The Trump Administration used existing U.S. laws aggressively to address trade problems in a wide range of products. Some laws had previously been rarely used or had been used in a relatively narrow fashion. This is true of Section 232 of the Trade Expansion Act of 1962 which was a law put on the books in 1955 and modified in 1962 as an outgrowth of the Korean War and challenges the U.S. had faced in ramping up for the conflict. When the Trump Administration initiated two investigations on steel and aluminum in 2017, I had prepared write-ups for my firm’s webpage looking at the law and its prior application. As noted in my first trade flow on the 232 investigation on steel from April 2017, the law deals with threats from imports to national security, including effects of imports on domestic industries. See Terence P. Stewart, Imports of Steel into the United States and their Effect on National Security (Updated), April 20, 2017 (no longer available online). The trade flow is reprinted below as it reviews the relevant language from the statute.
Imports of Steel into the United States and their Effect on National Security (Updated)
April 20, 2017 Terence P. Stewart
(Updated 4-20-2017 afternoon)
The U.S. steel industry has been hard pressed by dumped and subsidized imports for many decades causing the closure of many plants and the loss of thousands of good paying jobs. While the industry has filed literally hundreds of cases to address unfair trade practices, the industry continues to face large structural problems from China and others. And steel is a fundamental building block of a strong national defense.
On April 19, 2017, Secretary of Commerce Ross initiated a Section 232 investigation into whether imports of steel mill products threaten national security.[1] On April 20, 2017, President Trump signed a Presidential Memorandum for the Secretary of Commerce directing Commerce to prioritize the investigation and to “proceed expeditiously.”[2] How quickly the investigation will proceed is unclear, but, in remarks upon signing the Memorandum, President Trump said “we’ll be back over a period of the next 30 to 50 days, …, and maybe sooner than that. But statutorily, we probably want to take a very good, strong, hard study.”[3]
The Commerce Secretary has initiated an investigation under a long extant but relatively seldom used US law. Specifically, Section 232(b) of the Trade Expansion Act of 1962, as amended, requires the Secretary of Commerce on his own motion or upon the request from the head of any department or agency, to initiate an investigation “to determine the effects on the national security of imports of the article” of interest. 19 U.S.C. 1862(b)(1)(A).
Commerce has up to 270 days to conduct such an investigation, is required to consult with the Secretary of Defense “regarding the methodological and policy questions raised” by the investigation, seek information from other agencies and where appropriate hold public hearings and give interested parties an opportunity to present information. 19 U.S.C. 1862(b)(2)(A). Commerce can also ask Defense for an assessment of the defense requirements of the article being investigated. Id. at (b)(2)(B).
At the end of the investigation, the Secretary of Commerce submits a report containing the findings and recommendations of action or inaction and will publish the public portions in the Federal Register. 19 U.S.C. 1862(b)(3)(A) and (B).
The President has 90 days to determine what, if any, action to take if Commerce has found that importations “threaten to impair the national security” and has an additional 15 days to implement the action determined to be necessary to eliminate the threat. 19 U.S.C. 1862(c). The President must submit to the Congress a written statement of the reasons to take action or to take no action.
Subsection (d) of 232 (19 U.S.C. 1862(d)) reviews elements that should be considered by the Commerce Secretary and the President:
For purposes of this section, the Secretary and the President shall, in the light of the requirements of national security and without excluding other relevant factors, give consideration to domestic production needed for projected national defense requirements, the capacity of domestic industries to meet such requirements existing and anticipated availabilities of the human resources, products, raw materials, and other supplies and services essential to the national defense, the requirements of growth of such industries and such supplies and services including the investment, exploration, and development necessary to assure such growth, and the importation of goods in terms of their quantities, availabilities, character, and use as those affect such industries and the capacity of the United States to meet national security requirements. In the administration of this section, the Secretary and the President shall further recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports shall be considered, without excluding other factors, in determining whether such weakening of our internal economy may impair our national security.
Commerce regulations are found at 15 C.F.R. 705 et seq.
Since the law took effect, there have been twenty-six 232 investigations, nine since 1988: three on crude oil and refined petroleum products, and cases on iron ore and semi-finished steel, ceramic semiconductor packages, gears and gearing products, plastic injection molding machines, uranium, and antifriction bearings. https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote/section-232-investigations. Typically import relief has not been provided (crude oil from individual countries embargoed on two occasions, one involving Libya and one involving Iran) but that has depended on both the facts of the individual investigations and the construction of the statutory terms by the Administration in power. VRAs were used on machine tools; use of national stockpile and the denial of GSP benefits were used on chromium, manganese and silicon ferroalloys; several crude oil cases, President authorized additional fees.
