National Security Investigations of Steel and Aluminum

Thinly-veiled protectionism or a bona-fide national security measure? Section 232 of the Trade Expansion Act of 1962 may answer “yes” to both descriptions. After pretty much lying dormant for the better part of two decades, the statute is back with a vengeance.

By now, I’m sure everyone’s heard about the Section 232 investigations on steel and aluminum.  Because I’ve received a number of questions about the statute, the investigations and the potential consequences, I thought it may be useful to provide a brief summary of these points on my firm’s website.

Section 232, codified at 19 U.S.C. § 1862, authorizes the Commerce Department to investigate “the effects on the national security of imports of” particular types of merchandise. Commerce, in consultation with the Defense Department and any other Federal agencies it designates, has 270 days to conduct its investigation. That agency must then issue a report to the President “with respect to the effect of the importation of such article in such quantities or under such circumstances upon the national security,” along with proposals on remedying the situation.

Commerce Proposes, El Jefe Disposes

If the Commerce report “finds that an article is being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security,” the President then has 90 days to determine what action to take. While doing nothing is an option, the statute provides broad authority “to adjust the imports of the article and its derivatives so that such imports will not threaten to impair the national security.”

The factors that both Commerce and the President are directed to take into account include the “domestic production needed for projected national defense requirements” and domestic capacity to provide that production, and the impact of imports on that capacity. Indeed, the statute’s laundry list of factors seem to focus more on the domestic industry’s general financial condition than national security-specific guidelines.

The President has virtually untrammeled authority to adopt a remedy. The only specific action identified is negotiation of an agreement “which limits or restricts the importation into, or the exportation to, the United States.” Such negotiations are not required, however, and the statutory authority “to adjust the imports” appears broad enough to include quantitative restrictions and additional tariffs, and can target all or only some countries. The only brake Section 232 provides is “enactment of a disapproval resolution” by Congress.

What Happens Next?

I’m reluctant to make predictions, particularly about the future, but there are a couple of points leading me to expect that some kind of action will be taken in both investigations.

First, both were commenced at the direction of the President, rather than through an industry request. Thus, there appears to be a political imperative to reach an affirmative outcome, “affirmative” defined as imposition of trade relief.

Second, the scope of each investigations — “steel” and “aluminum” — is extraordinarily broad.  This breadth may give rise to a concomitantly broad form of relief, or could be a stalking horse for Commerce and the domestic steel and aluminum industries to pare the focus to specific types of products. I expect the latter, at which point everyone will breathe a sigh of relief because “it could have been worse”; perhaps that has been the strategy all along.

Perhaps the most wide-ranging use of Section 232 remedies was President Carter’s imposition of a “Petroleum Import Adjustment Program” in 1979, involving a “a gasoline conservation fee on imports of crude oil and gasoline.” Most other cases (all unsuccessful) were more narrowly-drawn, such as plastic injection molding machines, uranium, integrated circuit ceramic packages and bolts, nuts and large screws of iron or steel.

Whether the outcomes of the steel and aluminum determinations are pre-ordained is anyone’s guess at this point. If, as I expect, there are findings that the investigated imports or some subset are having an adverse effect on national security, the only questions will be what kind of import restrictions will be adopted.



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