Corporate America Scrambles To Win Tariff Exemptions "So Projects Aren – Liberty Craze

Corporate America Scrambles To Win Tariff Exemptions "So Projects Aren't Delayed Or Canceled"

Posted by Tyler Durden on

Even though the scope of President Trump's planned steel and aluminum tariffs wasn't yet fully known when he stunned America (and global markets) a week ago by announcing at an impromptu meeting with steel executives that he'd be implementing a 25% tariff on steel and 10% tariff on aluminum, lawyers at every company that relies on imported steel or aluminum started scrambling to develop a plan for the worst-case scenario.

Trump

And while the reality is a watered-down version of the "no exemptions" rhetoric that Trump boasted last week (at least for now, considering that Mexico and Canada, countries that produce a significant chunk of America's steel, are receiving a temporary dispensation as NAFTA talks are ongoing), hours after Trump signed his proclamation Thursday afternoon - announcing that the tariffs would take effect in 15 days - Bloomberg was ready with a story about America's importers pleading their cases to the Commerce Department, all hoping to receive exemptions of their own, for "national security" or other reasons.

Steel

Companies that rely on steel and aluminum imports can ask the Commerce Department for a waiver if there’s a limited supply of the product in the US, or if, lacking the materials would put our national security at risk. But as Bloomberg points out, how these standards will be interpreted is anyone’s guess. Which is why aluminum can makers, pipeline builders and car companies are now making their cases about why they, too, should be exempt.

"The can industry relies on imported metal to make up for shortfalls of domestic steel and aluminum production. US steel producers are unable to satisfy domestic demand for food, aerosol and other can production," the Can Manufacturers Institute said Thursday. The group will apply for exemptions for aluminum can sheets, aluminum ingots and steel tinplate - the material many food cans are made of.

A lobbying group for automakers is planning to press the Trump administration to expand the number of countries that would be exempt from the tariffs (which, incidentally, would also render them effectively toothless, though Trump has said they could raise tariffs on other countries to make up for it)...

The trade group that represents General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV hinted that automakers -- which purchase about 15 percent of the steel and almost 40 percent of aluminum consumed in the U.S. -- will press the Trump administration to water down the order by carving out exceptions for imports from some countries.

"The temporary exemption for our trading partners in Canada and Mexico is a step in the right direction," said Matt Blunt, president of the American Automotive Policy Council. "We fully understand the desire to take action against nations whose unfair trade practices have led to global overcapacities in steel and aluminum, and encourage the administration to adopt a targeted approach."

And a group representing natural gas producers is arguing that some of the types of steel that are necessary to build the tanks and equipment to harvest and store LNG aren't available in the US...

The Center for LNG, a liquefied natural gas industry group, plans to seek an exemption because some of the five kinds of steels it uses aren’t available from U.S. sources. For example, steel used for cryogenic tanks, where fuel is stored after it’s been chilled to minus 260 degrees Fahrenheit (minus 162 Celsius), is hard to come by domestically, Daphne Magnuson, a spokeswoman for the group, said Thursday.

Oil and gas industry lawyers are struggling to make a case for an exemption since booming shale production (though, as we pointed out late last year, there are still many "known unknowns" that threaten the industry)...

The oil and gas industry’s success in boosting production has reduced the perception of energy security risk in Washington, which may make it difficult for oil companies to win exemptions to the tariffs, according to Kevin Book, managing director of Clearview Energy Partners LLC. The Trump administration may be reluctant to grant too many exceptions because it would have to raise tariffs on other countries to make up the difference, Book said in a note Thursday.

"We will work with the administration for maximum flexibility and consideration in how today’s proclamation is applied to minimize the impacts to U.S. investment in infrastructure, energy development, and building new facilities for America’s future," Jack Gerard, president of the American Petroleum Institute, said in an emailed statement.

Pipeline developers are also hoping to use the "scarcity" argument to win exemptions. Of course, pipeline operators who are in the middle of massive projects are panicking that they might need to delay or cancel them because of a sudden surge in costs...something that would clearly kill jobs and lead to the type of bad optics that Trump doesn't want to see.

Andy Black, president of the Association of Oil Pipe Lines, said in an interview Monday that pipeline developers would be seeking exemptions for when they can’t get sufficient materials sourced domestically. "That’s what pipeline operators feel like they need to keep a period of buildout going, so projects aren’t delayed or canceled because of cost," he said.

...

Greg Armstrong, CEO of Plains All American Pipeline LP, told audience members at a Houston conference on Monday that he couldn’t buy one type of 26-inch (66-centimeter) pipe he needs for a specific project because it’s only made in three places -- and none of them are in the U.S.

Plains is building two pipelines right now to bring oil from the booming Permian shale basin, Armstrong said. One would go to Corpus Christi, Texas, and the other to a major storage hub at Cushing, Oklahoma. The two projects will add about 750,000 barrels a day of capacity to move oil and will help send shale production to overseas buyers.

"We’ve got about $1.5 billion of projects under way right now that use quite a bit of steel, so we were trying to figure out how bad that hurts, depending on where we made orders," he said.

We also wouldn't be surprised to see some US states pushing for exemptions, as the job-hurting effects of higher steel and aluminum costs damage local importers: they might wield some political leverage because 12 of 15 states identified by Deutsche Bank's Torsten Slok voted for Trump.

States


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