Section 232 Investigations: Overview and August 24, 2020 Issues for Congress Rachel F. Fefer, President Trump has used Section 232 authority to apply new tariffs to steel and Coordinator aluminum imports and potentially to imports of automobiles and automobile parts and Analyst in International certain other goods. Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862) Trade and Finance provides the President with the ability to impose restrictions on certain imports based on an affirmative determination by the Department of Commerce (Commerce) that productthe Keigh E. Hammond product(s) under investigation "“is being imported into the United States in such Senior Research Librarian quantities or under such circumstances as to threaten to impair the national security." ” Congress has interest in Section 232 actions because they are a delegation of its Vivian C. Jones constitutional authority over tariffs and commerce with foreign nations, and raise a Specialist in International number of economic and policy issues. Some Members have introduced legislation to Trade and Finance revise Section 232 authorities.

Global overcapacity in steel and aluminum production, mainly driven by China, has Brandon J. Murrill Legislative Attorney been an ongoing concern of Congress. While the United States has extensive antidumping and countervailing duties on Chinese steel imports to counter China's ’s unfair trade practices, steel industry and other experts argue that the magnitude of Michaela D. Platzer Specialist in Industrial Chinese production acts to depress prices globally. The George W. Bush, Obama, and Organization and Business Trump Administrations have each engaged in multilateral discussions to address global steel capacity reduction through the Organisation for Economic Co-operation and Development (OECD) and other international forums.

Brock R. Williams Specialist in International Effective March 23, 2018, President Trump applied 25% and 10% tariffs, respectively, Trade and Finance on certain steel and aluminum imports and, in February 2020, expanded the scope of products subject to the additional tariffs. Permanent tariff exemptions in exchange for quantitative limitations on U.S. imports were negotiated covering steel for Brazil and South Korea, and both steel and aluminum for Argentina. Australia was permanently exempted from both tariffs, with no quantitative restrictions. The United States removed tariffs on steel and aluminum imports from Mexico and Canada, in part to secure congressional support for the new United States-Mexico-Canada Agreement (USMCA) and after the three countries agreed to establish an import monitoring mechanism. USMCA includes side letters limiting potential Section 232 tariffs on autos and parts above a certain threshold of imports.

In August 2020, citing a surge in imports, the United States reinstated tariffs on certain aluminum imports from Canada. Canada plans to retaliate with tariffs on U.S. imports equal to a reciprocal amount. Commerce is managing a process for exclusions of steel and aluminum products subject to Section 232 tariffs in order to limit potential negative domestic effects of the tariffs on U.S. businesses and consumers. As of early December 2019, of the nearly 94,000 steel exclusion requests, over 47,000 had been granted and over 13,000 had been denied. Commerce has also received over 13,000 aluminum exclusion requests, with almost 6,500 exclusions granted and 900 deniedMarch 23, 2020, Commerce received 179,128 exclusion requests, 157,983 for steel and 21,145 for aluminum. Of those requests, the agency granted 78,569 exclusions and denied 25,440. The remaining requests are pending. Several Members of Congress and the Commerce Inspector General have raised issues and concerns about the exclusion process.

Several U.S. trading partners are challenging the tariffs under World Trade Organization (WTO) dispute settlement rules and have threatened or enacted retaliatory measures. Some analysts view the U.S. unilateral actions as potentially undermining WTO rules, which generally prohibit parties from acting unilaterally, but provide exceptions, including when parties act to protect "“essential security interests."” In turn, the United States has initiated cases against other countries'’ retaliatory measures under WTO rules. Some U.S. firms are also challenging the Administration'’s actions domestically.

Congress enacted Section 232 during the Cold War when national security issues were at the forefront of national debate. The Trade Expansion Act of 1962 sets clear steps and timelines for Section 232 investigations and actions, and allows the President to make a final determination over the appropriate action to take following an affirmative Congressional Research Service Section 232 Investigations: Overview and Issues for Congress finding by Commerce that the relevant imports threaten to impair national security. Prior to the Trump Administration, there were 26 Section 232 investigations, resulting in nine affirmative findings by Commerce. In six of those cases the President imposed a trade action.

After imposing the steel and aluminum tariffs, the Administration opened threesix additional Section 232 investigations, intensifying debate over potential legislation to revise the authority. The investigations covered

• imports of:  automobile and automobile part importsparts, initiated May 23, 2018;
•  uranium ore and product importsrelated products, initiated July 18, 2018; and
•  titanium sponge imports, initiated March 4, 2019.

;  transformers and certain grain-oriented electrical steel parts, initiated May 4, 2020;  mobile cranes, initiated May 6, 2020; and  vanadium, initiated June 3, 2020 Commerce determined imports of each productof the first three products threaten to impair national security in its final reports, which. The final reports were submitted to the President, but have not been made public. The President chose not to impose restrictions on uranium and titanium, but potential import restrictions on autos remain pending.

The President'The latter three investigations are ongoing. The President’s Section 232 tariff actions and investigations raise a number of potential issues for Congress. The focus on imports from traditional U.S. allies has prompted some policymakers to raise questions about the proper interpretation of threats to national security on which Section 232 investigations are based. The tariffs'’ economic effects—relatively higher domestic steel and aluminum prices and expansion in production in those sectors, and higher costs for consumers and many end users (e.g., auto manufacturing and construction)—have also prompted reactions from several Members, some in support of the measures and others voicing concerns. To date, Congress has held hearings on the potential economic and broader policy effects of the tariffs, and legislation has been introduced to override the tariffs that have already been imposed, or to revise or potentially limit the authority previously previously-delegated to the President in future investigations.

