A domestic steel producer, a group of congressmen, and a coalition of conservative groups are all questioning a proposed steelmaking venture involving a Chinese manufacturer they say would imperil the political and economic purposes of President Donald Trump's tariffs and could also create national security risks.
The debate centers on the possible importation of 300,000 tons of stainless steel through "a proposed joint venture between Tsingshan Group, a Chinese-owned firm that is now the largest stainless steel producer in the world, and Allegheny Technologies, Inc. (ATI)," according to a letter the lawmakers sent Treasury Secretary Steve Mnuchin last March, but made public for the first time in this report.
The representatives emphasized national security concerns because of the possibility of "technology transfer," arguing the Chinese could glean secrets about U.S. steel production as it relates to defense-related products.
"A strong steel and aluminum industry are vital to our national security, absolutely vital," President Trump said when announcing the tariffs in early March, 2018. "Steel is steel. You don't have steel, you don't have a country."
The ATI-Tsingshan venture applied for a tariff exemption—known as a 232 exemption for the part of the law that allows it—in order to produce 300,000 tons of stainless steel that would largely come from Tsingshan's Indonesia plant. ATI said the steel cannot be produced domestically, an assertion local producers have questioned.
"The concern is if the 232 exclusion is granted there will be a flood of cheap materials from China incorporated into the stainless steel operation in North America, a cheap final product," said Chris Fuentes, CEO of North American Stainless, which has said claimed they're capable of producing a significant portion of the tonnage promised by ATI-Tsingshan.
"What that means is all the domestic producers will have to lower the price of that steel to levels where not only we will not be competitive, we will be losing money."
Two other domestic steel producers, Outokumpu and AK Steel, are also on record saying they can supply the type of stainless steel in question domestically.
Despite the claims of those three producers, ATI is standing by the assertions made in the exemption application.
"ATI maintains that the vertically integrated stainless steel market is not like carbon steel," said Natalie Gillespie, a spokeswoman for ATI.
"Therefore, we believe firmly that our request to import stainless slabs from Indonesia is fact-based and compelling, and we remain actively engaged in a constructive dialogue with the U.S. Commerce Department about our case," she added in an email to the Washington Free Beacon.
When the eleven lawmakers sent the letter to Treasury Secretary Steve Mnuchin last March, they asked for an investigation into the ATI-Tsingshan venture by the Committee on Foreign Investment in the United States, or CFIUS.
A Treasury spokesperson told the Free Beacon the department is prohibited by law from commenting on CFIUS investigations, and therefore would not confirm or deny any investigation related to ATI-Tsingshan.
Kentucky representative Hal Rogers and Kentucky Governor Matt Bevin, both Republicans, also asked Commerce Secretary Wilbur Ross to investigate. A request for comment from the Commerce Department was not returned.
National security issues were also highlighted in the letters.
A coalition of 18 conservative-leaning organizations also expressed concerns to Mnuchin in Fegruary.
"These types of joint ventures are exactly the type of veiled transactions that Congress sounded the alarm about when it passed bipartisan legislation last year to expand the scope of reviews and powers of CFIUS," the letter to Mnuchin said. "Allowing this joint venture to continue without scrutiny opens our defense industry and country to significant national security risks."
ATI is also disputing the notions of technology transfer.
"There is no technology transfer at the [Allegheny and Tsingshan] Stainless joint venture's Midland, [Pa.] plant," Gillespie said. "No items for the defense industry are produced by the joint venture due to the commodity-product capability of the Midland plant."
"Also, the U.S. Specialty Metals Amendment prohibits using non-U.S. melted specialty metals for U.S. Defense applications."
Because neither the Commerce nor the Treasury departments responded materially to comment requests from the Free Beacon, it is uncertain when any kind of decision on the exemption request from ATI-Tsingshan might be handed down, but the process already seems to be taking longer than expected.
A report from the Pittsburgh Post-Gazette in August of 2018 said, "Commerce officials have said they hope to rule on requests within 90 days of when they are posted on the agency's website."
"The main criteria that Commerce officials appear to be relying on when considering whether to grant relief is whether U.S. producers object to the requests," the Post-Gazette report noted.
"So far, the rule seems to be ... if you get an objection, you're done," an attorney who represents companies seeking tariff relief told the paper.
Fuentes, meanwhile, said if the ruling on the exemption comes down to the competing claims, he believes the decision should fall in his favor almost by default, meaning a ruling against the exemption request.
"So we're asking the secretary, who do you believe? The three U.S. companies that say they have the capacity, or the Chinese-owned company?"