Depending on project requirements, fabricators and OEMs may need to source steel plate with a specific country of origin. Typically, private projects can source the steel plate they need, from any country of origin, while government-funded projects often require domestic material. In this article, we will explore the difference between foreign and domestic steel and discuss how these differences impact sourcing.

WHAT IS FOREIGN STEEL?

First, let’s discuss foreign steel. Foreign steel is any steel that is produced in another country and imported. The top countries that produce and export steel to the U.S. include:

  • Canada
  • Mexico
  • South Korea
  • Brazil
  • Japan

Source: American Iron and Steel Institute, as of Jan 2022

Private projects with no country-of-origin specifications could consider sourcing foreign steel, while most U.S. and Canadian government projects would not be able to consider foreign material.

Steel productions method may differ from country to country, too, which can lead to quality concerns when sourcing material from a foreign mill. For this reason, many fabricators sourcing foreign material rely heavily on a supplier to broker the transaction. Leeco Steel, for example, employs a rigorous supplier review process and ISO 9001-certified quality management system to vet and verify the quality of all foreign mills and materials.

U.S. TARIFFS AND TRADE RESTRICTIONS

The U.S. has enacted tariffs and trade restrictions on imported steel for decades and one such example includes Section 232 of the Trade Expansion Act of 1962. In 2018, Section 232 was used to enact a 25% tariff on all steel materials imported to the U.S., including Canada and Mexico. It was argued that foreign steel was a threat to various industries, including defense, and jeopardized U.S. jobs.

In recent years, however, steps have been taken to ease some of the restrictions enacted in Section 232. Under new agreements with the European Union, Japan and the United Kingdom, a yearly quota system was implemented, which allows 500,000 Mt of steel melted and poured in those countries or regions of origin to be exported to the U.S. A 25% tariff is then imposed on higher quantities.

HOW DO U.S. TARIFFS AND TRADE RESTRICTONS AFFECT SOURCING FOREIGN STEEL?

Foreign steel was traditionally cheaper than U.S.-produced steel, which led manufacturers to source steel materials from foreign countries to reduce productions costs. However, recently imposed tariffs -including Section 232 - and other restrictions have led to higher-priced foreign steel materials which then made the market for domestic steel more competitive.

CANADA AND MEXICO TARIFFS THAT IMPACT SOURCING FOREIGN STEEL

Canada and Mexico placed tariffs and trade restrictions on imported steel materials in recent years, which impacts the ability to source foreign steel in those countries.

Canada, for example, implemented a 25% tariff on steel imports from the U.S. in 2018 in response to Section 232. Canada also has enacted provisional safeguards in 2019 that imposed Tariff Rate Quotas (TRQs), on imports of certain heavy plate and stainless-steel materials as retaliation against U.S. imposed tariffs. These allowed a set number of materials to be imported at a lower tariff rate and an unlimited amount to be imported at a higher tariff rate.

Canada no longer requires shipment-specific import permits on steel and aluminum from the U.S. after Section 232 tariffs were removed and the TRQs expired. However, under Canada’s General Import Permits No. 80 and 81, detailed records and reporting are required for U.S. steel and aluminum imports. Lastly, the Special Import Measures issued regulations against Anti-Dumping in Canada in August 2019.

Additionally, Mexico imposed 15% tariffs on countries who do not engage in a free trade agreement in May 2022. In August 2023, this tariff rate increased to 25% and these measures will remain in effect until July 31, 2025. Mexico also imposed retaliatory tariffs against the U.S. in response to Section 232, but these have since been removed.

WHAT IS DOMESTIC STEEL?

Next, we will explore domestic steel. In 2022, the U.S. ranked fourth in global steel production and Canada ranked 17th, according to the World Steel Association. Fabricators in both countries have an ample supply of domestic steel from which to source and it is often competitively priced. Domestic steel can either be melted domestically or in another country of origin, but must always be finished, or manufactured, within the country it is sold to receive domestic classification.

MANUFACTURED VS. MELTED AND MANUFACTURED IN THE U.S.

Sometimes, steel materials are labeled as manufactured in the U.S., while other materials may be labeled as melted and manufactured in the U.S. It is important to understand the distinction, as this could impact the specific type of domestic steel you are required to source for your project.

Steel that is manufactured in the U.S. is finished domestically but is not produced domestically. The steel slab is produced in a foreign mill, and then imported to the U.S. to be “manufactured” - or finished - in a U.S. mill. This includes, but is not limited to, manufacturing steel plate and steel mesh.

Steel melted and manufactured in the U.S., on the other hand, is fully produced in the U.S., from melting and casting raw materials to creating a finished plate. Oftentimes government projects will specify that steel materials must be melted and manufactured in the U.S., which is why it is important to understand the different designations. Currently, there are no regulations dictating that use of domestic steel in Canadian government projects, although unions throughout Canada have been pushing for this legislation in recent years.

U.S. BILLS AND LEGISLATION IMPACTING DOMESTIC STEEL

The U.S. government has, historically, required domestic steel be used in certain instances and these requirements have grown over time.

For example, the Buy American Act, which was passed in 1933, requires government-funded projects to purchase steel products that have been mined, produced or manufactured in the U.S. Additionally, 55% of the cost components of manufactured goods must be domestic. However, that rate is scheduled to increase to 65% in 2024 and 75% in 2029 as a result of the Build America, Buy America Act of 2021.

A more recent example is the 2021 Infrastructure Investment and Jobs Act (IIJA). This bill takes domestic sourcing a step further as to require all metal and iron purchased for government-funded projects to be melted and manufactured in the U.S. These provisions are expected to affect government-funded projects across several industries, including:

CANADIAN CALLS TO ACTION IMPACTING DOMESTIC STEEL

In March 2023, the Canadian Steel Producers Association (CSPA) called for action to ensure Canada’s competitiveness in the steel industry and job safeguards amid rising steel imports. The CSPA outlined eight demands, in their call to action, which included more financial support and increasing usage of and reducing restrictions for sustainable steel.

HOW DO DOMESTIC STEEL SOURCING REQUIREMENTs affect you?

While domestic steel has traditionally been easier and faster to procure than foreign steel, analysts expect demand for domestic steel to increase due to cost competitiveness against foreign steel as it fluctuates based on policy and market demand. This will, in turn, affect availability and lead times. Fabricators who work with industries such as, but not limited to, infrastructure and energy could see changes in the steel materials they need to source as new federal requirements take effect. Canadian steel is available for use on U.S. projects under certain conditions outlined by Chapter 10 of the North American Free Trade Agreement (NAFTA), now known as the United States-Mexico-Canada-Agreement (USMCA). Canada does not currently have regulations regarding use of domestic materials on government-funded projects.

SOURCING STEEL PLATE MATERIALS

When seeking a steel plate supplier, it Is important to consider whether they stock materials that meet your project requirements for country of origin. Leeco Steel stocks a variety of plate grades from mills across the globe and can meet any country-of-origin requirements your project may have. Leeco works with a variety of large domestic and foreign steel mills, which include:

 

  • Nucor Steel
  • SSAB
  • Cliffs Steel
  • POSCO (Korea)
  • Dongkuk (Korea)
  • Gerdau (Brazil)

 

Contact us or submit your quote today to discuss your order with a knowledgeable representative.