The Trump Administration has conducted five Congressional Research Service link to page 6 link to page 7 link to page 7 link to page 8 link to page 10 link to page 10 link to page 12 link to page 12 link to page 13 link to page 17 link to page 20 link to page 21 link to page 21 link to page 24 link to page 25 link to page 26 link to page 27 link to page 29 link to page 30 link to page 31 link to page 33 link to page 35 link to page 35 link to page 37 link to page 38 link to page 39 link to page 41 link to page 42 link to page 44 link to page 44 link to page 48 link to page 49 link to page 50 link to page 55 link to page 56 link to page 56 link to page 57 link to page 58 link to page 58 link to page 59 link to page 59 link to page 59 link to page 60 Section 232 Investigations: Overview and Issues for Congress Contents Introduction ..................................................................................................................................... 1 Overview of Section 232 ................................................................................................................. 2 Key Provisions and Process ...................................................................................................... 2 Section 232 Investigations to Date ............................................................................................ 3 Relationship to WTO ................................................................................................................ 5 Section 232 Actions on Steel and Aluminum .................................................................................. 5 Commerce Findings and Recommendations ............................................................................. 7 Presidential Actions ................................................................................................................... 7 Country Exemptions ........................................................................................................... 8 Product Exclusions............................................................................................................ 12 Tariffs Collected to Date ......................................................................................................... 15 Additional Trump Administration Investigations .......................................................................... 16 Automobiles and Parts ............................................................................................................ 16 Uranium .................................................................................................................................. 19 Titanium Sponge ..................................................................................................................... 20 Transformers and Components ............................................................................................... 21 Mobile Cranes ......................................................................................................................... 22 Vanadium ................................................................................................................................ 24 Section 232 Tariffs and International Trade .................................................................................. 25 Steel and Aluminum Trade ...................................................................................................... 26 Retaliatory Tariffs.................................................................................................................... 28 U.S. Steel and Aluminum Manufacturing and Employment ......................................................... 30 Domestic Steel Manufacturing ................................................................................................ 30 Domestic Aluminum Manufacturing ....................................................................................... 32 Global Production Trends ....................................................................................................... 33 International Efforts to Address Overcapacity ........................................................................ 34 Policy and Economic Issues .......................................................................................................... 36 Domestic Court Challenges ..................................................................................................... 37 Proclamation Imposing Tariffs on Steel-Derivative Products ........................................... 39 WTO Cases ............................................................................................................................. 39 Retaliation ............................................................................................................................... 43 Economic Impacts ................................................................................................................... 44 Industry-Level Dynamics of the Tariff Increase ............................................................... 45 Aggregate Effects on the U.S. Economy .......................................................................... 50 Issues for Congress ........................................................................................................................ 51 Possible Long-Term Effects .............................................................................................. 51 Appropriate Delegation of Constitutional Authority ........................................................ 52 Legislative Responses to Retaliatory Tariffs ..................................................................... 53 Establishing Threshold ...................................................................................................... 53 Interpreting National Security ........................................................................................... 54 Establishing New International Rules ............................................................................... 54 Impact on the Multilateral Trading System....................................................................... 54 Impact on Broader International Relationships ................................................................ 55 Congressional Research Service link to page 8 link to page 10 link to page 18 link to page 31 link to page 32 link to page 33 link to page 34 link to page 37 link to page 48 link to page 51 link to page 51 link to page 53 link to page 53 link to page 54 link to page 63 link to page 67 link to page 69 link to page 70 link to page 71 link to page 61 link to page 63 link to page 67 link to page 69 link to page 72 Section 232 Investigations: Overview and Issues for Congress Figures Figure 1. Section 232 Investigation Process .................................................................................... 3 Figure 2. Section 232 Investigations ............................................................................................... 5 Figure 3. Section 232 Exclusion Requests as of July 27, 2020 ..................................................... 13 Figure 4. U.S. Trade Affected by Section 232 Tariffs ................................................................... 26 Figure 5. U.S. Steel and Aluminum Imports ................................................................................. 27 Figure 6. U.S. Imports of Select Derivative Products ................................................................... 28 Figure 7. Retaliatory Actions by U.S. Trading Partners ................................................................ 29 Figure 8. Steel and Aluminum Manufacturing Employment ........................................................ 32 Figure 9. WTO Cases Challenging the United States’ Section 232 Actions ................................. 43 Figure 10. Steel Price Indices ........................................................................................................ 46 Figure 11. Aluminum Price Indices ............................................................................................... 46 Figure 12. Domestic Production and Imports: Steel ...................................................................... 48 Figure 13. Domestic Production and Imports: Aluminum ............................................................ 48 Figure 14. U.S. Exports Subject to Section 232 Retaliation .......................................................... 49 Tables Table B-1. Section 232 Investigations and Presidential Actions, 1962-2019 ................................ 58 Table C-1. Select Proposals on Section 232: 116th Congress ........................................................ 62 Table D-1. Top U.S. Import Suppliers of Aluminum and Steel Products ...................................... 64 Table D-2. Top U.S. Import Suppliers of Steel and Aluminum Derivatives ................................. 65 Table D-3. Estimates of U.S. Imports Under Ongoing Section 232 Investigations ...................... 66 Appendixes Appendix A. Amendments to and Past Uses of Section 232 (19 U.S.C. §1862) ........................... 56 Appendix B. Section 232 Investigations ....................................................................................... 58 Appendix C. Proposals Concerning Section 232........................................................................... 62 Appendix D. 2019 U.S. Steel and Aluminum Imports .................................................................. 64 Contacts Author Information ........................................................................................................................ 67 Congressional Research Service link to page 61 Section 232 Investigations: Overview and Issues for Congress Introduction The Trump Administration has conducted eight investigations, two of which have led to presidential proclamations imposing tariffs on U.S. imports of certain steel and aluminum products, using presidential powers granted under Section 232 of the Trade Expansion Act of 1962.¹1 Section 232 authorizes the President to impose restrictions on certain imports based on an affirmative determination by the Department of Commerce (Commerce) that the targeted products are being imported into the United States "“in such quantities or under such circumstances as to threaten to impair the national security."” The Constitution gives Congress primary authority over international trade matters.²2 In the case of Section 232, Congress has delegated to the President broad authority to impose limits on imports in the interest of U.S. national security. The statute does not require congressional approval of any presidential actions that fall within its scope.³

3 Section 232 is one of several tools the United States has at its disposal to address trade barriers and other foreign trade practices. Additional tools include (1) investigations and actions to address import surges that are or threaten to be a "“substantial cause of serious injury"” to a U.S. industry (Section 201 of the Trade Act of 1974); (2) those that address violations or denial of U.S. benefits under trade agreements (Section 301 of the Trade Act of 1974); and (3) antidumping and countervailing duty laws (Title VII of the Tariff Act of 1930) to counter injurious unfair trade practices.

