Two years of plant closures have led steel pipe maker Zekelman Industries to take matters into its own hands. The company announced on Oct. 21 that it filed a lawsuit against the Mexican government for breaching a 2019 joint steel trade agreement with the United States.
The joint steel agreement was made when the United States–Mexico–Canada Agreement was signed. In that agreement, the U.S. agreed to drop Section 232 tariffs if Mexico agreed to restrain steel and aluminum export volume to 2015-17 levels. The U.S. complied with the agreement. Mexico almost immediately breached it and continues the breach today, directly harming many U.S. companies and American workers.
In 2022, a triple digit increase of Mexican imports of steel piping used to cover electrical wiring, a Zekelman staple, led to the closing of its factory in Long Beach, California.
At the time, the U.S. Census Bureau estimated that the expected volume of Mexican imported steel conduit would hit 69,641 tons in 2022 compared with 11,960 in 2017, an increase of 480% over the three year period. In March 2018, the U.S. began to implement Section 232 steel tariffs worldwide, which was a 25% tariff on imported steel and aluminum products. However, Canada and Mexico were exempt because of the USMCA free trade agreement. In that agreement to lift the Section 232s, Washington said that if volumes imported into the U.S. from Mexico exceeded historical averages, the U.S. could impose Section 232 tariffs on Mexico, or use some other measures to reduce the surge.
Little has been done, despite USTR efforts to stop the surge. Zekelman said in September that it would close another mill, this time it was the Wheatland Tube factory in Illinois. The factory will shut down in early November. At least 375 people have lost their jobs between the two factory closures in less than two years.
Zekelman filed a lawsuit in U.S. District Court for the District of Columbia against the Republic of Mexico for violating trade agreements and dumping steel on the U.S. market. The company also filed petitions against Mexico with Homeland Security and the state of Pennsylvania. With Homeland, Zekelman filed a Section 232 Petition to compel Secretary Alejandro Mayorkas to use the Office of Trade Relations to enforce volume controls of Mexican steel pipe imports. In Pennsylvania, the company filed a Petition for Determination of Discrimination with the Commonwealth Court of Pennsylvania stating that Mexico is discriminating against steel conduit made in the state and thus violating the Pennsylvania Trade Practices Act of 1968.
Zekelman’s lawsuit filing states that competing goods are not just made in Mexico. Domestic demand in Mexico for steel and iron imports has risen 13% between 2015 and 2023, but actual steel and iron imports into Mexico rose by over 80% because it is likely destined for the U.S. market. Much of it is coming into Mexico from China and India, with imports from those two countries doubling in the 2015-2023 period. Mexican imports from China and India grew dramatically in 2021 and at roughly the same time that U.S. steel imports from Mexico surged.
In June, American domestic steel producers and organizations representing the industry and its workerssent a letter to President Biden urging the administration to take action to address violations of the 2019 joint steel agreement. A few months prior, Senators Tom Cotton (R-AR) and Sherrod Brown (D-OH) introduced their Stop Mexico’s Steel Surge Act, calling for the 25% Section 232 tariff on Mexico. That bill has been in the Senate Finance Committee since March.
Then in July, after trade diplomats from both sides discussed the problem, Biden’s solution was to tell Mexico that if the raw steel from which the final product was made did not come from Mexico, it would then be subject to the 25% tariff. This “melted and poured” rule means the steel – whether made from recycled steel goods or from iron ore in a blast furnace – had to come “out of the oven” so to speak in Mexico. But that did not address the issue of import surges. What, therefore, would stop Mexico from going above the historic average? The White House only said they would monitor the situation and retaliate from there.
For Zekelman, the surge continues. They are bringing legal pressure on the state, both here and in Mexico, to review their evidence.
The Mexico case is an example of how tariff policies can easily be thwarted by free trade agreements, and overproduction that leads to dumping lower priced items into the U.S. This ultimately puts pressure on the Section 232 tariffs, which have been successful in getting primary steel and aluminum production to increase in the United States. If foreign sources can overwhelm the domestic producer, the Section 232s can be rendered moot. Some may argue that the surge is due to higher demand in the U.S. If that is the case, imports once again are replacing domestic production, meaning domestic producers are unable to benefit from their own home market demand.
Mexico Steel Surge and Its Impacts
In April, CPA economist Andrew Rechenberg looked into what items were surging across the Mexican border above and beyond historic averages. The report estimates that Mexico’s increased shipments now account for over 87% of imports of steel conduit. Import levels are around 472% over the historic baseline this year alone, based on the CPA study.
When one considers the dollar value of the steel products being shipped in the official Census Bureau trade data, the surge violation is even more stark. Chapter 72 of the Harmonized Tariff System contains basic iron and steel products while Chapter 73 includes value-added products made from iron and steel, like steel piping, or steel conduit.
Mexico’s shipments of Chapter 72 iron and steel products are 134% over the historic baseline in 2023. Products like steel pipe, tubing and steel wires saw 2023 shipments exceed the baseline by 86%.
Census trade data is the officially reported figures. Mexican firms have consistently misclassified steel conduit imports under various product codes in recent years, underreporting the true scale of the steel product surge. For steel conduits specifically, imports from Mexico reached 472% above the 2015-2017 baseline period, based on Panjiva, a private, global trade data firm owned by S&P Global. Their early 2024 data suggests the surge will rise by 692% over the 2015-2017 baseline this year.
