Congress Does Nothing as Commerce Tariff Cronyism Gets Worse
Commerce Department now has 120 people working full-time deciding which businesses are exempt from tariffs.
They can't say they didn't see this coming.
In April, just weeks after President Donald Trump imposed new tariffs on imported steel and aluminum, the highest ranking members of the Senate Finance Committee wrote a letter to Commerce Secretary Wilbur Ross outlining a number of anticipated problems with the department's plan to grant tariff exemptions to some American businesses. This process—usually referred to as the "tariff exclusion process" in official documents—seemed to lack "basic due process and procedural fairness" warned Sens. Orrin Hatch (R–Utah) and Ron Wyden (D–Ore.) in their joint letter to Ross. They worried that, without mechanisms to ensure transparency and accountability, the tariff exclusion process could be "abused for anticompetitive purposes."
Four months later, Hatch's and Wyden's warnings have proven accurate.
Thousands of American companies have filed more than 33,000 requests for exemptions to the steel and aluminum tariffs, but fewer than 1,500 have been granted and the vast majority remain in limbo. In hearings before Congress and in the media, executives at tariff-hit businesses have complained about the confusing and unresponsive process. The opportunity for cronyism is apparent and U.S. steel manufacturers have, according to multiple media reports, successfully exerted significant control over the exemption-granting process. In short, everything Hatch and Wyden warned about has come to pass—and yet the Department of Commerce has not addressed those concerns.
Instead, the department has left Congress, the American public, and thousands of businesses trying to navigate the exclusion process nearly entirely in the dark. It has not provided even basic information about how the process works, including rudimentary details like which officials are responsible for making final determinations, or the metrics by which those decisions are made.
"It's very difficult to get ahold of anyone," at the department, says Todd Adams, president of Sanitube LLC, a family-owned Florida-based small business that manufacturers steel tubes, valves, and fittings for the food and beverage industry.
Adams' business has applied for several exemptions from the steel and aluminum tariffs, but it has been a costly and time-consuming process for a business with no legal team or lobbyists, he told the House Ways and Means Committee last month.
"When they want to get ahold of me, I'll get a call at 6:30 at night," he said. "I'll try to answer their questions, but it's a one-way stream of information."
"The process has just been a fiasco," Ken McInnis, director of supply chains and global purchasing for RotoMetrics, a Missouri-based tool and die company, told the St. Louis Post-Dispatch this week.
Officially, the tariff exclusion processes for steel and aluminum are outlined on a pair of web pages set up by the Department of Commerce earlier this year. They include bare bones information—links to forms that must be filled out, an explanation of the 30-day public comment period on all applications, and the like—without providing a shred of detail about who is deciding which exemptions get granted, or why, or how. It leaves you with the impression that the department is trying to make a high-stakes game that's full of political influence look like a rote bureaucratic operation.
In response to requests for more information, a Commerce Department official tells Reason that there are 95 staff and contractors working on the steel and aluminum exclusion requests, with 25 additional contractors currently on-boarding.
But who those people are and what they are being told to do matters—and it matters a lot.
Applications for exemptions that have been denied usually come back with no explanation of why they were not accepted. Rep. Jackie Walorski (R–Ind.), whose office has conducted a review of the waiver applications granted and denied by the Commerce Department, found last month that not a single application has been accepted if U.S. Steel or another domestic steelmaker had objected to its granting. Because there is no publicly available rubric for the granting or denying of exemption application—nor any opportunity to appeal the department's decisions—businesses are left entirely at the mercy of government officials and the steel lobbyists who appear to be directing the process.
Those are significant "due process flaws that do not exist with respect to most other government procedures," says Willie Chiang, vice president of Plains All American GP, a Texas-based pipeline company that's been on the losing end of the exemption process.
"A petitioner's ability to state its case is limited to the submission of a standardized form and supporting electronic documentation," Chiang told the House Ways and Means Committee last month. "No forum is provided for interaction with those determining the merits of either the petitioners' or the objectors' arguments. In addition, there is no opportunity to respond to objections—even if the objections contain incorrect information."
It's a far cry from the "fair and transparent process" that Ross promised in March when the steel and aluminum tariffs were unveiled. At the time, the secretary said that he, "in consultation with other Administration officials, will evaluate exclusion requests, taking into account national security considerations. In that evaluation, the Secretary will consider whether a product is produced in the United States of a satisfactory quality or in a sufficient and reasonably available amount."
Aside from holding some hearings and sending some letters, Congress has so far not done enough to check the Commerce Department's power grab.
The latest effort to do something was launched last week by Sen. Ron Johnson (R–Wis.), who wrote to Ross last week on behalf of "a number of Wisconsin business leaders" who "have expressed concerns to me about the uncertainty and arbitrary nature of the exclusion process."
Johnson has formally requested detailed information that would fill-in key blanks about the exclusion process, including the identities of officials responsible for the final decisions on applications, "the department's metrics by which it evaluates whether to approve an exclusion request," and the department's process for determining whether claims made by businesses objecting to applications—which is to say, domestic steelmakers—are accurate.
If the department provides that information by Johnson's deadline of August 25, we will gain valuable insights into the tariff exclusion process. But it's already too late for some businesses, and who knows how long it will be before Congress acts on the information that it may receive next week.
They can't say they did not see these problems coming. Hatch, who raised a serious of relevant questions all the way back in April, told Reason this week that he continues "to monitor the exclusion process and my concerns about its impact on American manufacturers, businesses and families have only grown."
But those growing concerns have not turned into action. It's true that Hatch (and Wyden) peppered Ross with questions during a hearing about the tariff process last month—but those questions have not made the Commerce Department more transparent or forthcoming.
Until the department can provide adequate answers about the tariff exclusion process, and ensure due process for applicants whose requests for exemptions are denied, Congress should move to revoke the administration's authority for laying tariffs in the first place. After months of asking nicely, it's time for the elected representatives to play their part in standing up to an opaque, unaccountable, bureaucratic system that seems to be engaged in rampant cronyism at the expense of thousands of American businesses.