International trade is an important component of the U.S. economy, and Members often hear from constituents when factories and other businesses are hurt by competing imports, or if exporters face trade restrictions and other market access barriers overseas. Section 232 actions may affect industries, workers, farmers, and consumers in congressional districts and states (both positively and negatively). Following the steel and aluminum Section 232 actions, Commerce initiated Section 232 investigations into imports of automobiles and automobile parts in May 2018, uranium ore and product imports in July 2018, and titanium sponges in March 2019. Commerce submitted the auto investigation report to the President in February 2019, the uranium report in April, and the titanium sponges report in November, but none of the three reports has been made public or reportedly shared with Congress. Commerce initiated three more investigations in spring 2020 into imports of electrical transformers and certain grain-oriented electrical steel components, mobile cranes, and vanadium; all three inquiries are ongoing. All of the Section 232 All of the investigations potentially raise a number of economic and policy issues for Congress.

This report provides an overview of Section 232, analyzes the Trump Administration'’s Section 232 investigations and actions, and considers select policy and economic implications and issues for Congress. To provide context for the current debate, the report also includes a discussion of previous Section 232 investigations and a brief legislative history of the statute.

1 P.L. 87-794; 19 U.S.C. §1862. 2 Article I, Section 8, of the Constitution gives Congress the power “To regulate Commerce with foreign Nations ....” and “To lay and collect Taxes, Duties, Imposts, and Excises ....” 3 In the Crude Oil Windfall Profit Tax Act of 1980, however, Congress amended Section 232 by creating a joint disapproval resolution provision under which Congress can override presidential actions in the case of adjustments to petroleum or petroleum product imports. P.L. 96-223, Section 402. For more information, see Appendix A. Congressional Research Service 1 link to page 8 Section 232 Investigations: Overview and Issues for Congress Overview of Section 232 Overview of Section 232

Following an investigation by the Department of Commerce, Section 232 of the Trade Act of 1962 authorizes the President to impose imports restrictions on products, imported into the United States "“in such quantities or under such circumstances as to threaten to impair the national security."” The Trade Act of 1962, including Section 232, was enacted during the Cold War when national security issues were at the forefront. Section 232 has been used periodically in response to industry petitions, as well as through self-initiation by the executive branch. The Trade Expansion Act establishes a clear process and timelines for a Section 232 investigation, but the executive branch'’s interpretation of "“national security"” and the potential scope of any investigation can be expansive.

Key Provisions and Process

Upon request by the head of any U.S. department or agency, by petition by an interested party, or by self-initiation, the Secretary of Commerce must commence a Section 232 investigation. The Secretary of Commerce conducts the investigation in consultation with the Secretary of Defense and other U.S. officials, as appropriate, to determine the effects of the specified imports on national security. Public hearings and consultations may also be held in the course of the investigation. Commerce has 270 days from the initiation date to prepare a report advising the President as to whether or not the targeted product(s) is being imported "“in such quantities or under such circumstances as to threaten to impair"” U.S. national security, and to provide recommendations for action or inaction based on the findings. According to the statute, any portion of the report that does not contain classified or proprietary information must be published in the Federal Register. SeeSee Figure 1 for the Section 232 process and timeline.

While there is no specific definition of national security in the statute, it states that the investigation must consider certain factors, such as domestic production needed for projected national defense requirements; domestic capacity; the availability of human resources and supplies essential to the national defense; and potential unemployment, loss of skills or investment, or decline in government revenues resulting from displacement of any domestic products by excessive imports.⁴

4 Once the President receives the report, he has 90 days to decide whether or not he concurs with the Commerce Department'’s findings and recommendations, and to determine the nature and duration of the action he views as necessary to adjust the imports so they no longer threaten to impair the national security (generally, imposition of some trade-restrictive measure). The President may implement the recommendations suggested in the Commerce report, take other actions, or decide to take no action. After making a decision, the President has 15 days to implement the action and 30 days to submit a written statement to Congress explaining the action or inaction; he must also publish his findings in the Federal Register. Presidential actions may stay in place "“for such time, as he deems necessary to adjust the imports of such article and its derivatives so that such imports will not so threaten to impair the national security."⁵”5 Congress does not have to approve of a Section 232 determination or action.⁶

Figure 1. Section 232 Investigation Process

6 4 19 U.S.C. §1862(d). The Bureau of Industry and Security (BIS) at Commerce conducts the investigation in accordance with federal regulations codified in 15 C.F.R. part 705 (Effect of Imported Articles on the National Security). 5 Section 232(b). 6 For more information on TPA, see CRS In Focus IF10038, Trade Promotion Authority (TPA), by Ian F. Fergusson. Congressional Research Service 2 link to page 63 link to page 10 link to page 63 Section 232 Investigations: Overview and Issues for Congress Figure 1. Section 232 Investigation Process Source: CRS graphic based on 19 U.S.C. §1862. Source: CRS graphic based on 19 U.S.C. §1862.

Section 232 Investigations to Date

The Commerce Department (or the Department of the Treasury before it) initiated a total of 31 Section 232 investigations between 1962 and 2019 (see Table B-1). In 16 of these cases, Commerce determined that the targeted imports did not threaten to impair national security. In 14 cases, Commerce determined that the targeted imports threatened to impair national security and made recommendations to the President (see Figure 2). The President took action nine times. One case was terminated at the petitioner'’s request before Commerce completed its investigation. Prior to the Trump Administration, 10 Section 232 investigations were self-initiated by the Administration. (For a full list of cases to date, see Appendix B.)

see Appendix B.) In eight investigations dealing with crude oil and petroleum products, Commerce decided that the imports threatened to impair national security. The President took action in five of these cases. In the first three cases on petroleum imports (1973-1978), the President imposed licensing fees and additional supplemental fees on imports, which are no longer in effect, rather than adjusting tariffs or instituting quotas. In two cases, the President imposed oil embargoes, once in 1979 (Iran) and once in 1982 (Libya). Both were superseded by broader economic sanctions in the following years.⁷

