As things have continued to heat up with the “Buy American” legislation situation, a few more notable developments have occurred. According to an article published Monday in American Metal Market, Canadian municipalities took steps to encourage retaliation while constituents of the US steel industry feuded over the provisions’ clarity.

After meeting last weekend to vote affirmatively on measures that will encourage retaliatory actions, the AMM article suggests that a “full-scale attack on the provision by trying to renegotiate the North American Free Trade Agreement (NAFTA) to cover government procurement” could possibly occur. So, it seems that Canada would like to end protective policies on both sides of the border but is more than willing to engage the US in a trade war. You may remember from previous posts that this sort of economic hostility could very well result in the immediate loss of $3 billion worth water and wastewater business for the US. Also, as many as 650,000 American jobs will become vulnerable if other American trade partners decide to take similar actions. While the US government is surely focusing on developing the proper solution to these political effects, the American steel industry is fighting its own battles.

On the one hand, you have companies like Duferco Farrell (who has been mentioned in several articles) and their lawyers arguing that they are unable to purchase US-made slab steel in the specification they require. These constituents also argue that the legislation is “unclear” because it doesn’t reference the melting of steel. They assert that the company’s customers are wrongfully assuming the “Buy American” provisions exclude them from bids. As a result, they argue that the legislation needs to be clarified to allow the use of some foreign components and/or subcomponents.

An opposition to this stance, but not the “Buy American” provision itself, comes from the United Steelworker’s Union. In a statement to one of AMM’s publications, Thomas Conway, the union’s VP claims that Duferco Farrell should be able to find a domestic slab supplier. He cites OAO Severstal, US Steel, AK Steel, and Beta Steel as possible replacements. Out of his examples, Beta and US Steel declined to comment on the situation, AK Steel said they do not make slab in the thickness Duferco requires, and only Severstal affirmatively agreed with his statement. Although a Severstal spokesperson said the company could provide the steel to other steelmakers based on “unplanned outages and special metallurgical needs,” I wonder what sort of bone-crushing markup would accompany the supply.

Another opposition to the “Buy American” provisions does not address the availability of the steel or dispute the provision’s lack of clarity. However, the Municipal Castings Association and their lawyer Paul Rosenthal argue that the law is unclear because it lacks transparency, causes confusion, and provides an opening for a “circumvention of congressional intent”. This group calls specifically for the clarification of stipulations related to iron, steel , and manufactured construction material and a requirement to post all requests to waive the “Buy American” clause online for public review.

Yet another argument against the current provisions comes from Nucor Corporation and its legal representatives. They, like Duferco and MCA, argue that the provision is unclear. Unlike Duferco, however, they argue that the legislation needs to be cleared up to exclude companies who use foreign component and sub-components.

In my last post, I concluded that “Buy American” is a great personal philosophy but a poor political policy. I don’t know where this will all end up, but it seems that, at the moment, decision makers in the steel industry are more worried about protecting their interests under the existing “Buy American” provisions than they are about preventing any of the provisions’ potential ramifications. I believe that the same lack of foresight that has caused the provisions to be confusing and “interpretable” for steel the industry may also be at the heart of global repercussions of “Buy American” clauses.
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Steve Tatum

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