Nov 14, 2018

Inside the Cronyism-Laden Tariff Exemption Process

Post by Freedom Partners

While it’s obvious that recent tariffs on steel and aluminum imports have hurt American businesses, what is sometimes overlooked is the government’s problematic process by which companies apply for exemptions from the duties. The exemption process is so flawed that, instead of leveling the playing field, it tilts it all the more, making a strong case for the elimination of all tariffs.

The Exemption Process Is Not User-Friendly

Research performed by Marketplace found that companies say the exemption process “has been unclear and fraught with questions.” That could be because the criteria used to grant or deny exemptions has changed at least 16 times since the manual was first issued at the beginning of May. It ballooned from 24 pages in its first iteration to 108 pages in its 16th.

Confusion could also stem from the fact that the group of people approving and denying exemptions includes some 27 contractors, with various agencies offering some 62 volunteers. The Department of Commerce’s Bureau of Industry and Security is leading the exclusion process. Career employees at the department generally have no industry expertise, yet they must judge exemption applications as though they do.

The Majority of Exemption Requests Are Still Pending

As of Nov. 1, more than 35,600 steel and aluminum tariff exclusion requests have been filed by 798 firms across 46 states and Puerto Rico. At that point, the Bureau of Industry and Security had not made its way through the majority of them.

Requests for exemptions from steel tariffs:

  • 11,259 have been approved.
  • 4,367 have been denied.
  • 50.4% of all requests (31,527 in total) are still pending.

Requests for exemptions from aluminum tariffs:

  • 840 requests for exemptions from aluminum tariffs have been approved.
  • 141 requests for exemptions from aluminum tariffs have been denied.
  • 76.1% of all requests (4,105 in total) are still pending.

“Some companies that submitted multiple requests had some approved and some denied,” Marketplace reported. Results were also inconsistent among different companies that import the same or very similar products from the same country.

But inconsistency should be expected when the government picks winners and losers. To be clear, American companies are not at fault for seeking relief from tariffs — it’s a rational response to a market disruption such as harmful tariffs. However, the exemption process compounds skepticism about Washington when companies with deep pockets are best positioned to make the most gains. There are nearly 500 lobbyists trying to influence the government on tariffs. In each of the last three years, that number was below 200.

The Best Solution: Eliminate Tariffs

Even if the exemption process were speedier or less confusing, American businesses would still struggle under the heavy burden of tariffs. The flawed exemption process is a symptom of these protectionist trade policies. Instead of empowering bureaucrats to pick winners and losers, the Trump administration should simply drop all tariffs.

Tariffs are a tax on Americans — from business owners to consumers. A zero-tariff trade environment would place power back in the hands of consumers, allowing them access to the best-quality products at competitive prices.