7 7 The Section 232 petroleum embargo against Iran was revoked by Executive Order 12282 of January 19, 1981, “Prohibitions Against Transactions Involving Japan, Revocation,” 46 Federal Register 7925, which established broader sanctions against Iran. The petroleum embargo against Libya was superseded by (1) Proclamation 5141 of December 22, 1983, “Imports of Petroleum and Petroleum Products,” 48 Federal Register 56929, and (2) Executive Order 12538, “Imports of Refined Petroleum Products from Libya,” 50 Federal Register 47527, November 15, 1985; and then was effectively revoked by Executive Order 13357, “Termination of Emergency Declared in Executive Order 12543 With Respect to the Policies and Actions of the Government of Libya and Revocation of Related Executive Order,” 69 Federal Register 56665, September 20, 2004, and the corresponding Treasury regulation, Department of the Treasury, Office of Foreign Assets Control, “Libyan Sanctions Regulations, Angola (UNITA) Sanctions Regulations, Rough Diamonds (Liberia) Congressional Research Service 3 Section 232 Investigations: Overview and Issues for Congress In the three most recent crude oil and petroleum investigations (from 1987 to 1999), Commerce determined that the imports threatened to impair national security, but did not recommend presidential action to adjust imports. In the first of these reports (1987), Commerce recommended a series of steps to increase domestic energy production and ensure adequate oil supplies rather than imposing quotas, fees, or tariffs because any such actions would not be "“cost beneficial and, in the long run, impair rather than enhance national security."⁸”8 In the latter two investigations (1994 and 1999), Commerce found that existing government programs and activities related to energy security would be more appropriate and cost effective than import adjustments. By not acting, the President in effect followed Commerce'’s recommendation.

Prior to the Trump Administration, a president arguably last acted under Section 232 in 1986. In that case, Commerce determined that imports of metal-cutting and metal-forming machine tools threatened to impair national security. In this case, the President sought voluntary export restraint agreements with leading foreign exporters, and developed domestic programs to revitalize the U.S. industry.⁹9 These agreements predate the founding of the World Trade Organization (WTO), which established multilateral rules prohibiting voluntary export restraints.

10 The Trump Administration has initiated fiveeight Section 232 investigations to date. In addition to the two cases on steel and aluminum, on May 23, 2018, Commerce Secretary Wilbur Ross announced the initiation of a Section 232 investigation to determine whether imports of automobiles, including SUVs, vans and light trucks, and automotive parts threaten to impair national security on May 23, 2018.¹⁰ .11 In January 2018, two U.S. uranium producers petitioned for an investigation into uranium imports.¹¹12 On July 18, 2018, Commerce announced the initiation of a Section 232 investigation on these imports and informed the Secretary of Defense.¹²13 In September 2018, a U.S. titanium company petitioned for an investigation into titanium sponge imports. In March 2019, Commerce announced the initiation of a Section 232 investigation on these imports and informed the Secretary of Defense.14 In May 2020, Commerce initiated two separate investigations into imports of electrical transformers and certain grain-oriented electrical steel components15 and Sanctions Regulations,” 61 Federal Register 16042, March 30, 2006. 8 Department of Commerce, The Effect of Crude Oil and Refined Petroleum Product Imports on the National Security, January 1989. 9 U.S. President (R. Reagan), “Statement on the Revitalization of the Machine Tool Industry” Weekly Compilation of Presidential Documents, vol. 22 (December 16, 1986), p. 1654. 10 Article 11 of the WTO Agreement on Safeguards stipulates that “a Member shall not seek, take or maintain any voluntary export restraints, orderly marketing arrangements or any other similar measures on the export or the import side. These include actions taken by a single Member as well as actions under agreements, arrangements and understandings entered into by two or more Members.” There are exceptions to this prohibition, including for “[a]n import quota applied as a safeguard measure in conformity with the relevant provisions of GATT 1994 and this Agreement.” For more information, see https://www.wto.org/english/docs_e/legal_e/25-safeg_e.htm#fnt-3. 11 U.S. Department of Commerce, “U.S. Department of Commerce Initiates Section 232 Investigation into Auto Imports,” May 23, 2018, https://www.commerce.gov/news/press-releases/2018/05/us-department-commerce-initiates-section-232-investigation-auto-imports. 12 Energy Fuels Resources (USA) Inc. and Ur-Energy USA Inc., “Petition for Relief under Section 232 of the Trade Expansion Act of 1962 from Imports of Uranium Products that Threaten National Security,” January 16, 2018. 13 U.S. Department of Commerce, “U.S. Department of Commerce Initiates Section 232 Investigation into Uranium Imports,” July 18, 2018, https://www.commerce.gov/news/press-releases/2018/07/us-department-commerce-initiates-section-232-investigation-uranium. 14 U.S. Department of Commerce, March 2019, “U.S. Department of Commerce Initiates Section 232 Investigation into Titanium Sponge Imports,” https://www.commerce.gov/news/press-releases/2019/03/us-department-commerce-initiates-section-232-investigation-titanium. 15 U.S. Department of Commerce, “U.S. Secretary of Commerce Wilbur Ross to Initiate Section 232 Investigation into Congressional Research Service 4 link to page 63 link to page 44 Section 232 Investigations: Overview and Issues for Congress mobile cranes;16 in June, the Administration initiated one into vanadium imports.17 The latter two investigations were in response to industry petitions. Figure 2. Section 232 Investigations Secretary of Defense.¹³

Figure 2. Section 232 Investigations

Source: CRS Graphic based on BIS data (https://www.bis.doc.gov/). ). Notes: For a detailed list of cases, see Appendix B.

Appendix B. Relationship to WTO

While unilateral trade restrictions may appear to be counter to U.S. trade liberalization commitments under the WTO agreements, Article XXI of the General Agreement on Tariffs and Trade (GATT), which was one of the foundational agreements of the WTO, allows WTO members to take measures to protect "“essential security interests."” Broad national security exceptions are also included in international trade obligations at the bilateral and regional levels, and could potentially limit the ability of countries to challenge such actions by trade partners. Historically, exceptions for national security have been rarely invoked and multiple trading partners have challenged recent U.S. actions under the WTO agreements (see "“WTO Cases ").

