As you may have read in the press, the US Department of Commerce announced on May 23 another investigation under “Section 232” into whether certain imports impair the national security interests of the United States – this time covering automobiles, including SUVs, vans, light trucks, and automotive parts. This follows on recent similar investigations covering steel and aluminum, which has resulted in additional tariffs and/or country specific quotas.
Given this history, you may be wondering what you need to know and what you can do to defend against the possibility of serious trade restrictions covering automobiles and auto parts.
3 Key Takeaways.
- It is important to bear in mind that these investigations move quickly. The statute gives the Commerce Department 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. This means that US imports could be subject to additional duties or volume restrictions within the next 10 – 12 months. As a practical matter, the recent investigations into steel and aluminum took 11 months from initiation until duties were applied at the US border. Even so, the President spoke often about an expedited process in the last investigations. This could mean that this time, building off the experience of the last year, the investigation may proceed to remedy much quicker.
- Assuming that the investigation proceeds to a remedy, there will likely be an exclusion request process. That process may be relevant for you either in requesting an exclusion or opposing one. The process may track the aluminum and steel investigation, in which companies could submit a short request to be excluded from the duties. Interested parties can oppose the exclusion request by filing reply comments within 30 days, and then the Commerce Department is expected to rule. The exclusion request process for the steel and aluminum investigations has resulted in more than 10,000 requests filed to date.
- Consider your interests on a country-specific basis. There are likely to be country-specific negotiations that carve out imports from a particular country (like Canada and Mexico) or delay the effective date for the duties on a country-specific basis. In the steel and aluminum investigations, for example, duties on imports from the EU were delayed from going into effect in March 2018 until May 1, 2018 and then again until June 1, 2018. Such delays have a significant impact on purchases and supply decisions.
Based on the recent experience with steel and aluminum, the outer limit for the imposition of additional duties on auto imports is likely April 2019.
Prior to these Trump Administration investigations on steel and aluminum, the last prior investigation had been in 2001 under President George W. Bush. Additional duties went into effect as a result of the 2001 investigations, but they were repealed after a World Trade Organization challenge.
On May 30, 2018, the Department of Commerce will publish in the Federal Register a notice of request for public comments and public hearing [DOC-2018-0002] on the Section 232 (of the Trade Expansion Act of 1962, as amended; 19 U.S.C. 1862) national security investigation of imports of automobiles, including cars, SUVs, vans and light trucks, and automotive parts. If the Secretary finds that automobiles and/or automotive parts are being imported into the United States in such quantities or under such circumstances as to threaten to impair the national security, the Secretary shall recommend actions and steps that should be taken to adjust automobile and/or automotive parts imports so that they will not threaten to impair the national security.
Interested parties are invited to submit written comments, data, analyses, or other information pertinent to the investigation to Commerce by June 22, 2018. Rebuttal comments will be due by July 6, 2018. Commerce will hold a public hearing on the investigation on July 19 and 20, 2018 in Washington, DC. The notice identifies the issues on which the Commerce is interested in obtaining the public’s views. It also sets forth the procedures for public participation in the hearing.
This investigation is being undertaken in accordance with part 705 of the National Security Industrial Base Regulations (15 C.F.R. parts 700 to 709) (“NSIBR”). Commerce is particularly interested in comments and information directed to the criteria listed in § 705.4 of the NSIBR as they affect national security, including the following:
- 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 automobiles and automotive parts industry to meet national defense requirements and/or requirements to assure such growth, particularly with respect to investment and research and development;
- The impact of foreign competition on the economic welfare of the U.S. automobiles 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 our 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; and
- Any other relevant factors