, which in some cases, would either double the number of girth welds or increase the welding seams by 30 per cent.

These additional weld seams could increase the likelihood of cracks or failures.

“Decisions on product specifications should be made by companies, not government trade officials,” said Chiang.

Berg did not respond to Reuters’ request for comment.

Plains All American says it has resubmitted its request for an exclusion.

Conroe, Texas-based Heat Transfer Tubular Products has had a number of exemption applications rejected.  The company’s vice president Janese Sokulski says her company was rejected based on faulty objections from other US companies.

A competitor of her company, Webco Industries, objected to Heat Transfer Tubular Products application, citing it could make similar products in the US.

But Sokulski says that even if Webco did make the products, because it is a competitor, “they would never sell it to us”.