”). Section 232 Actions on Steel and Aluminum

In April 2017, two presidential memoranda instructed Commerce to give priority to two self-initiated investigations into the national security threats posed by imports of steel and aluminum.¹⁴18 In conducting its investigation, Commerce held public hearings and solicited public Imports of Laminations and Wound Cores for Incorporation into Transformers, Electrical Transformers, and Transformer Regulators,” May 4, 2020, https://www.commerce.gov/news/press-releases/2020/05/us-secretary-commerce-wilbur-ross-initiate-section-232-investigation. 16 U.S. Department of Commerce, “U.S. Department of Commerce to Initiate Section 232 Investigation into Mobile Crane Imports,” May 6, 2020, https://www.commerce.gov/news/press-releases/2020/05/us-department-commerce-initiate-section-232-investigation-mobile-crane. 17 U.S. Department of Commerce, “U.S. Secretary of Commerce Wilbur Ross Initiates Section 232 Investigation into Imports of Vanadium,” June 2, 2020, https://www.commerce.gov/news/press-releases/2020/06/us-secretary-commerce-wilbur-ross-initiates-section-232-investigation. 18 U.S. President (Trump), “Memorandum on Steel Imports and Threats to National Security,” Weekly Compilation of Presidential Documents, April 20, 2017, https://www.gpo.gov/fdsys/pkg/DCPD-201700259/pdf/DCPD- Congressional Research Service 5 Section 232 Investigations: Overview and Issues for Congress In conducting its investigation, Commerce held public hearings and solicited public comments via the Federal Register and consulted with the Secretary of Defense and other agencies, as required by the statute.¹⁵19 In addition to the hearings, stakeholders submitted approximately 300 comments regarding the Section 232 investigation and potential actions. Some parties (mostly steel producers) supported broad actions to limit steel imports, while others (mostly users and consuming industries such as automakers) opposed any additional tariffs or quotas on imports. The U.S. aluminum industry held differing views of the global aluminum tariff, with most parties opposing it.¹⁶20 Some stakeholders in the steel and aluminum industries sought a middle ground, endorsing limited actions to target the underlying issues of overcapacity and unfair trade practices. Still others focused on the process, voicing caution in the use of Section 232 authority and warning against an overly broad definition of "“national security"” for protectionist purposes.¹⁷

21 The Commerce investigations analyzed the importance of certain steel and aluminum products to national security, using a relatively broad definition of "“national security,"” defining it to include "“the general security and welfare of certain industries, beyond those necessary to satisfy national defense requirements, which are critical for minimum operations of the economy and government."¹⁸”22 The scope of the investigations extended to current and future requirements for national defense and to 16 specific critical infrastructure sectors, such as electric transmission, transportation systems, food and agriculture, and critical manufacturing, including domestic production of primary metals (e.g., production of iron and steel and aluminum) machinery, transportation equipment, and electrical equipment.¹⁹23 The reports also examined domestic production capacity and utilization, industry requirements, current quantities and circumstances of imports, international markets, and global overcapacity.  Commerce based its definition of national security on a 2001 investigation on iron ore and semi-finished steel.²⁰24 Section 232 investigations prior to 2001  generally used a narrower definition considering U.S. national defense needs or overreliance on foreign suppliers.

Commerce Findings and Recommendations

The final reports, submitted to the President on January 11 and Commerce has continued to use the broader 201700259.pdf, and U.S. President (Trump), “Memorandum on Aluminum Imports and Threats to National Security,” Weekly Compilation of Presidential Documents, April 27, 2017, https://www.gpo.gov/fdsys/pkg/DCPD-201700284/pdf/DCPD-201700284.pdf. 19 Department of Commerce, Bureau of Industry and Security, “Notice of Request for Public Comments and Public Hearing on Section 232 National Security Investigation of Imports of Steel,” 82 Federal Register 19205, April 26, 2017, and Department of Commerce, Bureau of Industry and Security, “Notice of Request for Public Comments and Public Hearing on Section 232 National Security Investigation of Imports of Aluminum,” 82 Federal Register 21509, May 9, 2017. 20 CRS In Focus IF10998, Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing, by Michaela D. Platzer. 21 “The case for and against 232 action on steel: Three principal positions,” Inside U.S. Trade, June 12, 2017, and “Awaiting an aluminum decision: some key comment takeaways,” Inside U.S. Trade, July 3, 2017. 22 U.S. Department of Commerce, Bureau of Industry and Security, “The Effect of Imports of Steel on the National Security,” p. 1, January 11, 2018, https://www.commerce.gov/sites/commerce.gov/files/the_effect_of_imports_of_steel_on_the_national_security_-_with_redactions_-_20180111.pdf. (hereinafter, Steel Report). 23 In addition to being labeled as one of the “critical infrastructure sectors,” both steel and aluminum industry organizations seek designation as an “essential industry” to allow continuation of operations in the event of federal emergencies such as during the Covid-19 pandemic. See American Iron and Steel Institute, “AISI Urges Administration to Designate Steel as Essential Industry,” March 20, 2020, and Aluminum Association, “American Aluminum an Essential Industry in a Moment of National Emergency,” March 19, 2020. 24 U.S. Department of Commerce, Bureau of Export Administration, “The Effect of Imports of Iron Ore and Semi-Finished Steel on the National Security,” October 2001, https://bis.doc.gov/index.php/forms-documents?task=doc_download&gid=81. Congressional Research Service 6 Section 232 Investigations: Overview and Issues for Congress definition for national security for the other Section 232 investigations under the Trump Administration. Commerce Findings and Recommendations The final reports, submitted to the President on January 11 and January 22, 2018, respectively, concluded that imports of certain steel mill products²¹products25 and certain types of primary aluminum and unwrought aluminum²² "aluminum26 “threaten to impair the national security"” of the United States. The Secretary of Commerce asserted that "“the only effective means of removing the threat of impairment is to reduce imports to a level that should ... enable U.S. steel mills to operate at 80 percent or more of their rated production capacity"” (the minimum rate the report found necessary for the long-term viability of the U.S. steel industry and, separately, for the aluminum industry). The Secretary further recommended the President "“take immediate action to adjust the level of these imports through quotas or tariffs"” and identified three potential courses of action for both steel and aluminum imports, including tariffs or quotas on all or some steel imports from specific countries.

