Turkish Law Blog

Section 232 Investigations – U.S. Tariffs in Times of Trade Wars

Mehmet Baysan Mehmet Baysan/ Breeding Henry Baysan
03 July, 2019
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While Section 232 of the Trade Expansion Act of 1962 is currently overshadowed in the news by other initiatives, it will likely remain one of the most critical tools used by the U.S. government in global trade – particularly in the current administration “trade wars.” As a result, it is imperative that we understand the issues inherent in imposing tariffs.

A Section 232 investigation is conducted under the authority of the Trade Expansion Act of 1962. This act codified at 19 U.S.C. §1862 covers a broad range of issues ranging from the initiation of an investigation to the scope of the Executive Branch’s authority within an investigation. It aims to determine the effects – if any -- of the imports of a particular article on the national security. Id. While national security is not specifically defined within the statute, §1862(d) allows the President to consider, among other factors, the relationship between the economic welfare of the United States and its national security.

The language contained in §1862 affords the President “unbridled discretion” to respond to an investigatory conclusion when an article adversely affects U.S. national security interests. The Supreme Court’s decision in Algonquin[1] – affirming the statute’s broad language by declining to review a presidential action under Section 232 for rationality, fact-finding, or abuse of discretion – leaves the President’s authority under this section broad and unfettered. It effectively grants him/her a heavy hand to decide matters in the regulation of commerce which is typically reserved for the United States Congress under Article I, Section 8 of the United States Constitution.

The exclusion of oversight of Presidential decision-making authority from the purview of the Administrative Procedure Act (“APA”) in the Supreme Court’s decision in Franklin v. Massachusetts, 505 U.S. 788 (1992) further eliminates any potential scrutiny of determinations made under this section. In fact, a three-judge panel of the United States Court of International Trade (“CIT”) recently affirmed this prevailing position in American Institute for International Steel v. the U.S., 18 Cv. 00152. In its 2-1 decision[2], the panel concluded that any review of a 232 regulation would be limited to – at least in theory – an action based on excessive use of the President’s section 232 authority. Id.; See also Indep. Gasoline Marketers Council, Inc. v. Duncan, 492 F.Supp. 614, 620 (D.D.C. 1980) (President’s imposition of a gasoline “conservation fee” pursuant to section 232(b) of the Trade Expansion Act was not authorized by statute). And any such challenge would only be maintained if the regulation were not plainly related to national security. Id.

In short, through Section 232, Congress has given the Executive Branch broad authority: one that has been the subject of much criticism.

What happens when a Section 232 investigation is initiated?

A 232 investigation can be initiated in one of three ways:

1) A department or the agency of the U.S. Government may request it;

2) the Secretary of Commerce (the “Secretary”) may initiate it; or

3) an interested party[3] may request it.[4]

Once an investigation starts, the Secretary of Commerce must initiate an “investigation to determine the effect on the national security of imports of [an] article.” [5] The Secretary will have 270 days to complete this investigation[6] and submit a report to the President on the findings regarding “… the effect of importation of such article in such quantities or under such circumstances upon the national security[7].” The report must include recommendations for Presidential action or inaction based on the findings.[8]

As part of this process, the Secretary of Commerce must consult with the Secretary of Defense and other relevant U.S. officials to present information and seek advice. The Secretary of Commerce may also choose to hold public hearings for the same purpose.[9]

Within 90 days of receiving the Secretary’s report, the President must (1) “determine whether [he/she] concurs with the findings in the report, and (2) “if [he/she] concurs, 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.”[10] The President must implement this decision within 15 days.[11]

Despite having broad discretion, the President must take certain factors outlined in the statute into consideration. Most of these factors are aimed at comparing the adverse effects of the scrutinized article’s continued importation from other countries over U.S. producers of the same article with that of its importation’s ban or reduction over the domestic private and military demand.[12] The President is also encouraged to “recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries; any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports shall be considered, without excluding other factors, in determining whether such weakening of our internal economy may impair the national security.”[13]

Past 232 Investigation:

It is worth noting that Section 232 investigations are rare. Since 1980, the United States Department of Commerce has conducted only 16 related investigations. Only two of those investigations resulted in the imposition of tariffs: both occurred in 2017.

Investigated Articles  of Commerce

Date of Investigation

Outcome

Glass-lined Chemical Processing Equipment

1981

No action taken.

Ferroalloys

1981

No action taken.

Libyan Crude Oil

1982

Blocked all import of Libyan crude oil.

Metal Altering Equipment and Tools

1983

Voluntary agreements with exporting countries and other internal measures to increase U.S’s competitiveness in this area.

Nuts, Bolts, and Screws.

1988

No action taken.

Antifriction bearings

1988

Enactment of Buy American Act.

Uranium

1989

No action taken.

Plastic Molding

1989

No action taken.

Crude Oil

1989

Implementation of significant domestic structural changes

Gears and Relevant Products

1992

No action taken.

