The process to exclude specific suppliers or origins from the United States’ new Section 232 import tariffs may prove to be so time-consuming for oil and gas companies that projects will be delayed, energy associations have warned.
The worry is particularly acute for pipeline operators which have long argued that certain combinations of steel line pipe size and grade
are not available from domestic US suppliers.
The Section 232 tariff on imported steel threatens to make projects more expensive, and the energy groups are asking the US Department of Commerce for a streamlined process to determine which imported products will be exempted from the 25% tariff.
On Sunday March 18, Commerce announced its rules for requesting product exclusions
. The process is supposed to take a maximum of 90 days, including the consideration of any objections to the request.
The Interstate Natural Gas Association of America would prefer an expedited process providing a blanket exemption that would remain in effect for multiple customers, spokeswoman Cathy Landry said.
“We appreciate the Commerce Department’s commitment to review exclusion requests promptly,” Landry said in an email to American Metal Market. “We are concerned, however, that failure to allow broader exclusions - and to instead require each company to apply for product-specific exclusions - could result in delays and uncertainty.”
In a press release, the American Petroleum Institute emphasized that the US oil and gas industry “relies on global steel imports for its operations,” including drilling, production, pipelines, terminals, refineries and petrochemical plants.
“We support an exclusion process from the Department of Commerce that is both transparent and flexible,” Jack Gerard, API’s president and chief executive officer, said in the statement.
“We expect that the department will acknowledge various market realities and take into consideration the complex supply chains of the US oil and gas industry, and the need for speciality steel not available domestically for many of its projects,” Gerard said.
The Section 232 tariffs have already been costly to pipeline developers. American Metal Market’s pricing assessment for US domestic X52 line pipe
was $1,175-$1,210 per ton on February 27, a multi-year high.
The exploration and production sector is also concerned about the tariffs, and the unintended consequence of punishing suppliers and customers that do not deserve it.
In a letter to US President Donald Trump, the Texas Alliance of Energy Producers noted that steel “easily accounts for 10% or more” of upstream costs in the form of drill rigs, oil country tubular goods (OCTG), drill pipe and downhole tubing, in addition to line pipe.
“We ask that you address the various steel-related trade imbalances in targeted fashion to the maximum extent possible, in ways that will minimally affect our domestic oil and gas industry,” the Texas group wrote in the letter, signed by its chairman, Robert Osborne.
While Commerce begins to consider the request for product exclusions, Trump and his administration continue to negotiate country exemptions. The US’ partners in the North American Free Trade Agreement (Nafta) - Canada and Mexico - have been granted provisional exemptions from the tariffs while Nafta is being renegotiated.
“The exemptions for Canada and Mexico are very helpful, and if those exemptions were made permanent, that would alleviate our concerns considerably,” Osborne wrote.
While the energy groups plead for flexibility, the pro-tariff Alliance for American Manufacturing (AAM) is urging the Trump administration not to water down the effects of Section 232 when considering product and country exclusions.
“These matters must be implemented in a manner that does not undermine the effectiveness of the remedies,” AAM president Scott Paul wrote. “If a product is excluded based on short-term market limitations, the exclusion should be time-limited, and the Commerce Department should work with other federal agencies and [the US] Congress to develop strategies that encourage domestic suppliers to begin production.”