Earlier this month President Trump launched an investigation into steel imports under Section 232 of the Trade Expansion Act, which aims to identify potential threats to national security. On April 27, the president announced plans to launch another investigation under Section 232, this time with respect to aluminum, as part of an ongoing effort to protect the U.S. industry by using various laws to curb aluminum imports.
Section 232 authorizes the Secretary of Commerce to investigate whether an “article” is being imported into the United States “in such quantities, or under such circumstances as to threaten to impair the national security….” Section 232 investigations are conducted within the Department of Commerce by the Bureau of Industry and Security (BIS), which is also the same part of the DOC that handles export licenses and anti-boycott compliance.
The statute allows an interested party to file a request for Section 232 investigation, or permits the DOC to self-initiate an investigation. In this case, it appears that the DOC would be self-initiating an investigation.
As part of the investigation, the statute directs the DOC to consult with the Secretary of Defense regarding “methodological and policy questions” raised in the investigation. Commerce may also provide the public with an opportunity to comment. The DOC regulations provide that public hearings “may” be held if “deemed appropriate.”
Under Section 232, the Secretary of Commerce must submit a report to the president with findings of the investigation, within 270 days of initiation. So if the investigation was initiated on April 27, the DOC would have until January 22, 2018, to submit a report to President Trump. Upon receiving the report, the president has 90 days to determine whether he concurs with the finding of the Secretary of Commerce and determine what action should be taken. The president must also submit a report to Congress within 30 days of making a determination. Note that the president has apparently indicated his desire that the Commerce report due 270 days after initiation nonetheless be “expedited.” Press reports indicated that the president asked that the report mandated by the Section 232 investigation on steel imports, launched last week, be completed within 30-50 days.
The remedies provided under Section 232 are broad and vague. The statute only states that “if the President concurs, determines the nature and duration of the action that, in the judgment of the President, must be taken to adjust the imports of the article and its derivatives so that such imports will not threaten to impair the national security.” It is unknown what the “article” or “articles” will be here. Nevertheless, it appears to be aimed generally at aluminum imports.
The DOC regulations implementing Section 232 identify the following criteria for determining the effect of imports on national security:
- Domestic production needed for projected national defense requirements;
- The capacity of domestic industries to meet projected national defense requirements;
- The existing and anticipated availabilities of human resources, products, raw materials, production equipment and facilities, and other supplies and services essential to the national defense;
- The growth requirements of domestic industries to meet national defense requirements and the supplies and services including the investment, exploration and development necessary to assure such growth; and
- Any other relevant factors.
The regulations also identify the following economic factors:
- The impact of foreign competition on the economic welfare of any domestic industry essential to our national security;
- The displacement of any domestic products causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects; and
- Any other relevant factors that are causing or will cause a weakening of our national economy.
Past Use of Section 232
Past use of Section 232 has been extremely rare. Other than last week’s announcement of a Section 232 investigation on steel imports, the last time that a Section 232 investigation was requested was in 2001, when two members of Congress requested an investigation of iron ore and semi-finished steel. In that case, the president decided to take no action on imports under Section 232. The last time we know of that a Section 232 investigation occurred that actually resulted in import action was in 1983, in a case involving machine tools. In 1986, President Reagan deferred a “formal” decision, but instead instructed the United States to negotiate “voluntary restraint agreements” with Japan and Taiwan to limit machine tool imports.
This appears to be yet another attempt by the Trump Administration to search for any statutory tools available to help the U.S. aluminum industry by limiting imports. The fact that the Trump Administration is self-initiating the investigation suggests that there may well be some type of aluminum import restraints pursuant to this investigation. If the investigation actually leads to import duties or other restraints of some sort, there almost certainly will be a challenge by the United States’ trading partners in the World Trade Organization (WTO). While there is a provision in the WTO Agreement that permits members to depart from obligations for “war or other emergency in international relations,” it seems that U.S. trading partners would almost certainly challenge any United States invocation of this exception, and could lead to trade retaliation.
We will monitor this and let you know the scope of the investigation.