Brown, Casey Urge Administration to Add Grain-Oriented Electrical Steel Derivative Products To Section 232 Steel Tariffs

 

WASHINGTON, D.C. – U.S. Senators Sherrod Brown (D-OH) and Bob Casey (D-PA) sent a letter to Commerce Secretary Gina Raimondo yesterday urging the department to address the improper imports of downstream grain-oriented electrical steel (GOES) products by adding them to Section 232 tariffs. GOES is a necessary component of our electrical grid, which is part of our critical infrastructure and key to our national security. By adding GOES derivative products to the list of Section 232 tariffs, the administration to take against continued circumvention of current Section 232 tariffs and shore up domestic production.

Cleveland-Cliffs, the largest producer of flat-rolled steel in North America, is North America’s only producer of GOES. Cleveland-Cliffs employs thousands of workers in good-paying union jobs represented by the United Auto Workers between its plants in Zanesville, Ohio and Butler, Pennsylvania.

Without strong actions by the Biden administration to address these downstream product trade distortions and provide a degree of assurance that unfair trade will not be permitted to once again decimate the U.S. electrical steel market, domestic investment to expand GOES production will not likely occur. By taking action now, the Biden Administration can help support additional investment to increase U.S. production of these materials – a win for national security, domestic industry, and American workers,” wrote the senators.

In 2018, Senators Brown, Casey, and Rob Portman asked then-President Trump to make electrical steel a priority in any Section 232 trade remedy in an attempt to get relief for AK Steel (now Cleveland Cliffs), the last electrical steel manufacturer in the United States. Without relief, the company warned it might have to shut down the last production line in the entire country.

In 2020, at the urging of the senators, the Department of Commerce initiated a Section 232 investigation into imports of GOES derivative products, in which the Department found that GOES products were “being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security.” Since the release of these findings Commerce has not acted to address the national security threat. In February 2022, Brown, Casey, and Portman sent a letter to the Department of Commerce and the U.S. Trade Representative to express their concerns about the threat to domestic production of grain-oriented electrical steel

Right now, foreign countries, including Russia and China, are shipping GOES to Canada and Mexico where it is transformed into downstream electrical steel products which can enter the United States in circumvention of the Section 232 tariffs. In their most recent letter, the senators requested that Commerce start by working with partners Canada and Mexico to either reduce their exports of down-stream GOES products to the United States, or utilize more U.S. GOES in the manufacturing of products containing electrical steel.

You can find the full text of the letter here and below:

Dear Secretary Raimondo:
We share your concerns about the threat posed to U.S. national security by unfair trade in electrical steel derivative products and urge you to take steps to address improper imports of these derivative products and ensure the security of our nation’s transformer supply chain.

The unfair importation of downstream Grain Oriented Electrical Steel (GOES) products have undercut investments in domestic electrical steel and threatened the security of our transformer supply chain. The impact of these downstream imports has injured Cleveland-Cliffs, the sole remaining producer of electrical steels, including GOES and Non-Oriented Electrical Steel (NOES), in North America. Cleveland-Cliffs has recently made investments to optimize GOES and NOES production at its existing facilities in response to recent, positive market developments.[1] However, American companies remain resistant to making additional and major investments in domestic electrical steel production capabilities while unfair trade loopholes remain.  

To halt unfair trade practices and support domestic manufacturing of electrical steels, the Commerce Department must follow through on its findings that the unfair imports of downstream GOES products, such as laminations and cores from Canada and Mexico, poses a national security threat to the United States.[2]

Despite having this report in hand, the previous administration chose not to act to add GOES laminations and cores to its list of Section 232 tariffs. The failure of the previous administration to take action in defense of American industry has allowed for the continued circumvention of the Section 232 tariff and quotas that apply to electrical steel produced in Zanesville, Ohio, and Butler, Pennsylvania. The transformer supply chain is critical to our national security, and as such, we must maintain domestic production capacity for all of the key materials in the transformer supply chain, including GOES. Therefore, we urge you to revisit the Department’s October 2020 report and recommend to the President that downstream GOES laminations and cores be added to the Section 232 relief measures.

The problem of unfair trade in electrical steels has worsened. In fact, the values of laminations and core imports from China through Canada and Mexico have increased 262 percent on an annualized basis since 2017 and 38 percent in the past year. Imports of GOES coils also spiked in 2021, with an increase of 37 percent over 2020. Electric utilities and other stakeholders are raising concerns about the potential shortage of power and distribution transformers and GOES, absent efforts to address the imports of these derivative products. Demand for GOES has risen in the past year as foreign producers in China, Japan, and South Korea have begun consuming their excess production in home markets and have switched some of their GOES production capacity to NOES production to support the electrification of vehicles.

Without strong actions by the Biden administration to address these downstream product trade distortions and provide a degree of assurance that unfair trade will not be permitted to once again decimate the U.S. electrical steel market, domestic investment to expand GOES production will not likely occur. By taking action now, the Biden Administration can help support additional investment to increase U.S. production of these materials – a win for national security, domestic industry, and American workers.

We urge you to revisit the October 2020 report and take the necessary steps to recommend GOES laminations and cores be added to the Section 232 relief measures to ensure continued, robust domestic production of GOES and NOES. Further, we urge you to discuss this matter with industry stakeholders, including Cleveland-Cliffs, to inform next steps essential to our goals of not only protecting our national and economic security interests, but also in electrifying the nation’s vehicle fleet and greening the electric grid.

Thank you in advance for your attention to this issue.

Sincerely,