The Commerce Department has an online pamphlet from June 2007 entitled, Section 232 Investigations Program Guide: The Effect of Imports on the National Security (Bureau of Industry and Security Office of Technology Evaluation)(includes the statute, regulations and list of prior cases and their disposition). https://www.bis.doc.gov/index.php/forms-documents/section-232-investigations/86-section-232-booklet/file.
While the investigation and Presidential review could take a year, it could be, and is likely to be, completed much more quickly, especially given the President’s direction that Commerce prioritize and expedite the 232 investigation. Look for the Trump Administration to view national security needs more broadly than has been done in the past and to construe the statutory considerations in a manner that will support ensuring a viable industry in many sectors going forward.
[1] See Section 232 Notification Letter to Secretary of Defense James Mattis (2017-04-19) at https://www.commerce.gov/sites/commerce.gov/files/media/files/2017/2017-04-19_2.pdf.
[2] See the Memorandum at https://www.whitehouse.gov/the-press-office/2017/04/20/presidential-memorandum-secretary-commerce. The Department of Commerce’s press release and fact sheets are available at https://www.commerce.gov/news/press-releases/2017/04/presidential-memorandum-prioritizes-commerce-steel-investigation; https://www.commerce.gov/news/fact-sheets/2017/04/president-trump-standing-unfair-steel-trade-practices; https://www.commerce.gov/news/fact-sheets/2017/04/fact-sheet-section-232-investigations-effect-imports-national-security.
[3] See https://www.whitehouse.gov/the-press-office/2017/04/20/remarks-president-trump-signing-memorandum-regarding-investigation.
Use under the Trump Administration
The Trump Administration used the law aggressively in 2017-2018 to provide relief on steel and aluminum. For many trading partners, there was concern about the claim of a national security threat from neighbors and allies as well as other countries. A number of countries filed challenges at the WTO and also retaliated against U.S. exports, most on the bogus theory that section 232 was a safeguard action. The U.S. filed disputes against the countries who retaliated. All these disputes remain unresolved at the WTO awaiting panel reports in the second half of 2021.
The Commerce Department also initiated a 232 investigation on automobiles and auto parts and received petitions seeking investigations on a number of other products (e.g., uranium, titanium sponge, mobile cranes, vanadium, electrical steel components for electrical transformers used in power grids). While the 232 investigation on automobiles and auto parts resulted in a report going from Commerce to the President, no action was ever taken and the report was never released publicly or forwarded to the Congress.
The actions by the Trump Administration raised concerns with Congress on whether the law needed to be updated and whether it was being used properly, at least as far as automobiles went. While there has been significant court litigation in the U.S. on steel tariffs that resulted from the 232 investigation, these challenges have been largely rejected by the courts. As noted above, disputes at the WTO continue on the WTO consistency of U.S. actions.
Congressional actions
Both the U.S. House of Representatives and the U.S. Senate saw legislative proposals put forward in 2019 to modify section 232 usually to give the Defense Department a greater role in determining if there is a national security threat and also to ensure the Congress a role in reviewing any proposal before actions were taken. See, e.g., H.R. 1008 (Feb. 6, 2019) and S.365 (Feb. 6, 2019)(identical bills).
During the Senate Finance Hearing considering the nomination of President Biden’s USTR nominee Katherine Tai, a number of Senators raised concerns about greater coordination with Congress by the Administration in the trade law arena generally and a need to review and possibly update certain trade laws.
On March 15, 2021, Senator Rob Portman (R-OH) introduced S.746, the Trade Security Act of 2021, essentially a repeat of the legislation he introduced in 2019. He had six cosponsors — Dianne Feinstein (D-CA), Joni Ernst (R-IA), Kyrsten Sinema (D-AZ), Deb Fischer (R-NE), Roger Wicker (R-MS), and Todd Young (R-IN). The press release explains the purpose of the bill. See Press Release, Portman, Sinema, Ernst, Feinstein, Fischer, Wicker & Young Introduce Trade Security Act to Reform National Security Tariff Process, March 15, 2021, https://www.portman.senate.gov/newsroom/press-releases/portman-sinema-ernst-feinstein-fischer-wicker-young-introduce-trade. The press release is copied below and is follow by the bill which is embedded.
“WASHINGTON, D.C. – U.S. Senators Rob Portman (R-OH), Dianne Feinstein (D-CA), Joni Ernst (R-IA), Kyrsten Sinema (D-AZ), Deb Fischer (R-NE), Roger Wicker (R-MS), and Todd Young (R-IN) today introduced the Trade Security Act, legislation that will reform Section 232 of the Trade Expansion Act of 1962 to better align the statute with its original intent as a trade remedy tool for the president and Congress to respond to genuine threats to national security. In keeping with the original intent of Section 232, this bill makes common-sense reforms that require the Department of Defense to justify the national security basis for new tariffs under Section 232 and increase congressional oversight of this process. The text of the bill is here and a brief summary is below.
