How a Blacklisted Russian Firm Won (and Lost) a Break From Trump’s Tariffs
Posted August 9, 2018 8:14 p.m. EDT
Updated August 9, 2018 8:18 p.m. EDT
WASHINGTON — Hundreds of companies have asked the Trump administration for a special break from its sweeping aluminum tariffs. Few have succeeded. One that managed to get an exemption is a Russian firm currently subject to Treasury Department sanctions.
How Rusal America — a branch of a Russian metals giant controlled by an oligarch with close ties to President Vladimir Putin — managed to win an exclusion highlights the chaotic and unwieldy process surrounding President Donald Trump’s tariffs.
While Rusal and its controlling stakeholder, Oleg V. Deripaska, are restricted by U.S. sanctions, one of the company’s dozens of exemption requests was granted by the Commerce Department in July, apparently for the simple reason that no U.S. manufacturer objected.
Department officials reversed the decision this week, after concluding that an American aluminum manufacturer had meant to object, but made a mistake in its paperwork. The Trump administration has cited national security concerns in imposing tariffs of 10 percent on aluminum and 25 percent on steel, saying a flood of cheap foreign metals could degrade the American industrial base and make the U.S. military and others too dependent on imported metals. The tariffs hit dozens of countries, including Canada, Mexico, China and Russia, as well as the European Union.
To help American manufacturers obtain products they are unable to get from domestic suppliers, the administration established a process for companies to request exemptions.
Companies must file an exclusion request for every product they want to import, and, so far, just a few have gotten the green light. Since May, companies have filed nearly 3,000 requests for aluminum exclusions. By the start of this month, the Commerce Department had granted 115 of those requests and denied 111; the rest remain under review. The department has denied nearly 650 steel requests and approved more than 1,300, out of more than 22,000 requests filed.
Rusal is an unlikely company to win an exemption. Deripaska, its major shareholder, was blacklisted by the U.S. in April as part of an effort to punish members of Putin’s inner circle for interference in the 2016 election and other Russian aggressions. Deripaska and six other wealthy Russians were hit with sanctions that restricted their ability to travel to the United States or do business with any company in the West. As part of that effort, Rusal and other entities were also constrained from engaging in transactions with Western companies. Deripaska was once close with Paul Manafort, who served as Trump’s campaign manager, and who is on trial over allegations of financial fraud. During the campaign, Manafort suggested providing campaign briefings to Deripaska. There is no evidence that such briefings occurred.
Rusal has been struggling to operate with the U.S. sanctions in place and has appealed to the Treasury Department for relief. The United States has said it will consider lifting the ban if Deripaska cedes control of the company, and Rusal has begun the process for that to occur. In an interview with Reuters last month, Treasury Secretary Steven Mnuchin said he was open to easing the sanctions on Rusal, which the company has said pose a threat to its operations. “Our objective is not to put Rusal out of business,” he said.
Despite the cloud of sanctions, Rusal filed more than 100 requests for exclusions that would allow it to import aluminum products from its Russian parent company to produce furniture, portable ladders and other goods. An American aluminum titan, Century Aluminum, filed objections to all but a few of those requests.
Rusal’s first 19 requests were denied by Commerce Department officials. In late July, its 20th request was granted. To date, Commerce Department officials say they have never approved a request that another company objected to properly.
Democrats in Congress who noticed the exclusion were prepared to protest what they called suspicious timing, given that the exemption coincided with Trump’s summit meeting with Putin in Finland.
Commerce Department officials dismissed that criticism last week, saying they had coordinated with the Treasury Department unit that oversees sanctions in considering the Rusal application. The officials said that unit, the Office of Foreign Assets Control, was ultimately the decider on whether sanctions should prevent approval of an exclusion.
Treasury officials, however, denied that they had played a role in the exclusion request.
The Commerce Department “implements authorities that are separate and distinct from sanctions implemented by Treasury’s OFAC,” a Treasury spokesman said in an email. “This was a Commerce Department decision, and we were not specifically consulted.”
The Commerce Department said that the approval review lasted 12 weeks, and that “there were no objections posted by American companies for the approved request” during the monthlong comment period.
“The Commerce decision on this exclusion request simply acknowledges that this product is not available from U.S. manufacturers,” a department spokesman said.
This week, the department reversed course on the exclusion, after The New York Times inquired about whether Century Aluminum had, in fact, filed an objection, given its pattern of objecting to nearly every other Rusal application. Department officials determined that Century had meant to file an objection to Rusal’s request, but had erred in submitting the paperwork. The department effectively fixed Century’s error, then ruled that the objection was valid — and that Rusal’s exclusion was void.
In light of Century’s “clear intent to file the required objection form, not completed due to its clerical error,” the department said in a statement, officials have now “considered the objection on its merits and determined it supports a denial.”
Rusal officials declined to comment on the issue this week. “Thank you for your interest in our company,” a spokesman, Andrey Vetvinskiy, wrote in an email. “Unfortunately, we will not be able to arrange an interview with our top management this month.”
The Commerce Department’s reversal has raised new questions from Democrats, including Rep. Lloyd Doggett of Texas and Sen. Elizabeth Warren of Massachusetts, who say the department should have never considered granting an exclusion to a company under sanctions in the first place. “The Trump administration granted this tariff exclusion, certifying no national security concerns, to a sanctioned subsidiary owned by a sanctioned Russian aluminum company, a mere three days after Trump’s surrender in Helsinki to President Putin,” Doggett, who sits on the Ways and Means subcommittee for trade, said on Thursday. “This is not about the failure of one of those American companies to object, but about continuing, very objectionable favoritism toward Putin.”
Warren sent the Commerce Department a 10-page letter earlier this week, laying out concerns with the Rusal approval, which her staff had found in a database of exclusions. “The Trump administration undermined our national security by handing out a tariff exemption for millions of dollars of aluminum imports to a sanctioned Russian company — only to reverse this decision after my investigation revealed this giveaway,” she said Thursday. “They owe the American people an explanation for how this fiasco happened.”
Criticism of the exclusions process has crossed party lines. On Thursday, Sen. Ron Johnson, R-Wis., the chairman of the Homeland Security Committee, sent the commerce secretary, Wilbur Ross, a letter detailing frustrations that companies have experienced in applying for exclusions, and demanding answers for how exclusions are determined.
“Although you promised the process would be ‘fair and transparent,'” Johnson wrote, “a number of Wisconsin business leaders have expressed concerns to me about the uncertainty and arbitrary nature of the exclusions process.”