The Secretary of Defense, while concurring with Commerce's "’s “conclusion that imports of foreign steel and aluminum based on unfair trading practices impair the national security,"” recommended targeted tariffs and that "“an inter-agency group further refine the targeted tariffs, so as to create incentives for trade partners to work with the U.S. on addressing the underlying issue of Chinese transshipment"transshipment” in which Chinese producers ship goods to another country to reexport.²³27 He also noted, however, that "“the U.S. military requirements for steel and aluminum each only represent about three percent of U.S. production."²⁴

”28 Presidential Actions

On March 8, 2018, President Trump issued two proclamations imposing duties on U.S. imports of certain steel and aluminum products, based on the Secretary of Commerce'’s findings.²⁵29 The proclamations outlined the President'’s decisions to impose tariffs of 25% on steel and 10% on aluminum imports effective March 23, 2018, but provided for flexibility in regard to country and product applicability of the tariffs (see below). The new tariffs were to be imposed in addition to any duties already in place, including antidumping and countervailing duties (AD/CVD).

In the proclamations, the President established a bifurcated approach, instructing Commerce to establish a process for domestic parties to request individual product exclusions and a U.S. Trade 25 U.S. Department of Commerce, Bureau of Industry and Security, “The Effect of Imports of Steel on the National Security,” January 11, 2018, https://www.commerce.gov/section-232-investigation-effect-imports-steel-us-national-security. 26 U.S. Department of Commerce Bureau of Industry and Security, “The Effect of Imports of Aluminum on the National Security,” January 17, 2018, https://www.commerce.gov/sites/commerce.gov/files/the_effect_of_imports_of_aluminum_on_the_national_security_-_with_redactions_-_20180117.pdf (hereinafter, Aluminum Report). 27 Letter from James N. Mattis, Secretary of Defense, to Wilbur L. Ross Jr., Secretary of Commerce, 2018, https://www.commerce.gov/sites/commerce.gov/files/department_of_defense_memo_response_to_steel_and_aluminum_policy_recommendations.pdf. 28 Ibid. 29 Presidential Proclamation 9704 of March 8, 2018, “Adjusting Imports of Aluminum into the United States,” 83 Federal Register 11619, March 15, 2018, and Proclamation 9705 of March 8, 2018, “Adjusting Imports of Steel Into the United States,” 83 Federal Register 11625, March 15, 2018. Congressional Research Service 7 link to page 44 link to page 44 link to page 21 Section 232 Investigations: Overview and Issues for Congress establish a process for domestic parties to request individual product exclusions and a U.S. Trade Representative (USTR)-led process to discuss "“alternative ways"” through diplomatic negotiations to address the threat with countries having a "“security relationship"” with the United States.

The President officially notified Congress of his actions in a letter dated April 6, 2018. Several Members have voiced their views since the investigations were launched, including through hearings and letters to the President.²⁶

30 On January 24, 2020, after the steel and aluminum tariffs had been in effect for over 22 months, the President expanded the scope of products covered to include "derivative"“derivative” products, effective February 8, 2020.²⁷ 31 The President'’s proclamation stated that the additional tariffs were needed because the domestic steel and aluminum industries continued to be below the target capacity utilization identified in the initial Commerce investigations, and imports of certain finished, or derivative, products were undermining the purpose of the original proclamations.

With the increased costs of steel and aluminum inputs because of the Section 232 tariffs, some U.S. manufacturers had trouble competing with importers of finished, or derivative, products (e.g., steel wheels or metal filing cabinets). Thus, U.S. industries manufacturing similar products have sought AD/CVD protection from import competition. Thus, there has been a noticeable increase in AD/CVD investigations on finished products containing steel or aluminum. The additional AD/CVD cases as a result of the Section 232 tariffs are in addition to any AD/CVD duties already in place. Some economists have called this phenomenon "“cascading protection."²⁸

”32 According to the January 2020 proclamation, the countries that successfully negotiated exemptions from each of the steel and aluminum tariffs (see below) are also exempt from the additional tariffs on derivative products. The Commerce process for requesting product exclusions applies to derivative products (see below).

Some analysts have raised questions about the President'’s authority to impose the additional tariffs and some U.S. manufacturers have challenged the action (see "“Proclamation Imposing Tariffs on Steel-Derivative Products”"). The President'’s actions under the 2020 proclamation relies on the 2018 Section 232 investigations, although those investigations did not cover steel and aluminum derivative products. House Ways and Means Committee Member Representative Jackie Walorski sent a letter to Commerce questioning why a new investigation was not needed for the change in product scope, and how the change would help increase domestic industry capacity utilization, among other issues.²⁹33 The Section 232 statute does not specifically allow for additional actions after the initial timeline or provide an expiration date of an investigation. Similar questions as to whether the President'’s authority to act is time-limited have been raised in relation to the Section 232 auto investigation (see "“Automobiles and Parts").

