Frank Bergren, CEO of Illinois-based Metal Partners International, doesn’t usually visit Mid-Atlantic ports in person to receive his overseas shipments. On a recent Wednesday in early July, Bergren watched as 10,000 tons of steel arrived from Italy, bound for a fabrication plant nearby; Bergren routed the metal to a closer plant in hopes of saving money.
Logistical changes are just one way Metal Partners is adjusting to absorb higher costs from the tariffs imposed by the Trump Administration. The tab for the Italy delivery carried a tariff of about $1.5 million, a bill Bergren hadn’t budgeted for until June 1, when President Trump ended exemptions for trading partners in the European Union. In May, Bergren had already paid $1.6 million on a shipment delivered from Turkey. Much of that increase will get passed along to customers.
"It's not easy,” he says of the new tariffs. “It's a very complicated scenario to try and navigate.”
Metal Partners bends steel rods into rebar for a range of concrete support structures across the country, from grain storage buildings in the Midwest to the Lincoln Tunnel and LaGuardia Airport expansions in New York City. As the economy and building construction grow, so does demand for its products. Bergren currently sources about 60 percent of its raw steel from US companies like Gerdau, CMC, Steel Dynamics, Vinton and Cascade, but it needs more from foreign imports to fill that demand.
“We have a serious supply issue in the domestic market and without imported steel coming in, that is primary driver to what’s inflating the prices. Problem is lack of supply,” says Bergren.
Production has tapered off in recent years, but the White House aimed to restore US production to 80 percent capacity, partly by cutting off imports through tariffs. According to the American Iron and Steel Institute, US steel mills have shipped 4.2 percent more steel in the first five months of 2018 than the same period last year. Domestic steelmakers have restarted some production, which has Commerce Secretary Wilbur Ross telling lawmakers last month those plants should be able to meet the demand by the end of the year.
In the meantime, Bergren’s is among the tens of thousands of requests flooding the Commerce Department asking for help. To date, the Department of Commerce has approved 220 requests for exclusions of steel and aluminum and denied 175. The rest are waiting to be processed. The exclusions that have been granted last
The process has proved onerous for Metal Partners. Bergren’s first applications were returned due to technical issues; he’s resubmitted three times, with assistance from an industry specialist. He told CNBC he sought exclusions for seven products and spent four hours applying for each product. Commerce has yet to post his applications to regulations.gov, the website set up to review the requests.
Representative Jackie Walorski (R-Ind.), whose Indiana district is heavy with manufacturing, has been leading the charge in Congress to get Commerce to streamline and expedite the exclusion process. She was disturbed by what Secretary Ross told her at a recent meeting.
"He announced to some of my colleagues and myself that there was 'good news.' The piece of good news was the Treasury has received almost $1 billion in tariffs. The problem was that, I pointed out, that's American money -- that's from small business in my district,” says Walorksi.
In the meantime, companies like Metal Partners continue to pay tariffs on imports. Bergren is reaching out to lawmakers and hopeful that the Commerce Department will review the facts. “There’s no way the domestic mills are filling the void created by the reduction of foreign rebar coming in,” declares Bergren.
Lawmakers from across the country – and both sides of the aisle – voiced their irritation to the Commerce secretary at a June hearing held by the Senate Finance Committee. Sec. Ross blamed the lack of funding and personnel allotted for the process and said both were being increased.
Missouri Democrat Sen. Claire McCaskill criticized Commerce for not deciding who would be excluded before the tariffs went into effect, as the Bush Administration had done in 2002. “The day you announced the tariffs, you had not done the homework about what exclusions would be appropriate,” she said.
Republican Sen. Pat Roberts recounted the experience of Shield Agricultural Equipment, a 42-person company in southern Kansas that uses a specialized steel from Canada to make blades for farming machinery. Shield Ag, Roberts said, had also applied for an exclusion but had gotten radio silence. Roberts then asked Sec. Ross to give the company’s owner a call.
“There’s no reason he shouldn’t be granted an exclusion,” Sec. Ross said to Roberts. “I’ll call him no later than tomorrow morning.”