“’We must hold countries that violate our trade laws accountable, but we must do so in a way that protects American jobs and strengthens the U.S. economy,’ said Senator Portman. ‘I originally introduced this bill over concerns regarding the previous administration’s intent to misuse Section 232 statute to impose tariffs on automobiles and auto parts, which would have a devastating impact on Ohio jobs and the U.S. economy as a whole. This bipartisan legislation preserves this trade tool while properly placing the national security designation at the Department of Defense and expanding the role of Congress in the process. As a former U.S. Trade Representative, I know that misusing our trade tools not only hurts our exports and our manufacturers, but also our consumers, so I urge my colleagues to support this bipartisan legislation.’
“’Preventing harmful tariffs caused by unnecessary trade wars will save Arizona jobs and protect Arizona families and businesses from higher prices,’ said Senator Sinema.
“’When bad actors abuse and take advantage of our trade policies in a way that threatens our national security, we need to hold these countries accountable,’ said Senator Ernst. ‘The Department of Defense, not the Department of Commerce, should evaluate and verify the national security basis for Section 232 tariffs. This bipartisan legislation will increase congressional oversight, and in turn, help the president make decisions that support American jobs while protecting our national security.’
“’This bipartisan legislation would restore Congress’ trade oversight role and ensure that the Department of Defense justifies the national security needs of tariffs imposed under Section 232,’ said Senator Fischer.
“’Indiana is the most manufacturing-intensive state in the country, and tariffs can detrimentally impact Hoosier farmers and manufacturers if wrongly utilized. During this pandemic that has disrupted our domestic supply chains, we need to be especially vigilant about how Section 232 is used. I’ll continue working to ensure Hoosiers have a seat at the table for future trade discussions,’ said Senator Young.
“NOTE: The Trade Security Act reforms the Section 232 statute to ensure that (1) any Section 232 actions are based on a national security determination by the Department of Defense; and (2) Congress has a larger role to play in 232 actions. Specifically, this bill will:
“Bifurcate the existing Section 232 process into an investigation phase, led by the Department of Defense, and a remedy phase, led by the Department of Commerce. Splitting these responsibilities, while guaranteeing consultation between the two departments at all stages of the process, plays to each department’s strengths to ensure that the statute is used for genuine national security purposes.
“Require the Department of Defense – instead of the Department of Commerce – to justify the national security basis for new tariffs under Section 232 and make the determination about the national security threat posed by imports of certain products. If a threat is found, the Department of Defense would send its report to the president. In the event that the president desires to take action based on the finding of a national security threat, the president would then direct the Secretary of Commerce, in consultation with the Secretary of Defense and the U.S. Trade Representative, to develop recommendations for how to respond to the threat. After receiving the recommendations of the Secretary of Commerce, the president would decide whether to take action.
“Increase the role of Congress in the Section 232 process by expanding the process whereby Congress can disapprove of a Section 232 action by passing a joint resolution of disapproval. Currently, Section 232 contains a disapproval resolution process limited only to the disapproval of actions on oil imports, which was inserted into Section 232 in 1980 by Congress in response to concerns about the misuse of the statute. This bill would expand the use of that disapproval resolution process to all types of products. The reformed disapproval process will only apply to future Section 232 actions.
“Require consultation with Congress throughout the Section 232 process. “
Conclusion
In the United States, Congress and the Administration both have roles in international trade. Over the years, large amounts of responsibility for trade policy has been delegated by Congress to the President. The Trump Administration was aggressive in using all U.S. laws on the books to address trade areas of concern. When laws have not been reviewed in decades for fitness for purpose, an aggressive use of provisions, even if authorized by statute, will result in efforts to reconsider the scope of legislation by Congress.
Obviously, the introduction of a bill does not guarantee movement or modification of existing U.S. law. But there have been massive changes to the global economy and what may constitute a threat over the last nearly sixty years. There are also the questions of WTO compatibility and any WTO reform that may be appropriate based on the outcome of pending disputes and prior disputes on the use of GATT Art. XXI. Only a careful review of the existing law, current challenges, and WTO implications and potential modifications will lead to an appropriate review and possible modification of Section 232.
Senator Portman and the six co-sponsors have introduced a bill that if adopted would shift the roles of Commerce and Defense in the current legislation and would add a greater role for Congress in considering recommended actions. The bill certainly reflects concerns that have been expressed by many Senators and House members in the last few years on the proper role of Section 232 investigations.
The myriad problems facing U.S. companies from actions by some governments that are not addressed under the WTO, and the challenges to the national ability to safeguard health during the pandemic raise important red flags. Any legislative review of one statute should be undertaken in the context of a review of the array of tools available to the government and to the private sector and whether those tools are adequate to the needs of the present reality.
To read the original blog post from Terrence Stewart’s Current Thoughts On Trade, please click here