Company Sues Mexico in DC Court Over Alleged Breach of Deal to Eliminate Section 232 Duties
Domestic steel producer Zekelman Industries filed a lawsuit on Oct. 21 in a Washington, D.C., federal court alleging that the Mexican government breached its 2019 agreement with the U.S. to slow imports of Mexican steel products. The company argued that Mexico's breach of the deal "has devastated the U.S. steel industry," forcing the company to close two plants due to the oversupply of cheap steel (Zekelman Industries v. United States, D.D.C. # 24-02992).
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Central to the suit are the Section 232 tariffs imposed by former President Donald Trump on steel and aluminum imports, including from Mexico. In 2019, Mexico agreed to implement measures to "limit steel exports" in exchange for removing the Section 232 duties, Zekelman said.
Mexico specifically agreed to pass measures aimed at preventing "the importation of aluminum and steel that is unfairly subsidized and/or sold at dumped prices" and also the transshipment of aluminum and steel made outside of Mexico into the U.S. Zekelman said Mexico breached this deal, evidenced by the fact that the "level of Mexican steel exports to the U.S. skyrocketed."
The complaint laid out data showing that steel conduit shipments from Mexico are now 303% percent above the average from 2015-2017, though the data shows the largest surge of imports coming in late 2023 to early 2024.
The company said "Mexico's violations were deliberate: it is subsidizing and facilitating those exports to the U.S." Using cheaper labor and production costs along with "lax oversight," Mexico is able to "rapidly scale steel production, over-produce steel products, and then dump excess steel into U.S. markets," the brief said.
The company said Mexico's breach of the deal "has not gone unnoticed by American politicians," citing comments from Sen. Sherrod Brown, D-Ohio, who said in a letter to U.S. Trade Representative Katherine Tai that the surge of Mexican steel imports amounts to a breach of the 2019 deal.
Zekelman argued that Mexico isn't entitled to sovereign immunity, since it "breached the agreement in its capacity as a commercial actor," making it a "market participant." The U.S. company asserted standing to sue on the grounds that Mexico directly injured the intended beneficiaries of the deal, of which Zekelman is one.