Following a request from the President on May 23, the U.S. Department of Commerce initiated a vast investigation to determine the effects on national security of imports of automobiles — including not only cars but SUVs, vans and light trucks — in addition to automotive parts.
The Secretary of Commerce initiated this investigation under Section 232 of the Trade Expansion Act of 1962,1 a once-obscure statute that has gained notoriety since its initial use by the Trump Administration 12 months ago. Section 232 authorizes Commerce to investigate whether products are being imported “in such quantities, or under such circumstances as to threaten to impair the national security.”2 Importantly, “national security” is defined expansively to include not only the military and national defense but also “the economic welfare of the Nation.”3
If an affirmative finding is made, the President is authorized to “adjust” imports of the products, and those “adjustments” may include actions such as tariffs, quotas, negotiated agreements with foreign governments and other important restrictions. The new investigation of imported automobiles and auto parts follows proceedings against a broad range of steel and aluminum imports, which led to the imposition of tariffs at the rate of 25 percent and 10 percent, respectively.
Section 232(b) establishes procedures governing national security investigations. It requires the Secretary of Commerce to submit to the President a report on the findings of the investigation within 270 days, which, in the new investigation, will be Feb. 17, 2019.4 The President then has 90 days to determine whether to accept the report’s findings. If so, the President must take action within 15 days and report the decision to Congress within 30 days.5
Although the procedures specified by Section 232 and the regulations enacted by Commerce are limited, they offer important opportunities for affected companies to present their views on the role and impact of imports on U.S. industry and the economy.
First, Commerce is directed to consult with other government agencies, expressly including the Department of Defense6 and almost certainly also to include the Departments of State, Treasury and Labor as well as the Office of the U.S. Trade Representative (USTR). This consultation requirement gives stakeholders multiple points of contact in the U.S. government to whom they can express their concerns.
Second, Commerce has announced a schedule in the autos investigation that will offer opportunities for parties to submit written statements and participate in a public hearing. Written comments are due June 22, rebuttal comments are due July 5 and Commerce will hold a multiday hearing starting on July 19.7
Third, there may be yet another round of written and/or oral proceedings before the USTR during its consideration of Commerce’s recommendations and its preparation of the remedies to be adopted by the President.
With respect to written comments, Commerce has identified several topics on which it is interested in receiving information in the autos investigation. These topics are directed to the criteria listed in the National Security Industrial Base Regulations (NSIBR).8 Specifically, the criteria listed in § 705.4 of the NSIBR include
- the quantity and nature of imports of automobiles — including cars, SUVs, vans and light trucks and automotive parts — and other circumstances related to the importation of automobiles and automotive parts
- domestic production needed for projected national defense requirements
- domestic production and productive capacity needed for automobiles and automotive parts to meet projected national defense requirements
- the existing and anticipated availability of human resources, products, raw materials, production equipment and facilities to produce automobiles and automotive parts
- the growth requirements of the automobile and automotive parts industry to meet national defense requirements and/or requirements to assure such growth, particularly with respect to investment and R&D
- the impact of foreign competition on the economic welfare of the U.S. automobile and automotive parts industry
- the displacement of any domestic automobiles and automotive parts, causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity or other serious effects
- relevant factors that are causing or will cause a weakening of the U.S. national economy
- the extent to which innovation in new automotive technologies is necessary to meet projected national defense requirements
- whether and, if so, how the analysis of the above factors changes when U.S. production by majority U.S.-owned firms is considered separately from U.S. production by majority foreign-owned firms
- any other relevant factors
Similar to the Section 232 national security investigations into imports of aluminum and steel, Commerce’s investigation into imports of autos and automotive parts was self-initiated. The Trump Administration’s use of this obscure trade remedy must be considered in the context of trade talks with Canada and Mexico, the NAFTA renegotiations, and the ongoing negotiations with the European Union, Japan, South Korea and China. Notably, Korea, a major producer of autos and automotive parts, was granted a country exemption from the Section 232 duties on steel due to its willingness to enter into an agreement in principle on the renegotiation of the United States–Korea Free Trade Agreement (KORUS). Whether South Korea will once again be rewarded for its willingness to engage in KORUS renegotiations remains to be seen.
What is clear is the Administration’s readiness to use available statutory tools and authority granted by Congress to pursue its aggressive trade agenda. The willingness even to consider using Section 232 to restrain imports of autos and automotive parts has led to immediate intense reactions and bipartisan calls for scrutiny by Congress, even to the point of threatening action to impose limits on presidential trade authority. Although the likelihood of congressional legislative action is limited, particularly in the run-up to the 2018 midterm elections, the Administration’s willingness to invoke national security to restrain imports affecting major segments of the U.S. economy will ensure further controversy even as it redefines the scope of the debate.