U.S. Steel wants certain steel imports from China banned — but it’s a long road ahead.
The International Trade Commission (ITC) on Thursday announced it will investigate claims made by U.S. Steel that Chinese steel producers have engaged in unfair trade practices such as fixing prices, stealing trade secrets and mislabeling products to avoid U.S. trade duties.
This is excellent news, and the ITC's investigation is hugely important. China's trade cheating has directly led to 13,500 steel layoffs and plant closures nationwide. But what happens now?
Calm down Lucille, we're here to help.
U.S. Steel filed the trade case under section 337 of the Tariff Act of 1930, which is one of the ways that the ITC investigates unfair practices in import trade. Here’s what we can expect.
The Investigation
Now that the ITC has agreed to look into the claims made by U.S. Steel, it is required to hold “formal evidentiary hearings” before an administrative law judge. It will look a lot like a trial, with complainants presenting their case (U.S. Steel in this instance) and respondents (the state-backed Chinese steel companies) being given the opportunity to present their side. An ITC attorney also will be on hand to represent “the public interest.”
The pressure is really on the Chinese companies to disprove U.S. Steel’s allegations. As the United Steelworkers noted: “Chinese companies will have to provide the documents to prove that they are not engaged in the practices they are accused of utilizing.”
The Decision
The administrative law judge assigned to the case is charged with issuing an initial determination. The ITC then has an opportunity to “review and adopt, modify or reverse” what the judge finds.
If a violation is found, the ITC may move to bar the importation of certain products into the United States. In this case, that’s exactly what U.S. Steel is seeking — the blocking of carbon and alloy steel made using knowledge U.S. Steel alleges the Chinese gained after hacking the company in 2011.
U.S. Steel also may move for temporary relief pending final resolution of the investigation. All of this will move rather quickly (for government standards, anyway). The ITC is “required to conclude its investigation at the earliest practicable time” and must establish a target date for issuing its decision within 45 days after announcing the investigation.
The Final Say
ITC orders become final within 60 days of issuance, unless “disapproved for policy reasons by the U.S. Trade Representative within that 60-day period.” That basically means President Obama has the power to step in and put a stop to things if he so chooses.
Another potential roadblock: If the ITC rules in U.S. Steel’s favor, the Chinese companies can appeal to the U.S. Court of Appeals for the Federal Circuit.
The WTO
But even if U.S. Steel gets everything it wants from the ITC, the Obama administration stays out of the investigation and the Chinese steel companies lose their appeals, it’s not over. The Chinese can appeal to the World Trade Organization (WTO), which has a whole other process for deciding whether the 337 decision is fair.
And China almost certainly will head to the WTO. Two state-backed Chinese steelmakers already have gone on record saying they think the entire case is acting in breach of WTO rules, and China’s Commerce Ministry called the case “protectionism” that will interfere with trade.
Here at the Alliance for American Manufacturing, we believe that China is wrong, of course — the United States has the right to take action to address blatant trade cheating — but what is clear is that China is gearing up for a fight.
The Complication
Happening concurrently to this case is a debate over China’s market economy status.
Under the agreement China entered into when it joined the WTO, it agreed to be named a “non-market economy” for 15 years. This gave the United States additional remedies to deal with China’s trade cheating. It also reflected the fact that China isn’t a market economy — it is a communist system, and the government frequently intervenes in its market to prop up entire sectors of the economy (including steel).
During the 15-year period, China was to take steps to move toward an open market. It did not. But China still thinks it is entitled it to be automatically named a market economy. The 15-year mark is in December 2016, and China is building up to a big showdown over the status issue.
Although it isn’t directly a factor in this 337 case, China’s market status no doubt will hang over the entire thing. Don’t be surprised if it becomes a factor at some point in the process.