Steel Importers Battle Their Competitors for Tariff Relief

Call it the battle of the kettlebells.

When a small Georgia manufacturer, Goldens’ Foundry and Machine Company, told the Trump administration that steel tariffs should apply to kettlebells and dumbbells, exercise giant Peloton pushed back.

The tariff request “greatly overstates the potential impact of imported exercise equipment on U.S. national security concerns,” Peloton said in a plea this spring to the Commerce Department.

Exercise equipment is among hundreds of examples in which companies are being pitted against each other over how tariffs should apply to their products. So are refrigerated trailers, metal furniture, chainsaws, and even shaving cream canisters.

Tariffs on steel and aluminum products aren’t new—President Donald Trump levied them during his first term. But earlier this year, his administration adopted a novel way of deciding what to tariff. Instead of businesses lobbying for tariff exclusions, the Commerce Department is now asking companies competing with imports to suggest what to put on the list.

Companies potentially affected can respond, but so far it’s been a lopsided process.

In a round of comments this summer, Commerce granted virtually all requests to tariff certain products not already falling under another tariff measure or investigation—covering 407 categories. No rebuttals arguing against them were granted.

“One of the things that we’re finding across the board are those arguments really worked in general on tariffs last time, and they’re not working this time,” said Sarah Sprinkle of Sandler, Travis & Rosenberg.

The measures are having a “significant impact,” she said, as affected companies face both the 50% tariffs and administrative expenses to calculate the value of steel and aluminum in their products.

Assessing Security Threats

For companies struggling to boost domestic production while competing with cheaper imports, the inclusion process offers an opportunity to level the playing field and give US manufacturing a leg up.

For importers, new tariffs aren’t the only challenge. They’ve got to move quickly because the comment windows are only 14 calendar days apiece. A second comment period opened Sept. 15.

Trade lawyers are scanning all inclusion requests for eight- or 10-digit codes that classify products for import, known as Harmonized Tariff Schedule (HTS) codes.

“It’s causing some surprise to companies,” said Kelsey Christensen, a senior attorney at Clark Hill. “If they’re not actively monitoring this inclusion process, they may not know if they’re at risk of having new duties apply to their imports.”

Goldens’, the Georgia manufacturer, argued in its letter to Commerce that reliance on imports for kettlebells and dumbbells lowers demand for domestic steel—which carries national security implications.

The statute under which these tariffs are being applied—Section 232 of the US Trade Act of 1964—is designed to address national security concerns.

“As your Department cautioned in 2018, it would be a grave mistake to dismiss consumer iron and steel items as irrelevant to national security objectives,” the company wrote.

The tariffs will help US companies like Goldens’ stay competitive, CEO George Boyd Jr. said in an email.

“We have seen a steady loss of work both in our company and our industry of iron casting work to low cost countries like India and China,” he wrote. “Without protection, our domestic iron casting industry will continue to be seriously impaired and undermined. “

The company asked Commerce to extend the tariffs to cover some exercise equipment.

Exercise equipment manufacturer Powertec had this rebuttal: “Dumbbells & kettlebells are consumer products, not components for defense or critical infrastructure.”

A view inside the dishwasher production facility at GE Appliances in Louisville, Kentucky.

Photographer: Michael Hickey/Getty Images for GE Appliances, a Haier company

The North American Die Casting Association, which represents more than 400 members, submitted 12 inclusion requests, for products including chainsaws, patio furniture, consumer drones, refrigerator-freezers, and washing machines.

Tariffs on household appliances will mean higher prices for US consumers, LG Electronics said in response to one of the letters. And higher prices lead to lower demand, “directly undermining the very type of domestic manufacturing capacity these tariffs are meant to protect.”

“Refrigerators, washing machines, and dryers do not implicate any cognizable national security threat capable of justifying the application of Section 232 duties,” the company added.

GE Appliances argued, “there is no domestic supply for certain of these products, and others are unavailable in either the quantity or specifications” the company requires.

‘Abrupt Expansion’

Industry groups are calling for a redesign of Commerce’s new tariff process.

The US Chamber of Commerce, in a Sept. 16 letter signed by 42 other groups, called for more transparency with fewer headaches.

Companies must report where steel was melted and poured—and where aluminum was smelted and cast—calculations that are proving burdensome, the Chamber said.

Importers are struggling to get data that their suppliers may view as confidential, such as the value of the steel or aluminum content, Christensen said.

The calculations are so onerous that some companies are choosing to pay 50% tariffs on the full value of goods—rather than just on the percentage that is steel or aluminum—or estimating, and later correcting it, Sprinkle said.

Depending on the product, it can even be more cost-efficient to pay the tariff on the full value, rather than performing the calculations, she said.

The Chamber also warned companies were struggling as “the abrupt expansion of the steel and aluminum tariffs also undermines the predictability manufacturers need for investment and production planning.”

At the end of the last round of inclusion requests, Commerce acted swiftly: It sent a list of included HTS codes to the Federal Register on a Friday. The imports covered by those codes had to start paying the tariffs the following Monday.

The inclusion request period that opened Sept. 15 will close Sept. 29, followed by a two-week rebuttal period ending Oct. 14.

Auto parts are next: Commerce asked that industry to suggest new tariffs last week.