U.S. Department of Commerce Initiates Section 232 Investigation that Could Limit Steel Imports in the Name of National Security

Last week, President Trump signed a presidential memorandum asking Commerce Secretary Wilbur Ross to expedite an investigation into the effects of steel imports on U.S. national security. The Department of Commerce conducts such investigations under Section 232 of the Trade Expansion Act of 1962, which authorizes the president to impose import restrictions to protect national security. According to this April 20 memorandum, "[t]he artificially low prices caused by excess capacity and unfairly traded imports suppress profits in the American steel industry, which discourages long-term investment in the industry and hinders efforts by American steel producers to research and develop new and better grades of steel."

Under the statute, Commerce conducts an investigation and issues a recommendation, and the president then decides whether to take action, and if so, in what form. The president has broad powers under the act to impose trade remedies like tariffs and quotas or to otherwise protect domestic industry through measures to support U.S. producers. Past measures have included research funding and "Buy American" restrictions.

The last time the department conducted a Section 232 investigation was in 2001. Following Section 232 investigations, President Carter banned oil imports from Iran in 1979, and in 1982, President Reagan embargoed all crude oil produced in Libya.

During the investigation, Commerce must consult with the Department of Defense. As per the department's Federal Register notice, it will accept comments until May 31, 2017 and will hold a public hearing in Washington, D.C. on May 24. 82 Fed. Reg. 19205 (Apr. 26, 2017).

The statute and accompanying regulations provide a number of the factors that Commerce will consider during its investigation. These broad areas for examination include: domestic production needed for projected national defense requirements, domestic industry capacity, the availability of human resources, materials, and facilities essential to national defense, the impact of foreign competition on the economic welfare of the domestic industry, and other factors that could cause a weakening of the national economy. 19 U.S.C. § 1862(d); 15 C.F.R. § 705.4. The department indicated in its Federal Register notice that it is particularly interested in receiving comments regarding these criteria specified by the regulations.

We note that the department could open Section 232 investigations involving additional industries as well, and the president's memorandum even points out other core industries, like vehicles, aircraft, and shipbuilding.

*Nicholas Sparks contributed to this report.

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