Steel made in China, India, Vietnam and India costs a lot less than U.S. made steel. Even when you factor in transportation costs, it is still cheaper to import foreign steel. A lot cheaper.
Cheap steel is bad news for the U.S. steel industry and steelworkers. Uncle Sam has tried to slap “anti-dumping” tariffs on certain countries that dump steel in the U.S. at below market prices but the foreign steel makers have learned how to circumvent those tariffs. For example, a Chinese company subject to an anti-dumping tariff could easily transship their products through another country not subject to the tariff and relabel it as if it were made in that country.
That may be changing if President Trump follows through with an across the board 25% tariff on all foreign produced steel. This post examines the impact of the proposed new tariff on whistleblower awards.
Whistleblower awards for foreign steel? Yes! And they can be substantial.
Foreign Steel, Buy America Act and Whistleblower Awards
The Commerce Department can’t regulate where American businesses buy their steel. Construction firms, bridge builders, oil rigger makers and automakers but lots of steel. They naturally look for the least expensive steel. That helps them keep costs down and profits up.
The one exception is for steel that Uncle Sam buys. Since the Great Depression, Congress has sought to protect American manufacturing jobs and the steel industry in particular. Congress did so by passing a series of laws called “Buy America” or “Buy American.”
These laws say that any steel used in government funded projects must be made or “rolled” in the United States. If tax dollars are used in a project, Uncle Sam wants to be sure that any steel or iron comes from a U.S. steel mill.
The biggest government expenditures for steel come from highway and bridge projects and building construction.
Until now, it has been profitable for companies to try and skirt the law by purchasing cheaper Chinese steel and relabeling it as made in the U.S.A. We prosecuted one company that purchased steel samples from a U.S. mill, simply so they could obtain the mill certification saying the steel was American made. The steel used in their construction projects, however, came from Turkey and China. They would then photocopy the certification from the US mill and attach it to the foreign steel.
Pretty clever until a project expediter blew the whistle and reported the company. That resulted in a $5 million fine and $400,000 whistleblower award.
We have heard that other companies are doing similar things on bridge and railroad contracts. (Amtrak and many commuter rails get government subsidies making their purchases subject to Buy American legislation.)
If President Trump follows through with his recently announced across the board tariff, using foreign steel on government projects won’t be as economical. Let me explain why.
Recent tariffs have focused on a single country thought to be selling for below cost or below the price that it charged at home. In 2016, President Obama imposed a 200% tariff on certain Chinese steel products. Shortly after taking office, President Trump announced tariffs on Chinese steel sheeting.
Now the administration claims that the President will sign a sweeping new tariff next week on both foreign aluminum and steel imports. The new tariff relies on a 1962 law called the Trade Expansion Act. Although tariffs aimed at a particular country are common, the sweeping across the board tariffs proposed by Trump have only been used twice. The Trade Expansion Act allows the President to enact emergency trade sanctions in the event of a national security interest.
Is protecting steelworkers a national security interest? The Commerce Department says yes. They issued a statement saying,
“The continued rising levels of imports of foreign steel threaten to impair the national security by placing the U.S. steel industry at substantial risk of displacing the basic oxygen furnace and other steelmaking capacity, and the related supply chain needed to produce steel for critical infrastructure and national defense.”
President Trump tweeted, “When a country (USA) is losing many billions of trade with virtually every country it does business with, trade wars are good and easy to win.”
We have no doubt that someone will challenge the new tariffs in court.
The new 25% across the board tariff is different from recent steel tariffs. It doesn’t focus on a specific country. All imported steel will be subject to a tariff. It won’t matter if the steel comes from China or Canada.
It’s relatively easy for an unscrupulous steel maker to transship or relabel steel. But sneaking steel into the U.S is another thing.
Steel rods, sheeting and bars are heavy and bulky. There is no easy way to get steel into the United States in bulk without Customs knowing about it. And once they see it, the importer will have to pay the tariff.
The tariff is good for the U.S. steel industry but bad for consumers (higher prices) and our allies (e.g. Canada).
With fewer incentives to use cheap foreign steel, more companies will use American steel in government projects. Whistleblower cases, at least for Buy America / Buy American violations will dry up.
The new tariff hasn’t been imposed yet. And the federal False Claims Act has a six-year statute of limitation. That means companies that cheated Uncle Sam aren’t out of the woods yet. For would be whistleblowers, that means information that may now be a few years old is still eligible for an award.
With Trump’s heavy emphasis protecting U.S. industry, we believe prosecutors will remain interested in Chinese steel and foreign steel cases for the next several years.
False Claims Act – America’s Whistleblower Award Law
The False Claims Act is a Civil War era law that allows anyone with inside information about fraud involving government funds to file a claim. If the government recovers anything from the wrongdoer, whistleblowers can receive an award of between 15% and 30% of whatever the government collects.
With triple damages and high penalties, the fines and penalties can be quite high.
Protecting American jobs isn’t the only reason that we seek foreign steel whistleblowers. There is a safety factor as well.
Remember earlier when we mentioned that all steel sold in the United States comes with a mill certification? That certification contains more than just the country of origin. It also has important information about the quality of the steel. Just like not all cars are alike, not all steel is the same. There are huge variations in chemical composition, tempering and quality.
When a company transships steel and relabels it, the ultimate user doesn’t really know much about the quality of the steel. Even to the trained eye, poor quality steel can look exactly high quality steel.
Would you want to drive over a tall bridge knowing it was made of low quality pot metal? Of course not! We know of two cases in which concrete panels fell because of poor quality steel hangers. One caused a death to a pedestrian outside a county parking garage and the other killed a motorist in a tunnel.
Using mislabeled steel is not a victimless crime. It hurts not only American workers, it could actually kill or cause physical injuries.
Call for Chinese Steel Whistleblowers
If you have inside information about businesses, suppliers or contractors that are using or have used foreign steel on government funded construction projects, you may be entitled to a cash award. Common examples of government funded construction projects include bridge construction, public hospitals, military installations and airports. Even highways use large amounts of steel (rebar in concrete).
The fine print:
To qualify for an award, you must be the original source of the information. What you read in the paper or hear from friends doesn’t qualify. But if a friend or co-worker is the original source, you can “join forces” and file a claim together.
Awards are generally paid only to the first to file. If you are interested in stopping greed and corruption and want an award, don’t delay.
All inquiries are protected by the attorney – client privilege. That means all information you share with us remains confidential, even if you never decide to file an award claim. Our legal services are offered on a contingent fee basis. You only pay us if we collect an award on your behalf.
To learn more about foreign steel cases, visit our Buy America information page. Have a question or want to find out if your information qualifies you for an award, give us a call. We can be reached online, by email or by phone 414-704-6731 (direct).
MahanyLaw – America’s Whistleblower Lawyers
Update: We have another post discussing the safety aspects of foreign steel.