Just one week after launching a national security investigation of steel imports under Section 232 of the Trade Expansion Act of 1962, President Trump has announced plans to institute a similar investigation regarding aluminum. In a memorandum of April 27, 2017, President Trump announced that the Secretary of Commerce had initiated an investigation under Section 232 to determine the national security effects of aluminum imports.
Concurrent with this new action under Section 232 on aluminum, the Department of Commerce has also moved forward in its Section 232 investigation of steel. On April 26, 2017, the Commerce Department issued a schedule for the steel Section 232 investigation, calling for a hearing on May 24, applications to participate in that hearing by May 17, and written comments by any person by May 31.
I. Section 232 investigation of aluminum
President Trump’s memorandum on the Section 232 aluminum investigation largely mirrors his prior memorandum on the Section 232 steel investigation. Both memoranda note that “[c]ore industries such as steel, aluminum, vehicles, aircraft, shipbuilding, and semiconductors are critical elements of our manufacturing and defense industrial bases.” Both memoranda emphasize the need to defend these core industries “against unfair practices and other abuses.” Both memoranda assert that “global markets” are “distorted by large volumes of excess capacity” and observe that this excess capacity “discourages long-term investment in the industry.” Finally, both memoranda emphasize that other efforts at controlling overcapacity have been unsuccessful.
Although some initial reports suggested an expedited timeline for the aluminum investigation, the press release accompanying President Trump’s memorandum on aluminum referred only to the statutory timeline. This timeline permits the Secretary of Commerce 270 days to determine the national security effects of the imports at issue, and gives the President a further 90 days thereafter to determine what action is necessary to adjust the imports in question. In remarks at the White House, Commerce Secretary Wilbur Ross promised that “the federal government will be proactive” and that the Commerce Department would “conduct this investigation thoroughly and expeditiously so that we can fully enforce our trade laws and defend this country against those who would do us harm.”
Pursuant to the Section 232 statute, Secretary Ross must determine whether aluminum is being “imported into the United States in such quantities or under such circumstances as to threaten to impair the national security.” Based on Secretary Ross’s findings, President Trump must issue a report to Congress and may take such actions as he deems necessary to “adjust” aluminum imports “so that such imports will not threaten to impair the national security.”
The Commerce Department determines the effect of imports on national security based on the quantity of those imports, and other circumstances related to importation. The Commerce Department judges national security requirements based on a number of factors, including the domestic production needed for national defense requirements, the capacity of domestic industries to meet national defense requirements, and existing and anticipated availability of human resources, raw materials, and other supplies essential to national defense.
The Section 232 regulations contemplate public hearings and commentary in these investigations, and prior investigations under the statute have involved multiple hearings across the United States. As discussed in Part III below, the Commerce Department will likewise hold hearings and permit public comments in the Section 232 steel investigation, and following the initial announcement of the investigation, the Commerce Department has indicated it is “particularly interested” in comments on certain topics. Similar guidance regarding the Section 232 aluminum investigation may be issued in the coming days.
II. Prior Section 232 investigations
According to a Commerce Department summary, there have been 26 prior investigations under Section 232, with the first investigation occurring in 1963 and—prior to last week—the most recent investigation being initiated in 2001. These prior investigations have related to industries including tungsten mill products, anti-friction bearings, petroleum, watches, and ferroalloys. Prior investigations were initiated by industry associations or other private parties, as well as cabinet officials, members of Congress, or by presidential decree.
Most prior investigations under Section 232 have not resulted in presidential action. In the first investigation under Section 232, for example, the Commerce Department concluded that imports of the metals in question did not threaten to impair national security. In other cases, even when the Commerce Department has determined that the imports of the product at issue do threaten national security, the President has determined that no action was necessary to adjust imports. The President made such a determination in both 1994 and 2000, for example, with respect to petroleum imports.
When Presidents have acted under Section 232, they have taken a variety of steps. In response to some investigations the President has simply embargoed imports of the product in question. Voluntary restraint agreements were sought in connection with one Section 232 investigation, and another investigation resulted in the removal of products from eligibility for duty-free entry under the Generalized System of Preferences. In other investigations, the President has imposed fees or quotas to limit imports of the product at issue.
Presidential actions under Section 232 have at times been subject to challenge. In response to one such challenge, the Supreme Court held in 1976 that Section 232 authorized the President to impose not only quotas to control imports, but also to implement certain license fees. The Supreme Court emphasized the limits of its holding, however, that stated that its conclusion in that case “in no way compels the further conclusion that any action the President might take, as long as it has even a remote impact on imports, is also so authorized.”
Taking up this limiting language in subsequent case, a federal district court struck down President Carter’s imposition of a license fee on crude oil and gas pursuant to a Section 232 investigation. As that court concluded, the fee in question would affect not only oil imports, but also domestic oil. In light of this broad effect and the Supreme Court’s limiting language, the court held that the President lacked authority under Section 232 to impose the fee. Despite this decision, however, the President retains significant discretion to act under Section 232, should the Commerce Department determine that imports of aluminum (or steel) threaten to impair national security.
III. Steel Section 232 investigation update – Schedule for hearing and comments
This initiation of this new Section 232 investigation of aluminum is accompanied by developments in the Section 232 investigation of steel, initiated on April 20, 2017. Specifically, on April 26, 2017, the Commerce Department requested public comments and announced a hearing in the Section 232 steel investigation.
The steel investigation hearing will be held in Washington, D.C. on Wednesday, May 24, 2017, at the Commerce Department auditorium. Requests to participate in the hearing are due the previous week, on Wednesday, May 17, 2017. The Commerce Department will accept comments from anyone, whether appearing at the hearing or not, through Wednesday, May 31, 2017.
The Commerce Department has indicated that it is “particularly interested” in comments directed at a number of specific criteria, consistent with the Section 232 regulations. These criteria are:
(a) Quantity of steel or other circumstances related to the importation of steel;
(b) Domestic production and productive capacity needed for steel to meet projected national defense requirements;
(c) Existing and anticipated availability of human resources, products, raw materials, production equipment, and facilities to produce steel;
(d) Growth requirements of the steel industry to meet national defense requirements and/or requirements to assure such growth;
(e) The impact of foreign competition on the economic welfare of the steel industry;
(f) The displacement of any domestic steel causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;
(g) The displacement of any domestic steel causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;
(h) Relevant factors that are causing or will cause a weakening of our national economy; and
(i) Any other relevant factors.
According to the Commerce Department’s notice, the hearing will last from 10 a.m. until 1 p.m., and although each speaker will be allowed only 10 minutes to present, limits on the number of persons presenting may be necessary. The Commerce Department advises those who seek to participate in the hearing to “describe the individual’s interest in the hearing” and “where appropriate, explain why the individual is a proper representative of a group or class of persons that has such an interest.” Consistent with the conduct of prior investigations, the Commerce Department has indicated that it wishes to ensure “a full range of comments is heard” at the hearing.
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Interest in these two Section 232 investigations is likely not limited to the aluminum and steel industries. In fact, in light of President Trump’s initiation of two such investigations in quick succession, other industries—particularly those also described as “core industries” in the underlying memoranda—may seek similar treatment.