With the Legal Status of the Section 232 Report Unclear, the Trump Administration Emphasizes its Authority to Impose Duties
The Trump Administration continues to threaten "very high tariffs" on automobiles and automobile part imports from around the world, despite fundamental questions about whether it still has legal authority to do so. Faced with federal court decisions that have limited the executive's reach under Section 232 of the Trade Expansion Act of 1962 ("Section 232") and an expired deadline to release the underlying investigation report, the Administration has again suggested that it can impose the duties if it chooses.
Commerce Secretary Wilbur Ross said on January 23, 2020, that "we have a perfect justification to put tariffs on if we wish to," and that many "simply don't understand" the executive's tariff authority. Further, in January 2020, the Department of Justice ("DOJ") concluded that:
"the President may direct the Secretary of Commerce not to publish a confidential report to the President under Section 232 of the Trade Expansion Act of 1962, notwithstanding a recently enacted statute requiring publication within 30 days, because the report falls within the scope of executive privilege and its disclosure would risk impairing ongoing diplomatic efforts to address a national-security threat and would risk interfering with executive branch deliberations over what additional actions, if any, may be necessary to address the threat.”
Duties on vehicles and parts are a major issue for U.S. importers and automotive suppliers for a number of reasons, in particular because of the significant volume of imports.
On May 23, 2018, Commerce announced the Section 232 investigation to determine whether certain imports covering automobiles, including SUVs, vans, light trucks, and automotive parts impair U.S. national security. On February 17, 2019, Commerce provided an unpublished report of its affirmative findings to President Trump. The President chose not to invoke his authority to impose tariffs or other remedies on autos or auto parts but rather directed the U.S. Trade Representative ("USTR") to pursue negotiations of agreements to address the national security threat posed by the imports.
Since then, the USTR has concluded negotiations with Canada, Mexico, and South Korea, with no sign of Section 232 tariffs applying to the auto and auto part imports from these countries. The Administration released side letters along with the new U.S.-Mexico-Canada Agreement that exempts specified volumes of vehicle, light truck, and auto imports from the potential tariffs. Modifications to the U.S.-South Korea Free Trade Agreement delayed reduction of a 25% tariff on light-truck imports, and an initial agreement with Japan did not address trade commitments on motor vehicles at all. Further, the USTR has stated that there is no intent at this time to pursue Section 232 tariffs against these countries.
The Administration's negotiation with the European Union remains ongoing, and the President has stated that the EU "[knows he's] going to put tariffs on them if they don’t make a deal that’s a fair deal."
Section 232 Before the Courts
But through what mechanism? President Trump's authority to impose Section 232 tariffs on autos based on the February 2019 report has expired. Section 232, codified at 19 U.S.C. § 1862, states that the President has 90 days upon receipt of Commerce's report to determine the nature and duration of the action to be taken. After the Trump Administration extended the 90-day period by an additional six months, the deadline passed in November 2019 without further action. Additionally, a recent U.S. Court of International Trade ("CIT") opinion on a separate Section 232 action concluded that the "President's expansive view of his power under [S]ection 232 is mistaken, and at odds with the language of the statute, its legislative history, and its purpose." The CIT determined that the President ran out of time and failed to adhere to time limits imposed by the statute when he doubled duties on Turkish steel imports five months after initially imposing tariffs under Section 232.
The statute and recent CIT authority present grounds to challenge presidential action under Section 232 on automobiles without a new investigation. DOJ's recent opinion, however, indicates that the Administration believes it may proceed anyway. That opinion indicates that President Trump may rely on the language in 19 U.S.C. § 1862(c)(3), which states that, where a trade agreement is not reached within 180 days or if the agreement proves ineffective, "the President shall take such other actions as the President deems necessary to adjust the imports of such article so that such imports will not threaten to impair the national security." This requires publication of such actions but does not specify a time frame. Additionally, President Trump could threaten measures under statutes he has invoked or considered during past negotiations, such as the International Emergency Economic Powers Act ("IEEPA") or the Trading with the Enemy Act.
Importers in particular should closely monitor the developments and consult with counsel regarding mitigation (and legal challenges) in the event the Administration proceeds with the duties.