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(Adds background on trade action, case)
By Krista Hughes
WASHINGTON, July 10 (Reuters) - U.S. steel producers on Thursday accused Russia of flooding the market with cheap flat-rolled steel, challenging a 15-year trade deal and potentially reigniting a decades-old dispute over imports amid heightened tensions between Washington and Moscow.
In a submission to the Commerce Department, Nucor Corp , U.S. Steel Corp, ArcelorMittal USA LLC and others said the agreement had not stopped Russian producers from undercutting local prices or flooding the U.S. market with a 1,400 percent shipment increase in the first half of 2014 compared with the year-ago period.
"The agreement has failed in achieving its statutory purpose and thus should be promptly terminated," said the submission, released by steel industry lawyers.
Scrapping the 1999 suspension agreement would be in line with the U.S. administration's tougher stance toward Russia following a flare-up in tensions over Ukraine, including dropping the country from a trade benefits program.
The agreement has sheltered Russian steelmakers from steep anti-dumping duties on hot-rolled coil (HRC), instead setting a cap on imports and a minimum price. Reuters reported last month that the industry was considering the move.
But the industry's submission noted that the reference price had been below U.S. market prices since 2004, with the gap widening to more than $180 in the second quarter. Russian prices were also lower than any other imports sold in U.S. markets.
"This consistent disconnect between the price of imports from Russia and those from other markets demonstrates that the suspension agreement is not working," said Alan Price, an attorney from Wiley Rein representing Nucor Corp.
"The failure of the suspension agreement to prevent underselling is allowing Russian producers to sell significant and injurious volumes of hot-rolled steel into the U.S. market," Price said.
The call to scrap the deal follows travel bans and asset freezes imposed on Russian officials after Russia's military seized the Crimean Peninsula from Ukraine earlier this year.
Russia is a major HRC supplier and the move also reflects concerns about weak global prices, oversupply and sluggish demand for hot-rolled steel, used in appliances and autos.
A Commerce Department official said the department was reviewing the request, which comes a day before a closely watched decision over anti-dumping duties on imports of pipe used in the oil and gas industries.
If the agreement is ditched, Russia's Severstal would be hit with anti-dumping duties of 73.59 percent. Other Russian producers, such as Novolipetsk Steel and Magnitogorsk Iron and Steel Works, would face duties of 184.56 percent.
The original deal was agreed as the United States moved to stem a flood of Russian steel imports after the Cold War ended. It can be terminated with 60 days notice and duties would apply immediately.
The submission was also signed by Gallatin Steel Company, Steel Dynamics and SSAB. (Reporting by Krista Hughes; Editing by G Crosse, James Dalgleish and Richard Chang)