CHICAGO — Zekelman recently filed a lawsuit in the U.S. District Court for the District of Columbia against the Republic of Mexico for violating trade agreements and dumping steel on the U.S. market. The lawsuit alleges that Mexico’s conduct threatens the national security of the United States by damaging domestic steel producers. Additionally, these violations forced Zekelman to close its Long Beach, CA, tube manufacturing factory in 2022 and most recently its Chicago, IL, location, which will shut down in 2025. The closure of these two locations have resulted in more than 400 American workers losing their jobs.
Simultaneously, Zekelman also filed petitions against the Republic of Mexico with the U.S. Office of Homeland Security and the Commonwealth of Pennsylvania. At the national level, the company filed a Section 232 Petition with the U.S. Office of Homeland Security to compel Secretary Alejandro Mayorkas to use the Office of Trade Relations to enforce trade agreements between the U.S. and Mexico. Additionally, a Petition for Determination of Discrimination was filed in the Commonwealth Court of Pennsylvania stating that Mexico is discriminating against steel conduit made in Pennsylvania and violating the Pennsylvania Trade Practices Act (PTPA). The PTPA was implemented in 1968 to protect steel and aluminum products made in Pennsylvania and made it unlawful for any public agency to specify, purchase, or permit to be furnished or used, in any public works, aluminum or steel products made in a foreign country which has been determined as discriminating by the Court.
Steel shipments from Mexico have increased dramatically since 2021, causing declining employment and stunted growth at U.S. steel makers. The U.S. had agreed to lift tariffs in 2019 in return for Mexico agreeing to abide by reasonable levels of imports of steel to the U.S.
“Mexico is violating trade agreements, and the Biden Administration is failing to enforce these rules. The American steel industry is being damaged and American workers are paying a price,” said Barry Zekelman, Executive Chairman and CEO. “Mexico is dumping steel on the American market. They price goods far lower than what domestic manufacturers can because of low labor and production costs. Mexico is being allowed to avoid tariffs, which nearly all other steel importers with similar labor conditions face. This is taking place even though the U.S. Commerce Department’s International Trade Administration previously found the Mexican government was subsidizing its steel producers.”
A 2019 agreement lifted tariffs on Mexican steel put in place by the Trump Administration and eliminated retaliatory measures taken by the Mexican government. Each country promised to implement measures to prevent the importation of aluminum and steel that is unfairly subsidized and/or sold at dumped prices, while also blocking the transshipment of aluminum and steel made outside of Mexico or the United States to the other country. Almost immediately Mexico began violating the agreement. Steel imports from Mexico rose in 2022 to a level 72% above the benchmark historical average set between 2015-2017. The Mexican government is the majority shareholder in some of the largest steel producers in the country.
“America’s steel industry, American jobs and the national security of the United States are at risk. The U.S. government has an obligation to act. The closure of our Long Beach and Chicago plants are harbingers of what the industry faces if Mexico is allowed to continue to flagrantly violate trade agreements,” Zekelman said. “There is a chronic global overcapacity in steel production. Dumping of steel in the U.S. by Mexico – at prices below what it sells for on their domestic market – is a significant threat to the U.S. economy. It means domestic steel producers face unfair competition. It means plant closures and bankruptcies for some producers, with layoffs at other companies.”
U.S. Senators Tom Cotton (R-TX) and Sherrod Brown (D-OH) have introduced bipartisan legislation seeking to reinstate the 25% steel tariff until Mexico complies with the 2019 agreement. In the meantime, U.S. producers are delaying hundreds of millions of dollars in investments in new plants and upgrades at existing facilities. A healthy U.S. steel industry is critical to supplying the U.S. military and meeting the need for steel generated by the Infrastructure Investment and Jobs Act. The iron and steel industry is a dynamic part of the U.S. economy, supporting nearly 1.7 million jobs in 2023. Dumping of steel by Mexico threatens $520 billion in total economic output in this country.
Zekelman’s filings note that it appears that it is not just Mexican steel being shipped into the United States. Though domestic demand in Mexico for steel and iron imports has risen by only 13% from 2015 to 2023, actual steel and iron imports into Mexico rose by over 80%. Much of that steel and iron is coming from China and India, with imports from those two countries doubling in that timespan. Mexican imports from China and India grew dramatically in 2021 and at roughly the same time that U.S. steel imports from Mexico surged. As the Center for a Prosperous America notes, “this great surge in Mexico’s steel imports from countries like China and India at exactly the same time as its export surge to the United States suggests there may be a high level of masked Chinese and Indian steel making its way through Mexico to avoid steel duties.”
In July 2024, the Biden Administration implemented a “melt-and-pour” requirement on Mexican steel imports that applies a Section 232 tariff on any Mexican steel not melted and poured in a USMCA country or Brazil before arriving in the United States (Mexico negotiated an exemption for steel melted and poured in Brazil). The White House stated, “these measures will provide an effective, long-term alternative means to address any contribution by Mexican steel articles imports to the threatened impairment of the national security by restraining steel articles imports to the United States from Mexico, limiting transshipment, and discouraging excess steel capacity and production.” However, data contained in the Zekelman filing indicates that the melt-and-pour strategy will have little to no effect on surging Mexican imports of steel.
“Domestic steel is critical to nearly every industry, from transportation to defense and energy to food production,” Zekelman said. “We cannot sit quietly and allow Mexico’s steel dumping to damage countless communities across the U.S. by unfairly taking jobs and shutting businesses.”
For additional background and data regarding this issue, visit Zekelman’s October 2024 Legal Action informational page.
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