Country Exemptions

”). Country Exemptions Although tariffs were initially imposed on most trading partners, including many allies and FTA partners, the President expressed a willingness to consider exceptions to individual countries, 30 U.S. President (Trump), “Letter to Congressional Leaders on Requests for Exclusions from United States Tariffs on Aluminum and Steel Imports,” Weekly Compilation of Presidential Documents, April 6, 2018. 31 The White House, “Proclamation on Adjusting Imports of Derivative Aluminum Articles and Derivative Steel Articles into the United States,” 85 Federal Register 5281, January 24, 2020. For a full list of derivative products covered see https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote/section-232-investigations. Steel and aluminum derivative products are defined according to certain criteria and the specific covered products are specified in annexes of the presidential proclamation. 32 Chad P. Bown, “Trump’s steel and aluminum tariffs are cascading out of control,” Peterson Institute for International Economics, February 4, 2020. 33 Letter from Rep. Jackie Walorski to Wilbur L. Ross Jr., Secretary of Commerce, March 3, 2020. Congressional Research Service 8 Section 232 Investigations: Overview and Issues for Congress partners, the President expressed a willingness to consider exceptions to individual countries, specifically stating that countries with which the United States has a "“security relationship"” may discuss "“alternative ways"” to address the national security threat and gain an exemption from the tariffs. Initially, the President temporarily excluded imports of steel and aluminum products from Mexico and Canada from the new tariffs, and the Administration implicitly and explicitly linked a successful outcome of the North American Free Trade Agreement (NAFTA) renegotiation to maintaining the exemptions. With regard to other countries, the President charged the USTR with negotiating bilaterally with trading partners on potential exemptions.

On March 22, 2018, after discussions with multiple countries, the President issued proclamations temporarily excluding Australia, Argentina, Brazil, South Korea, the European Union (EU), Canada and Mexico, from the Section 232 tariffs.³⁰34 The President gave a deadline of May 1, 2018, by which time each trading partner had to negotiate "“a satisfactory alternative means to remove the threatened impairment to the national security by imports"” for steel and aluminum in order to maintain the exemption. On April 30, 2018, the White House extended negotiations and tariff exemptions with Canada, Mexico, and the EU for an additional 30 days, until June 1, 2018, and exempted Argentina, Australia, and Brazil from the tariffs indefinitely pending final agreements.³¹35 South Korea, which pursued a resolution over the tariffs in the context of discussions to modify the U.S.-South Korea (KORUS) Free Trade Agreement, agreed to an absolute annual quota for 54 separate subcategories of steel and was exempted from the steel tariffs.³²36 South Korea did not negotiate an agreement on aluminum and its exports to the United States have been subject to the aluminum tariffs since May 1, 2018.

On May 31, 2018, the President proclaimed Argentina and Brazil, in addition to South Korea, permanently exempt from the steel tariffs, having reached final quota agreements with the United States on steel imports.³³37 Brazil, like South Korea, did not negotiate an agreement on aluminum and is subject to the aluminum tariffs. The Administration also proclaimed aluminum imports from Argentina permanently exempt from the aluminum tariffs subject to an absolute quota.³⁴38 The Administration proclaimed imports of steel and aluminum from Australia permanently exempt from the tariffs as well, but did not set any quantitative restrictions on Australian imports.

As of June 1, 2018, imports of steel and aluminum from all other countries were subject to the Section 232 tariffs. The imposition of tariffs on major trading partners such as Canada, Mexico, and the European UnionEU increased the economic significance of the tariffs and prompted criticism from several Members of Congress, including the chairs of the House Ways and Means and Senate Finance Committees.³⁵

39 34 Proclamation 9710 of March 22, 2018 “Adjusting Imports of Aluminum into the United States,” 83 Federal Register 13355, March 28, 2018; and Proclamation 9711 of March 22, 2018, “Adjusting Imports of Steel into the United States,” 83 Federal Register 13361, March 28, 2018. 35 Executive Office of the President, “President Donald J. Trump Approves Section 232 Tariff Modifications,” press release, April 30, 2018, https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-approves-section-232-tariff-modifications/. 36 U.S. Customs and Border Protection, QB 18-118 Steel Mill Articles (AMENDED), May 1, 2018, https://www.cbp.gov/trade/quota/bulletins/qb-18-118-steel-mill-articles. 37 Proclamation 9759 of May 31, 2018, “Adjusting Imports of Steel into the United States,” 83 Federal Register 25857, June 5, 2018. 38 Proclamation 9758 of May 31, 2018 “Adjusting Imports of Aluminum into the United States,” 83 Federal Register 25849, June 5, 2018. 39 Chairman Kevin Brady, “Brady Statement on Administration’s Action on Steel and Aluminum Tariffs,” press release, May 31, 2018; Chairman Orrin Hatch, “Hatch Statement on Administration Aluminum, Steel Tariff Announcement,” press release, May 31, 2018, https://www.finance.senate.gov/chairmans-news/hatch-statement-on- Congressional Research Service 9 Section 232 Investigations: Overview and Issues for Congress The Trump Administration completed negotiations on the United States-Mexico-Canada Agreement (USMCA) on September 30, 2018, to replace the NAFTA. The USMCA did not resolve or address the Section 232 tariffs on imported steel and aluminum from Canada and Mexico, but includes a requirement that motor vehicles contain 70% or more of North American steel and aluminum content to qualify for duty-free treatment.³⁶40 The parties also signed side letters in case of Section 232 action on autos and auto parts, to exclude certain amounts of Canadian and Mexican exports of these products and provide a 60-day period to reach a negotiated outcome.³⁷41 Separately, on May 17, 2019, the three parties announced a new monitoring mechanism to prevent surges in imports of steel and aluminum, and agreed to withdraw all Section 232 steel and aluminum tariffs and related retaliatory tariffs.³⁸

