Some U.S. Aluminum Mills Want Changes In Tariff Exclusion Policies

Some U.S. aluminum mills are complaining that aluminum customers are getting tariff exclusions on billions of pounds of imported product – as a result, this scenario is undermining the domestic market which the levies were originally expected to support.

In March 2018, the Trump administration imposed a 10% tariff on foreign-made aluminum – but granted importers exclusions from the duty for metal not available domestically. However, the Wall Street Journal reported that U.S. aluminum producers now assert the exclusion process is prompting even more imports, raising questions about the tariff’s effectiveness.

According to the Aluminum Association, a trade group based in Arlington, Va., the U.S. Commerce Department issued import exclusions for 7.6 billion pounds of aluminum this year through the beginning of June, after excluding 10.7 billion pounds for all of calendar 2019.

The association opposes the tariffs because it claims such duties cannot cope with cheap exports from China which have led to a global aluminum glut. The association asked the Commerce Department to cease issuing tariff exclusions for Chinese imports.

The association further said tariff exclusions are driving import volumes higher for products that once were made exclusively by domestic mills. For example, can-sheet imports increased to 403 million pounds in 2019 from 188 million pounds in the prior year. Imports of foil and other aluminum products also rose.

“The exclusion process has gotten out of control,” said Jean-Marc Germain, chief executive of Constellium SE, a French-based company which operates five mills in the U.S., accounting for 40% of its sales. “It’s being used as leverage in the domestic aluminum industry. We’re getting squeezed.”

Constellium also claimed the tariff waivers are allowing customers like beverage-can manufacturers to shift purchases overseas if they aren’t given price reductions or more favorable contractual terms.

However, a spokesman for the Commerce Department said: “Exclusions are only granted in cases where no U.S. producer demonstrates the ability to provide the requested product.”

The department has nonetheless commenced a review of the exclusion process.

Ball Corp. (BLL), the largest maker of aluminum cans in the U.S., said rolling mills cannot keep pace with the rising demand for cans.

“No company has added any significant domestic capacity since the tariff went into effect,” Ball told the Commerce Department in early July.

Ball, which is based in Colorado and makes 100 billion cans every year, is adding capacity to plants in Georgia and Texas and plans to build new facilities in Arizona, Georgia and in the Northeast to meet demand.