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World Feeling the bite from tariffs that were meant to help It, Alcoa seeks exemption

The Commerce Department imposed tariffs on steel and aluminum earlier this year, saying that imports of foreign metals were degrading the “industrial base” and threatened national security.

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Alcoa would seem to be in prime position to benefit from President Donald Trump’s aluminum tariffs. The 130-year-old American aluminum producer has in recent years faced stiff competition from overseas.

But on Monday, Alcoa asked the administration for an exemption from the 10 percent tariffs. The reason: The company imports much of its aluminum from its facilities in Canada, which is among the countries subject to Trump’s metals tariffs.

The Commerce Department imposed tariffs on steel and aluminum earlier this year, saying that imports of foreign metals were degrading the “industrial base” and threatened national security. That move was supposed to help U.S. metal manufacturers, like U.S. Steel and Century Aluminum.

But Alcoa’s request underscores the risk the Trump administration faces as it tries to protect U.S. firms by erecting trade barriers. While the tariffs help some companies, they have the potential to hurt thousands of others. Businesses that rely on foreign materials are facing increased costs, while others that depend on access to overseas markets are being hit with retaliatory tariffs from countries like Canada, Mexico and the European Union.

Alcoa last month said the aluminum tariffs would likely add $100 million in costs this year, a disclosure that contributed to a sharp decline in the company’s stock.

Other big companies, including Harley-Davidson, Whirlpool and Caterpillar, in recent weeks have detailed the extra costs to their businesses caused by the Trump administration’s tariffs. Coca-Cola last month said it was increasing the cost of some of its products to reflect higher metals costs. And the financial hits from the levies could escalate in the coming months. The Trump administration is threatening to impose tariffs on imports of cars and car parts and could impose tariffs on $200 billion worth of goods from China.

After the aluminum tariffs were proposed, Alcoa asked that they not be imposed on Canada and other countries with which the United States has generally had good trading relations.

In its exemption request, Alcoa said it imports aluminum from its Canadian operations for further production at its Warrick facility, near Evansville, Indiana, which employs around 1,600 people. Alcoa’s customers then use the aluminum from that plant to make food and beverage cans.

Alcoa said it cannot get the type of aluminum it needs in sufficient quantities from its own facilities in the United States or from other U.S. producers. Even if America’s dormant aluminum plants were revived, the United States would still be dependent on imports, mostly from Canada, said Tim Reyes, president of Alcoa Aluminum, in a statement. The company said it plans to file additional exemption requests.

It is not clear whether Alcoa will gain any exemptions. The Commerce Department process gives other U.S. companies the ability to object to exemption requests if they say they can provide the imported materials. So far, deference is being given to those objections. The New York Times reported on Sunday that two of the United States’ largest steel manufacturers had successfully objected to reprieve requests from U.S. firms that buy foreign steel.

Through the beginning of August, the Commerce Department had approved 115 requests for aluminum exclusions and denied 111, with thousands of others not yet adjudicated.

“We will deal with them in the same transparent and impartial manner as we deal with all requests,” James Rockas, a spokesman for the Commerce Department, said in an email, referring to Alcoa. “Once we see whether serious objections have been raised it will be easier to evaluate the Alcoa application.”

Chicago-based Century Aluminum, which supports the tariffs, has filed objections to several exemption requests, according to public filings. Century’s chief executive, Michael A. Bless, said earlier this month that the levies were prompting aluminum companies to revive idled capacity. The company intends to invest as much as $150 million on restarting and upgrading a plant in Hawesville, Kentucky.

Both Alcoa and Century have financially benefited from the rise in aluminum prices in the United States.

Commerce officials stressed on Monday that granting an exclusion in a case where a U.S. company could supply the product in question would undermine the rationale for the tariffs, which are meant to reduce imports and boost the domestic metals industries.

A company that is denied an exclusion may resubmit its application if no U.S. producer will sell the product it is seeking, or a substitute, a department official said. The Commerce Department this month will revise its rules to allow companies to directly rebut exclusion objections.

Aluminum industry representatives say tariffs are hurting the sector and will ultimately make U.S. companies that rely on foreign metals less competitive.

“During a time of record demand for aluminum in the United States, it is critical that companies have access to a steady source of supply,” Matt Meenan, a spokesman for the Aluminum Association, a lobbying group, said in an email.

One company’s experience in the steel exclusions process could bode well for Alcoa: A Chinese-owned company, Greenfield Industries of South Carolina, was granted nearly 1,000 exclusions to import specialized steel from its parent company in China.

This article originally appeared in The New York Times.

Peter Eavis and Jim Tankersley © 2018 The New York Times

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