Auto Parts Industry Seeks Relief From Higher Steel Tariffs

Autoparts Report, Dec 19, 2002

A number of U.S. automotive suppliers have filed for exclusions from the high tariffs imposed by the Bush administration. Companies that have filed range from Tier 1 producers to small Tier 3 manufacturers.

The Motor & Equipment Manufacturers Association (MEMA), fearing significant job losses in the auto supplier industry has asked the Bush administration to expand its existing guidelines in the course of the second round of exclusions and "to consider the critical factors of price and supply of domestic steel as part of its decisions".

"Although MEMA supports the existence of a strong domestic steel industry, the tariffs have had a devastating impact on U.S. automotive suppliers," stated Chris Bates, president and CEO of MEMA. "The supply constraints and price increases resulting from the high steel safeguard tariffs are now forcing large Tier 1 automotive suppliers to begin manufacturing or buying components that they previously made or purchased in America from overseas sources."

According to MEMA, other companies are responding to the pressure of high steel tariffs by slowing production lines or considering the permanent relocation of manufacturing facilities to other countries. The movement to shift U.S. production facilities and jobs to foreign locations where steel supplies and prices remain steady is now building rapidly, MEMA said.

Automotive suppliers, as an industry, did not benefit significantly from the first round of the exclusion process, administered by the Department of Commerce and the U.S. Trade Representative's office, according to MEMA. As U.S. manufacturers of automotive parts and components purchase an estimated 95 percent of their steel from U.S. steel mills and service centers, they have not garnered notable relief under the existing guidelines of the administration's exclusion process, the association added.

The current process has exempted mainly specialty forms of foreign steel which could not be manufactured or purchased in the U.S. market. Somewhat ironically, U.S. steel producers gained exclusions in the first round to import slabs and flat-rolled steel products at lower prices, while steel consumers garnered minimal relief. In addition, foreign competitors have gained a stronger foothold in the U.S. market by purchasing steel at global prices and exporting those finished or semi-finished goods into this country at low tariff rates, MEMA said.

MEMA said it is concerned that higher steel costs threatens the viability of a strong American manufacturing base. "Without a secure supply of raw materials and a steady cost structure, U.S. automotive parts and components manufacturers will not be able to secure future business and to ensure their competitive stance in the global automotive industry, MEMA said.

MEMA remains a strong supporter of the House Resolution (507), introduced by Rep. Joe Knollenberg (R-Mich.) on Oct. 9. This bipartisan legislation garnered strong support in the 107th Congress and it will be re-introduced in the House in 2003. The Knollenberg Resolution calls upon the president to require that the International Trade Commission (ITC) consider the effect of the tariffs on steel-consuming industries in the United States.

This analysis would be included in the ITC's midterm review of the administration's steel safeguard program, which must be released by September 2003, MEMA said.