Ceramic Semiconductor Packaging

1993

Domestic steps to support research and development and further funding for this industry.

Crude Oil

1994

Continuation with initiatives to increase domestic production. Implementation of energy conservations and efficiency policies.

Crude Oil

1999

Same as above.

Iron Ore and Semi-finished Steel Products

2001

No action taken.

Steel

2017

25% to 50% tariffs on specified products applied independently to various exporting countries.

Aluminum

2017

10% tariff on specified products.

Automobiles and Certain Automobile Parts

2019

US Representative to Conduct Negotiations with third party auto manufacturers including those in the EU and Japan.

On April 19, 2017, the Secretary of Commerce began an investigation to determine the effects of steel imports on national security.[14] The Secretary concluded that the continued importation of steel in the quantities allowed adversely affected the economic welfare of the United States steel industry, contributing to the general weakening of its economy and, therefore, was a risk to national security. As a result, the Secretary recommended that the President adjust the level of imports by imposing additional quotas and tariffs on steel imported into the United States.[15]

Following this advice, on March 23, 2018, the President concurred with the Secretary’s findings and imposed a 25% tariff on steel imports. (Canada and Mexico were among the countries that were initially exempt). Ultimately, on May 17, 2019, the United States terminated this tariff against these two countries. The imposition of this tariff on Australia Argentina, South Korea, Brazil, and some European Union member countries was deferred until May 1, 2018. Later, some of these deferrals were extended and some of these countries were permanently exempted from such tariffs.

On August 25, 2018, the President issued a fifth steel proclamation and doubled the tariff against Turkey to 50%. Although the President based his decision “[t]o further reduce imports of steel articles and increase domestic utilization[16],” many in Turkey saw this move as politically motivated and unmoored from any commercial justifications.[17] On May 16, 2019, the United States canceled these additional tariffs against Turkey bringing them down to its pre-August 25th rates.

Most recently, on May 17, 2019, the White House announced that the continued importation of automobiles and certain automobiles parts into the US threatened its national security. In this letter, President concurred with the Secretary’s recommendation that such imports should be reduced.[18] Although the President has not taken any concrete action to address this concern, he directed the US Trade Representative to engage in further negotiations with foreign countries – including Japan and those countries that are in the European Union – that export these articles into the United States. There is a common belief that the President will delay any decision regarding this matter; however, undoubtedly, this announcement adds further strain on the US’s already tense relationship with its trading partners.

What’s next?

In the age of trade wars, the wide latitude given to the President of the United States to wield this powerful trade tool will likely continue to cause uncertainty and unease both nationally and globally, and President’s future actions will be met with more resistance. Though increasing tariffs is often advertised as a step that will only affect the party exporting the subject matter goods, it is hardly the case. While tariffs have a more direct and short-term effect on the exporting country, they are already impacting a wide base of local businesses and consumers in the U.S. And when tariffs are imposed on raw materials – like steel and aluminum – the economic effects at home will be even more widespread. More people in the United States and abroad will inevitably create more “interested parties” that will lead to more frequent and compelling challenges of these regulations in U.S. courts.

In light of Judge Katz’s separate opinion in American Institute for International Steel, supra, and a growing pool of potential litigants, courts will be hard-pressed not to revisit some of the restrictive precedent affirming the Executive Branch’s unbridled authority under Section 232. Today’s economic, political, and social environment will likely contribute to the growing need to review the courts’ prevailing expansionist views on this issue. Whether the courts will be willing to change their previous position to approve Congress’ wide delegation of its power to regulate commerce or not remains in question. However, the true focus should be more on the potential adverse consequences of such legal uncertainty likely to follow.


  1. Federal Energy Administration v. Algonquin SNG Inc., 426 U.S. 548 (1976).
  2. https://www.cit.uscourts.gov/sites/cit/files/19-37.pdf.
  3. According to 19 U.S.C. §1677(9)’s broad definition of this key term, a local and foreign trade partner may qualify as an interested party.
  4. 19 U.S.C. 1862(b)(1)(A).
  5. Id.
  6. 19 U.S.C. 1862(b)(3)(A).
  7. Id.
  8. 19 U.S.C. 1862(b)(3)(A).
  9. 19 U.S.C. 1862(b)(2)(A).
  10. 19 U.S.C. 1862(c)(1)(A).
  11. Id.
  12. 19 U.S.C. §1862(d).
  13. Id.
  14. See S. Department of Commerce, the Effect of Imports of Steel on the National Security (Jan 11, 2018).
  15. Id at 58.
  16. Proclamation 9772 of August 10, 2018, Adjusting Imports of Steel into the United States, 83 Fed. Reg. 40,429, 4 (August 15, 2018).
  17. https://www.nytimes.com/2018/08/10/us/politics/trump-turkey-tariffs-currency.html
  18. https://www.whitehouse.gov/presidential-actions/adjusting-imports-automobiles-automobile-parts-united-states/

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