How Much Power Does Section 232 Give the President to Restrict Steel Imports?

Monday, May 15, 2017 1:34 PM Written by 
Published in Trade Cases

How Much Power Does Section 232 Give the President to Restrict Steel Imports?

Commentary by Lewis Leibowitz
The Law Office of Lewis E. Leibowitz
Washington, D.C.

We have had many questions about the power of the President under Section 232 of the Trade Expansion Act of 1962.  The statute gives the President considerable power to take action to prevent imports from impairing the national  security.  This power has not been used very often.  Since 1980, the Commerce Department has conducted 14 investigations under Section 232. Very few were successful in obtaining import relief.

1.    Procedure

Section 232 is invoked either by self initiation by the President, or upon a petition by a U.S. industry claiming that imports of any article threaten to impair the national security.  The current investigations on steel and aluminum were self-initiated based on orders of President Trump.

The statute requires the Department of Commerce to conduct an investigation and prepare a report for the President within 270 days of the initiation of the investigation.  Commerce published the notice of initiation April 26, but the investigation was said to have been initiated on April 19, 2017. The deadline for the completion of Commerce’s investigation and report to the President would therefore by 270 days after April 19, or January 14, 2018. 

However, the statute does not prevent the Secretary of Commerce from issuing his report earlier than the 270 day deadline.  In his April 20 memorandum, President Trump mentioned a Commerce report and recommendations within 50 days.  

That short a time seems unrealistic, although it is possible in theory.  The Commerce Department is accepting public comments until May 31, 2017 in the steel case, 41 days after initiation.  Presumably, the Commerce report, which must include findings and recommendations for presidential action, will take more than 9 days to prepare.  If, as seems likely, the Defense Department will provde its assessment of the military and related needs for steel as part of the Commerce investigation, that time period could be extended.

The President must make a final determination within 90 days after receiving the report and recommendations from Commerce.  While the President can act sooner than 90 days after the Commerce report, some time must pass to consider the recommendations and develop a final decision. Given all the required steps, the earliest the President might act would be late July.  Action before that date would signal a lack of attention to the interlinking factors that should drive the decision to interfere with the market.  While it is possible that a decision could come before late July, it seems unlikely.

2.    Review of the decision by the Courts

In general, courts are very reluctant to review decisions of the President of United States.  However, two recent actions of President Trump, both involving immigration policy, have been enjoined by the courts.  An action to restrict or eliminate steel imports may be questioned by the courts because of the significant economic harm to the United States resulting from reduction of steel products in the US market that are needed by steel-using industries.  

The investigative report by the Secretary of Commerce may also be subject to judicial review.  These questions are very complex and cannot easily be answered.  The Commerce Department has considerable discretion in this area of inquiry and a decision that steel imports threaten to impair the national security could be difficult to overturn in the courts. Presidential implementation would also be difficult to overturn.  The courts could also review the nature of the remedies.  The statutory language is very broad regarding remedies; the degree to which a problem related to steel imports is supported by evidence and the degree to which the remedy would solve that problem could be reviewed.  The standard is likely to be favorable to the Commerce Department and the President. [Article Continues Below]

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3.    What are the Likely Recommendations of Commerce If a Threat to National Security Is Found?

The Secretary of Commerce is required to make recommendations for the actions to be taken to adjust imports of a product that threatens to impair the national security.  However, the President is not bound to follow the recommendations of the Secretary of Commerce.  He may adopt one or more measures addressing steel imports that follow or differ from the Commerce recommendations.

Import-related measures could consist of one or more of the following: increased tariffs; quantitative restrictions; tariff rate quotas (different duties after a certain quantity of material has been imported); license fees for imports; or more drastic measures, including an embargo on steel imports. Mentioning these possibilities does not mean that they are even being considered, much less up for adoption.

The measures may apply only to those products where imports have been found to threaten the national security.  The fact sheet released on April 20 lists five major steel products—it is possible that the Commerce Department could find that imports of certain products did not threaten to impair the national security.   Only after comments have been submitted by the May 31 deadline (which may be extended) can we see what products might be spared the imposition of import restrictions.  

Certain measures are less likely than others—an embargo on imports would almost certainly be challenged in the World Trade Organization.  Canada and Mexico, among other free trade agreement countries, may argue that their imports should not be subject to the same restrictions as non-FTA countries.  We need to wait and see what the comments say.

Another unlikely measure is a renewed set of VRAs [Voluntary Restraint Agreement], such as those negotiated in the 1960s and 1980s.  The WTO Safeguards agreement declared such agreements to be a violation of international trade rules.  
 
4.    The President’s authority.

The statute, which can be found in the United States Code under Title 19, section 1862, provide that the President may, after a recommendation from the Secretary of Commerce:

determine 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.

That is very broad authority indeed.  It is not unlimited, however.  The President must find that the measures “must” be taken to protect the national security.  Steel has never been found to be essential to the national security.  Most recently in 2001 the Commerce Department found that national security was not impaired by steel imports, because domestic steel producers were amply capable of supplying military needs.  That is still the case today.  

5.    The Possibility of Retroactive Relief

While the authority of the President is broad, it is not unlimited.  The President has never before determined that retroactive import restriction “must” be taken to protect national security.  It is impossible to predict what the Secretary of Commerce or the President will conclude “must” be done.  But imposing relief on imports that have already entered the country seems unlikely to be so necessary.

The statute does require that relief be implemented within 15 days after the President determines what he will do.  Thus, there is a possibility that the relief decided on will affect ships that are more than 15 days from US shores when the decision is made.  Careful monitoring is necessary for importers, service centers and steel using manufacturers.
 
6.    Duration of Relief

The statute, because it deals with threats to national security, does not have a mandatory time limit.  However, there are several constraints on the President’s freedom of action:

•    The President must submit a written report to Congress within 30 days of making his determination.  Congress may pass a resolution of disapproval or pass a statute constraining the President’s authority or terminating the relief.

•    The World Trade Organization dispute settlement provisions may be invoked by US trading partners if the relief against imports is not warranted.  A national security finding will present difficulties for the WTO dispute settlement system, as the Helms-Burton issue in the 1990s makes clear.  However, if the President acts without regards to the obligations of the global trading system, a dispute is likely.

7.    Final Thoughts

Predictions are too dangerous under the circumstances, because many facts are not yet known.  It is clear that the factual record for this case has yet to be written.  Interested parties must participate or risk being ignored.  Importers and their domestic customers (US manufactures of everything from automobiles to capital goods) are vital to the national security of this country as well as steel producers.  In fact, based on mountains of evidence, they are much more important than steel production.  Let’s hope we don’t have to decide between steel and steel users.  This may be the last opportunity to prevent a decision that could do severe and lasting damage to vital parts of the economy.  This is not a matter of convenience for US manufacturers competing in the global economy.

Trade Attorney Lewis Leibowitz will be presenting more information about Section 232 and other trade actions with former ITC Chairman Daniel Pearson of Cato Institute at this year's SMU Steel Summit Conference which will be held on August 28, 29 & 30, 2017 in Atlanta, Georgia. You can find more details about our conference by going to our website (www.SteelMarketUpdate.com/Events/Steel-Summit) or by clicking on this link.

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Read 1288 times Last modified on Monday, 15 May 2017 09:40
Lewis Leibowitz

Lewis Leibowitz, Owner of the Law Office of Lewis E. Leibowitz, practices in the areas of international trade law, customs law, and international commercial transactions. He represents clients before all federal courts and agencies dealing with international trade matters.

Mr. Leibowitz advises and assists clients in diverse matters including trade remedies, customs, foreign-trade zones and free trade agreements, trade negotiations, and related matters.

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