U.S. sees possible legal challenges to crackdown on steel imports

U.S. Secretary of Commerce Wilbur Ross speaks at 2017 SelectUSA Investment Summit in Oxon Hill, Maryland

WASHINGTON (Reuters) – The Trump administration expects U.S. and World Trade Organization-related legal challenges in response to a possible crackdown on foreign imports of steel or aluminum, U.S. Secretary of Commerce Wilbur Ross said on Monday.

President Donald Trump ordered the investigation in April under the rarely used section 232 of the Trade Expansion Act of 1962. It allows the president to impose restrictions on imports for reasons of national security.

Ross is expected to announce within days the outcome of the steel inquiry.

“We assume that if there is any affirmative action that comes out of either one, there probably will be either a domestic legal challenge and, or, a WTO challenge, so we have that very much in mind,” Ross told a news conference on the sidelines of the SelectUSA investment summit.

The administration says the lack of domestic producers could impede U.S. defense procurement for its armed forces as well as for strategically important infrastructure. Foreign steel companies have been concerned the probe may be aimed at shoring up American producers and cutting out foreign competition

While the investigation has mainly been aimed at cheap imports from China, European steel exporters worry they will be targeted by the U.S. measures.

European steel association (Eurofer) chief Axel Eggert told Reuters last week his group was exploring options, including submitting a complaint to the World Trade Organization, in response to U.S. tougher measures.

Speaking during the investment conference, Ross said he expects the outcome of the investigations to be concluded this month. Trump would move swiftly to act on the recommendations of the report, he added.

“The president being the president I don’t think he will dilly dally very long on making his decision whatever it turns out to be,” Ross said. “I would expect this to come to a head during the month of June.”

Steel stocks gained broadly on Monday after four steel companies were upgraded following a Reuters report on Friday that the investigation was nearly done.

Nucor, Steel Dynamics, U.S. Steel, and AK Steel were all upgraded to buy by Longbow Research.

The S&P 1500 steel sector .SPCOMSTEEL was up 2.5 per cent. U.S. Steel was up 3.9 per cent, AK Steel was up 4.0 per cent, Nucor was up 3.1 pct and Steel Dynamics was up 1.6 pct.

Asked during a panel discussion on Monday with UK trade minister Liam Fox whether European concerns over a potential U.S. crackdown steel were overblown, Ross said: “There have been a number of European companies against whom we have had trade cases and so the problem of overcapacity is not unique to one segments over the world, it happens to be very concentrated in China.”

“Since we are the world’s largest importer of steel, we’re the main victim of the overcapacity, so that is the issue we have to grapple with,” he added.

Fox acknowledged that Britain had concerns over possible U.S. actions on steel imports because the two countries traded steel for military projects. The two countries had a “shared view” on national security as NATO allies, he added.

“We will wait to see what the report says. It’s in our interest that global overcapacity is dealt with … but we have unique US-UK security concerns which we have raised,” he added.

(Reporting by Lesley Wroughton; Editing by Sandra Maler)