To avoid the oversight from Washington, Mexican exporters could simply be misclassifying steel products coming into the United States. That would make it harder for Washington to tell the true size of the steel wave from Mexico. But if the government wants the Section 232 steel tariffs to succeed, they will have to look into whether free trade partners like Mexico can upend those trade policies as we are seeing with some of these top steel product lines.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
Why This American Steel Products Giant is Suing the Mexican Government
Two years of plant closures have led steel pipe maker Zekelman Industries to take matters into its own hands. The company announced on Oct. 21 that it filed a lawsuit against the Mexican government for breaching a 2019 joint steel trade agreement with the United States.
The joint steel agreement was made when the United States–Mexico–Canada Agreement was signed. In that agreement, the U.S. agreed to drop Section 232 tariffs if Mexico agreed to restrain steel and aluminum export volume to 2015-17 levels. The U.S. complied with the agreement. Mexico almost immediately breached it and continues the breach today, directly harming many U.S. companies and American workers.
In 2022, a triple digit increase of Mexican imports of steel piping used to cover electrical wiring, a Zekelman staple, led to the closing of its factory in Long Beach, California.
At the time, the U.S. Census Bureau estimated that the expected volume of Mexican imported steel conduit would hit 69,641 tons in 2022 compared with 11,960 in 2017, an increase of 480% over the three year period. In March 2018, the U.S. began to implement Section 232 steel tariffs worldwide, which was a 25% tariff on imported steel and aluminum products. However, Canada and Mexico were exempt because of the USMCA free trade agreement. In that agreement to lift the Section 232s, Washington said that if volumes imported into the U.S. from Mexico exceeded historical averages, the U.S. could impose Section 232 tariffs on Mexico, or use some other measures to reduce the surge.
Little has been done, despite USTR efforts to stop the surge. Zekelman said in September that it would close another mill, this time it was the Wheatland Tube factory in Illinois. The factory will shut down in early November. At least 375 people have lost their jobs between the two factory closures in less than two years.
Zekelman’s lawsuit filing states that competing goods are not just made in Mexico. Domestic demand in Mexico for steel and iron imports has risen 13% between 2015 and 2023, but actual steel and iron imports into Mexico rose by over 80% because it is likely destined for the U.S. market. Much of it is coming into Mexico from China and India, with imports from those two countries doubling in the 2015-2023 period. Mexican imports from China and India grew dramatically in 2021 and at roughly the same time that U.S. steel imports from Mexico surged.
In June, American domestic steel producers and organizations representing the industry and its workers sent a letter to President Biden urging the administration to take action to address violations of the 2019 joint steel agreement. A few months prior, Senators Tom Cotton (R-AR) and Sherrod Brown (D-OH) introduced their Stop Mexico’s Steel Surge Act, calling for the 25% Section 232 tariff on Mexico. That bill has been in the Senate Finance Committee since March.
Then in July, after trade diplomats from both sides discussed the problem, Biden’s solution was to tell Mexico that if the raw steel from which the final product was made did not come from Mexico, it would then be subject to the 25% tariff. This “melted and poured” rule means the steel – whether made from recycled steel goods or from iron ore in a blast furnace – had to come “out of the oven” so to speak in Mexico. But that did not address the issue of import surges. What, therefore, would stop Mexico from going above the historic average? The White House only said they would monitor the situation and retaliate from there.
For Zekelman, the surge continues. They are bringing legal pressure on the state, both here and in Mexico, to review their evidence.
The Mexico case is an example of how tariff policies can easily be thwarted by free trade agreements, and overproduction that leads to dumping lower priced items into the U.S. This ultimately puts pressure on the Section 232 tariffs, which have been successful in getting primary steel and aluminum production to increase in the United States. If foreign sources can overwhelm the domestic producer, the Section 232s can be rendered moot. Some may argue that the surge is due to higher demand in the U.S. If that is the case, imports once again are replacing domestic production, meaning domestic producers are unable to benefit from their own home market demand.
Mexico Steel Surge and Its Impacts
In April, CPA economist Andrew Rechenberg looked into what items were surging across the Mexican border above and beyond historic averages. The report estimates that Mexico’s increased shipments now account for over 87% of imports of steel conduit. Import levels are around 472% over the historic baseline this year alone, based on the CPA study.
When one considers the dollar value of the steel products being shipped in the official Census Bureau trade data, the surge violation is even more stark. Chapter 72 of the Harmonized Tariff System contains basic iron and steel products while Chapter 73 includes value-added products made from iron and steel, like steel piping, or steel conduit.
Mexico’s shipments of Chapter 72 iron and steel products are 134% over the historic baseline in 2023. Products like steel pipe, tubing and steel wires saw 2023 shipments exceed the baseline by 86%.
Census trade data is the officially reported figures. Mexican firms have consistently misclassified steel conduit imports under various product codes in recent years, underreporting the true scale of the steel product surge. For steel conduits specifically, imports from Mexico reached 472% above the 2015-2017 baseline period, based on Panjiva, a private, global trade data firm owned by S&P Global. Their early 2024 data suggests the surge will rise by 692% over the 2015-2017 baseline this year.
To avoid the oversight from Washington, Mexican exporters could simply be misclassifying steel products coming into the United States. That would make it harder for Washington to tell the true size of the steel wave from Mexico. But if the government wants the Section 232 steel tariffs to succeed, they will have to look into whether free trade partners like Mexico can upend those trade policies as we are seeing with some of these top steel product lines.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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