Trade

The Department of Commerce OIG issued a management alert that the BIS may have allowed undue influence of an objector to the 232 exclusion process. Congresswoman Jackie Walorski supported by her Chief of Staff Mike Dankler have been raising these issues for some time most recently in an Oct. 17 letter to Commerce Secretary Wilbur Ross where she highlighted BIS determinations that “seem to run counter to the facts presented by both sides” and instances in which BIS has “bent or ignored its own regulations” and stated that both circumstances are “usually to the detriment of the requester.” Her letter also noted that BIS has accepted objections submitted after the deadline, denied requests due to apparently inadequate objections, and failed to issue decisions within the required timeframe.

According to the OIG, on October 29, 2018, they initiated an audit with the objectives to determine whether (1) BIS and ITA adhere to the processes and procedures in place to review Section 232 product exclusion requests and (2) exclusion request decisions are reached in a consistent and transparent manner. During our fieldwork, the following issues came to our attention that we believe require your immediate attention:

  • Evidence of an unofficial appeals process exists.
  • Communications with an objector prompted a change in internal review criteria.
  • Off-record discussions between interested parties and Department officials are not documented.

They stated they believe these issues give the perception that the Section 232 exclusion request review process is neither transparent nor objective.

Quoting from their alert:

“Evidence of an Unofficial Appeals Process Exists

The regulations governing the Section 232 exclusion request review process8 do not provide for appeals of final decisions; that is, the process ends when BIS publicly posts its decisions. However, we have seen evidence that BIS officials reconsidered several approved and posted exclusion requests (for which there were no procedural errors) at the request of an objector. We note that while BIS took action to reconsider these decisions, we have no evidence that these exclusion requests were subsequently rescinded or otherwise amended.

Communications with an Objector Prompted a Change in Internal Review Criteria

Prior to publicly posting exclusion requests, BIS evaluates them during a pre-clearance phase using internally developed criteria to ensure completeness and correctness. We identified that BIS revised a criterion for reviewing a specific attribute9 in the exclusion request form template within days of receiving a communication from an objector regarding the criterion. We found no evidence that other interested parties, such as requesters, were aware of the communication and had an opportunity to express their views on the issue. This follow-on action gives the appearance of improper influence to the process by an interested party. This criterion change will likely result in an increase in the number of exclusion requests rejected during pre-clearance.

Off-Record Discussions Between Interested Parties and Department Officials Are Not Documented

Just prior to the inception of the exclusion request review process on March 19, 2018, Department officials met with interested parties to discuss exclusion requests. Of the more than 100 meetings and telephone conversations between Department officials and interested parties that we examined for the period March 1, 2018, through March 31, 2019, none had an official record of the subjects discussed during the meeting. We also noted that, during these meetings, interested parties sometimes planned to discuss information about pending exclusion requests with Department officials that is not part of the official record used in BIS’ or ITA’s review. However, because there are no records of discussions, it is not clear whether pending exclusion requests were actually discussed or if BIS or ITA considers the information discussed at these meetings while rendering decisions. Nonetheless, this gives the appearance that Department officials may not be impartial or transparent and are potentially making decisions based on evidence not contained in the official record for specific exclusion requests.

Our Future Work

The concerns presented in this memorandum and any action taken by BIS as a result of this management alert will be considered in our future audits of BIS. This management alert will be posted to our public website.

The Bureau of Industry and Security may have allowed improper influence in its consideration of requests for exclusions from the Section 232 additional tariffs on steel and aluminum products, according to an Oct. 28 alert from the Commerce Department’s inspector general. The alert comes as Rep. Jackie Walorski, R-Ind., continues to raise similar concerns.

The OIG states that in the course of its audit of this exclusion request review process it found several issues that warrant immediate attention.

– Despite the fact that applicable regulations do not provide for appeals of final decisions on exclusion requests, there is evidence that BIS officials reconsidered several approved and posted requests (for which there were no procedural errors) at the request of an objector.

– BIS revised an internal criterion for reviewing a specific attribute in the exclusion request form template within days of receiving a communication from an objector regarding the criterion, and this change will likely result in an increase in the number of requests rejected during pre-clearance.

– Off-record discussions between interested parties and DOC officials are not documented, raising the possibility that pending exclusion requests may have been discussed outside of the official record.

The OIG therefore recommends that BIS consider taking the following actions: (1) regard all decisions as final once they are posted online or amend the rules to allow for appeals, (2) create a formal process for modifying the internal criteria used to review exclusion requests to ensure such criteria are properly vetted and approved prior to implementation, and (3) document all discussions with interested parties, and direct all emails concerning specific exclusion requests to BIS’ official organizational email addresses, to ensure that the correspondence becomes part of the official record.

The OIG alert coincides with an ongoing effort by Rep. Walorski to get a response from the DOC concerning allegations that the Section 232 tariff exclusion request process “continues to be plagued by a glaring lack of transparency, fairness, efficiency, and consistency.” In an Oct. 17 letter to Commerce Secretary Wilbur Ross, Walorski highlighted BIS determinations that “seem to run counter to the facts presented by both sides” and instances in which BIS has “bent or ignored its own regulations” and stated that both circumstances are “usually to the detriment of the requester.” Her letter also noted that BIS has accepted objections submitted after the deadline, denied requests due to apparently inadequate objections, and failed to issue decisions within the required timeframe. An Oct. 24 reply from Secretary Ross included no response to these allegations.”

The MBS Trade Team is gearing up to advocate for and file exclusion request for firm clients.  If you need assistance in filing for these refunds please contact us. 

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Denise Bode
Bio Link Denise co-leads the federal practice at Michael Best Strategies with expertise in association and coalition management as well as development of public policy strategies, at both the state and federal level. She was active, on behalf of firm clients, during the recent federal tax reform debate, much as she was during the last major tax reform in 1986. Expertise: Regulatory Law, Tax & Trade, Energy, Environmental, Food, Agriculture, and Telecommunications

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