Trade Cases

Leibowitz on Trade: Section 232—Past and Future

Written by Lewis Leibowitz

Readers asked me to discuss Section 232 and its possible future. Steel and aluminum tariffs have been around since 2018, not to mention other investigations on components of electric transformers made with electrical steel, autos and auto parts, and vanadium. I think that, under applicable law, certain of these cases have been resolved. I explain here why I think so and what might happen next. 

A little history is in order first. The concept of limiting imports for national security reasons goes back to the First World War. In its first iteration, national security was a wartime policy. Congress was concerned that domestic producers could strengthen an enemy by selling goods or services and by buying such goods from Germany and its allies. A few months after war was declared in 1917, Congress passed the Trading with the Enemy Act (TWTA), prohibiting any American from doing business with an enterprise located in a country with which the United States was at war. The president was authorized to permit trading, but without a license no trade was lawful. 

By the outbreak of World War II, the act was amended to apply in peacetime as well in certain situations. The United States was pulled from the gold standard in 1933 based on the authority of TWTA. After World War II, the Trading with the Enemy Act was restricted to countries at war with the United States; a new law called the International Emergency Economic Powers Act (IEEPA) was passed in 1976, giving the president power to declare a state of national emergency (short of war) and to regulate trade with countries as outlined in the declaration of national emergency. Sanctions on Iran, Iraq, Sudan, Somalia, Libya and other countries have been based on IEEPA.

After World War II and the creation of the General Agreement on Tariffs and Trade (GATT), easing restrictions on trade with major trading partners of the United States became a guiding policy. Congress enacted the Trade Expansion Act of 1962 to authorize the president to reduce tariffs as part of negotiated agreements. Section 232 of that act authorized the president to increase tariffs and other barriers to trade if the reductions in barriers “threaten[ed] to impair national security by permitting too many imports in competition with American producers. At first, the president used this authority only to restrict imports of crude oil and refined petroleum products, because low-priced oil imports threatened to injure the domestic oil production and refining industries. Until 1973, imported oil was generally much lower in price than domestically produced crude oil. The 1973 Arab-Israeli War and the rise of OPEC reversed that situation and foreign oil became more expensive. Tariffs on oil based on Section 232 lapsed early in the Reagan administration.

Industries outside petroleum began to clamor for trade protection based on national security in the early 1980s. Ferroalloys and machine tools were the first. The procedures under Section 232 gave the president discretion to deny protection from imports. Moreover, the president had no time limit on deciding whether to impose import restrictions even after an investigation and affirmative determination by the Secretary of the Treasury (from 1974 to 1980) or the Secretary of Commerce (since 1980). Ferroalloys and machine tools were not helped as a result of the unlimited discretion afforded to the president to take no action, or when action was delayed and taken in very small increments. Presidents did not want to create barriers to trade and were reluctant to use the authority under Section 232.

In 1988, in reaction to the recalcitrance of the Reagan administration, Congress amended Section 232 substantially. The Commerce Department was required to complete its investigation of whether imports threaten to impair national security within 270 days (previously the deadline was one year), and, if Commerce concluded that imports threatened to impair national security, the president was required, within 90 days after receiving the affirmative determination, to determine what action to take to end the perceived threat to national security. The president could not restrict imports under Section 232 unless the time limits were met. 

Coupling the requirement for a comprehensive solution and the time limits meant that the president was not permitted to “dribble out” relief in small increments to the affected industry. The statute required comprehensive relief within 90 days under the 1988 amendments. The White House opposed the requirements, but Congress enacted them over the objections of the White House; the president signed the bill into law, as part of the “Omnibus Trade and Competitive Act of 1988.” 

This new Section 232 structure and procedure continues to exist today. The steel and aluminum investigations were concluded in January 2018 (within 270 days after initiation) and the president issued his determinations on steel and aluminum within 90 days after receiving the Secretary of Commerce report. But the validity of the subsequent proclamations without a new Commerce report is currently under challenge. Moreover, the proclamations doubling the tariffs on steel imports from Turkey (in August 2018) and the “derivative products” proclamations (in January 2020) have been declared contrary to law. 

With respect to the investigations initiated in 2020 (electrical transformer components, autos and auto parts and vanadium), the reports have not been publicly disclosed (contrary to the statue), but assuming that they were completed within 270 days after the investigations were initiated, the 90-day time limits have long since passed. (There are other time limits in the statute as well, should the president choose to negotiate import restrictions with exporting countries.)

Numerous court cases have been filed concerning the legality of presidential proclamations under Section 232. Some have been decided and others are still pending. Still, a few principles have been clarified. First, the secretary’s investigation must take no longer than 270 days. Second, the president’s determination must be made within 90 days after receiving the Secretary of Commerce report finding that imports “threaten to impair” national security. Third, if the president fails to make a determination under Section 232 more than 90 days after receiving the Commerce report, the Commerce report cannot be the basis for presidential import restrictions. 

Looking at the 2020 investigations (autos and auto parts, vanadium, transformer components), those investigations can no longer support a presidential decision to restrict imports under Section 232. Thus, for President Biden to restrict imports of those products, a new Commerce investigation and report must be generated. At least that is the lesson taught by the cases decided under Section 232 so far. This does not mean that a new investigation may not be undertaken. Section 232 certainly allows for that. 

The procedural rules and the time limits in Section 232 serve as legitimate checks on the president’s authority to set trade policy. Congress has the constitutional authority to regulate international and domestic commerce, which it has done in enacting (and amending) Section 232. Without these checks, Congress would only be able to restrict the president by defining “national security” more narrowly, a challenge to the separation of powers provided in the Constitution. 

As I’ve suggested here, there are quite a few more open issues. But Congress clearly imposed conditions in Section 232 on the president’s power to raise tariffs or impose quotas. If those time limits and the contents of the proclamations meet the statutory requirements, the president has wide discretion to impose import restrictions. But the Chief Executive of the United States does not have the authority to raise tariffs or impose quotas under Section 232 without complying with these conditions. 

Bills are pending in Congress to further confine the president’s authority to regulate international trade, a power expressly given to Congress by the Constitution. Whether these bills will pass is anybody’s guess; but Congress was definite in preventing the president from using Section 232 as just an exercise in open-ended negotiations. 

Lewis Leibowitz

The Law Office of Lewis E. Leibowitz

1400 16th Street, NW, Suite 350

Washington, D.C. 20036

Phone:  (202) 776-1142

Mobile:  (202) 250-1551


Lewis Leibowitz, SMU Contributor

Lewis Leibowitz

Read more from Lewis Leibowitz

Latest in Trade Cases