Introduction
Section 232 of the Trade Expansion Act of 1962 serves as a critical U.S. trade policy tool designed to safeguard national security by regulating imports. The provision grants the President the authority to impose tariffs or other trade restrictions on imports that threaten national security. The underlying rationale is that certain imports could undermine domestic industries vital for national defense and infrastructure. This post provides background on the key aspects of Section 232, including its history and the exclusion process.
Section 232 History
Origins and Process
The Trade Expansion Act, signed into law by President John F. Kennedy in 1962, aimed to reduce tariffs, increase trade, and stimulate economic growth while also balancing the need to protect national security and critical domestic industries. Section 232 originated from the broader legislative effort to enhance U.S. economic growth and promote trade liberalization.
Before the President can impose import restrictions, Section 232 requires the Department of Commerce (“Commerce”) to investigate to determine the import’s effect on national security. After an investigation, Commerce must make an affirmative determination that the imports threaten U.S. national security. If Commerce finds no effect on national security, the President is informed that no further action is required. However, when Commerce determines there is a risk to national security, the President is notified and has 90 days to determine whether he/she agrees with the finding and decide on the actions to be taken. Under Section 232, the President has broad authority to impose tariffs, quotas, or exclude products or countries entirely. The decided action must be implemented within 15 days, and Congress must be notified.
Between 1962 and 2020, Commerce initiated 31 Section 232 national security investigations. In 14 instances, Commerce determined there was a national security threat. The President acted only nine times. Five of these investigations identified national security risks related to petroleum products and crude oil, resulting in embargos on crude oil from Iran in 1979 and Libya in 1982. Notably, the last time a president imposed tariffs or trade restrictions under Section 232 before the Trump Administration was in 1986.
Modern Application and the Exclusion Process
The Trump Administration
The Trump Administration launched eight Section 232 investigations covering the imports of steel, aluminum, automobiles (including SUVs, vans, and light trucks), automotive parts, uranium, titanium sponge, electrical transformers and certain grain-oriented electrical steel components, mobile cranes, and vanadium. On March 8, 2018, President Trump announced tariffs on certain steel and aluminum imports based on the Secretary of Commerce’s findings. The tariffs, set at 25% for steel and 10% for aluminum, took effect on March 23, 2018, with provisions for flexibility regarding specific countries and products.
The Exclusion Process
Due to increased steel and aluminum costs from Section 232 tariffs, some U.S. manufacturers struggled to compete with importers of finished products. To mitigate these impacts, in 2018, Commerce introduced an interim final rule allowing U.S. parties to request exclusions for items that are not “produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.” By February 7, 2021, Commerce received 288,021 exclusion requests—260,450 for steel and 27,571 for aluminum. Of these, 170,084 were granted, 59,134 were denied, and 44,325 were rejected or withdrawn.
The process for submitting exclusion requests has evolved over time. On June 10, 2019, Commerce announced the “Implementation of New Commerce Section 232 Exclusions Portal,” requiring that all new exclusion requests be submitted through the 232 Exclusions Portal. The new portal replaced the use of the Federal rulemaking portal (http://www.regulations.gov) and was designed to streamline the exclusions process. The Exclusions Portal enables individuals or organizations that submit 232 exclusion requests to view all requests, objections, rebuttals, and surrebuttal documents in one web-based system.
As part of the exclusion request process, there is a 30-day public comment period after Commerce posts a request. During this period, any U.S. manufacturer of the relevant articles can object. If objections are received, the requester can submit rebuttals to each objection. Objectors can then submit surrebuttals to these rebuttals. After these steps, Commerce’s International Trade Administration (ITA) reviews all information and provides a recommendation to the Bureau of Industry and Security (BIS), which then conducts a final national security review to make a decision.
Analysts expect that President Trump’s incoming administration will swiftly fulfill his promises to impose tariffs. With President Trump’s commitments to levy tariffs on imports from China, Section 232 is anticipated to remain a crucial tool.
Crowell and Moring, LLP continues to monitor developments in the customs and trade remedies space and their potential impact on businesses and customers.