On42 A year later, in May 2020, the American Primary Aluminum Association, which represents U.S. primary aluminum producers, alleged a surge in aluminum imports from Canada and called for the re-imposition of tariffs.43 The U.S. Chamber of Commerce, the National Foreign Trade Council, and Aluminum Association opposed the proposal.44 After consultations with Canada, the Trump Administration re-imposed tariffs on imports of non-alloyed unwrought aluminum from Canada, effective August 16, 2020.45 Canada called the new tariffs “absurd” and issued a list of products targeted for retaliatory tariffs.46 Regarding the EU, on October 16, 2018, the Trump Administration notified Congress under TPA of new broad-based U.S. trade agreement negotiations with the EU to address ongoing trade frictions including Section 232 tariffs. The Administration seeks a "“fairer, more balanced"” U.S.-EU relationship. The TPA notification followed the July 2018 Joint Statement (agreed between President Trump and European Commission President Jean-Claude Juncker) that aimed to de-escalate trade tensions in which the two sides agreed to not impose further tariffs on each other's ’s trade products while negotiations are active.³⁹47 The negotiations have not started formally, largely administration-aluminum-steel-tariff-announcement. 40 USTR, United States-Mexico-Canada Agreement Text, https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement. In a side letter on automobiles, the United States also agreed that, in the event of Section 232 measure imposed on passenger vehicles and auto parts, that the United States would exclude 2.6 million passenger vehicles, all light trucks imported from Mexico, and up to $108 billion worth (in declared customs value) of auto parts annually. For more information on USMCA, see CRS Report R44981, The United States-Mexico-Canada Agreement (USMCA), by M. Angeles Villarreal and Ian F. Fergusson. 41 Side letters are available at https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement/agreement-between. 42 USTR, “Joint Statement by the United States and Mexico on Section 232 Duties on Steel and Aluminum,” May 17, 2019, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/may/united-states-announces-deal-canada and and “Modification of Regulations Regarding the Steel Import Monitoring and Analysis System,” 85 Federal Register 17515, March 30, 2020. 43 American Primary Aluminum Association letter to USTR, May 26, 2020, available at https://www.prnewswire.com/news-releases/apaa-calls-on-ambassador-lighthizer-to-restore-tariffs-on-surging-canadian-aluminum-imports-301066198.html. 44 U.S. Chamber of Commerce, “U.S. Chamber Opposes Aluminum Tariffs on Canada,” June 23, 2020; “Business groups oppose Section 232 tariffs on Canadian aluminum,” Inside U.S. Trade, June 24, 2020. 45 White House, “Proclamation on Adjusting Imports of Aluminum Into the United States,” press release, August 6, 2020, and “Adjusting Imports of Aluminum Into the United States,” 85 Federal Register 49921, August 14, 2020. 46 Andy Blatchford, “Trump’s ‘absurd decision’ to slap aluminum tariffs on Canada draws threat of C$3.6B in retaliatory duties,” PolticoPro, August 7, 2020, and Government of Canada, “Notice of intent to impose countermeasures action against the United States in response to tariffs on Canadian aluminum products,” August 7, 2020, https://www.canada.ca/en/department-finance/programs/consultations/2020/notice-intent-impose-countermeasures-action-against-united-states-response-tariffs-canadian-aluminum-products.html. 47 White House Factsheet, “President Donald J. Trump Launches a New Reciprocal Trade Relationship with the Congressional Research Service 10 link to page 42 link to page 42 Section 232 Investigations: Overview and Issues for Congress The negotiations have not started formally, largely due to lack of U.S.-EU consensus on their scope. The EU asserts that it will stop negotiating if it is subject to new Section 232 tariffs.⁴⁰

Product Exclusions

European Union,” July 27, 2018. 48 For more information, see CRS In Focus IF10931, U.S.-EU Trade and Economic Issues, by Shayerah Ilias Akhtar. 49 Also see CRS In Focus IF10961, U.S.-Turkey Trade Relations, by Shayerah Ilias Akhtar. 50 The White House, “Statement from President Donald J. Trump Regarding Turkey’s Actions in Northeast Syria,” October 14, 2019, at https://www.whitehouse.gov/briefings-statements/statement-president-donald-j-trump-regarding-turkeys-actions-northeast-syria/. 51 The White House, “Remarks by President Trump on the Situation in Northern Syria,” October 23, 2019, at https://www.whitehouse.gov/briefings-statements/remarks-president-trump-situation-northern-syria/. 52 “CIT quashes expansion of Section 232 tariffs on Turkish steel,” Inside U.S. Trade, July 14, 2020. See “Domestic Court Challenges”. 53 @realDonaldTrump, December 2, 2019, at https://twitter.com/realDonaldTrump/status/1201455858636472320. Congressional Research Service 11 link to page 18 Section 232 Investigations: Overview and Issues for Congress Product Exclusions To limit potential negative domestic impacts of the tariffs on U.S. consumers and consuming industries, Commerce published an interim final rule for how parties located in the United States may request exclusions for items that are not "“produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality."⁴⁵”54 Requests for exclusions and objections to requests were initially posted on regulations.gov.⁴⁶55 The rule went into effect the same day as publication to allow for immediate submissions.

Commerce reviews exclusion requests and makes determinations based upon national security considerations. To minimize the impact of any single exclusion on the Section 232 action, the rule allows only "“individuals or organizations using steel articles ... in business activities ... in the United States to submit exclusion requests,"” eliminating the ability of larger umbrella groups or trade associations to submit petitions on behalf of member companies.⁴⁷56 Any approved product exclusion is limited to the individual or organization that submitted the specific exclusion request. Parties may also submit objections to any exclusion within 30 days after the exclusion request is posted. The review of exclusion requests and objections will not exceed 90 days, creating a period of uncertainty for petitioners. Exclusions will generally last for one year from the date of signature.⁴⁸

As of December 6, 2019, Commerce received almost 94,000 steel product exclusion requests, with 47,140 exclusions granted and 13,262 denied.⁴⁹ As of the same date, Commerce received 13,249 aluminum exclusion requests, with 6,443 exclusions granted and 862 denied (see Figure 3).⁵⁰ 57 As of July 27, 2020, Commerce received 222,773 exclusion requests, 198,869 for steel and 23,904 for aluminum. Of those requests, the agency granted 107,886 steel exclusions and 13,289 aluminum exclusions; 30,189 steel and 3,189 aluminum requests were denied (see Figure 3).58 Some Members have advocated for or against specific exclusions in support of constituents that represent different parts of the supply chain, in some cases putting Members on opposing sides of an exclusion request.59 54 U.S. Department of Commerce, Bureau of Industry and Security, “Requirements for Submissions Requesting Exclusions From the Remedies Instituted in Presidential Proclamations Adjusting Imports of Steel Into the United States and Adjusting Imports of Aluminum into the United States,” 83 Federal Register 12106, March 19, 2018. 55 Docket Number BIS-2018-0006 (Steel); Docket Number BIS-2018-0002, (Aluminum). 56 A parallel requirement applies for aluminum requests. 57 Bureau of Industry and Security, Requirements for Submissions Requesting Exclusions from the Remedies Instituted in Presidential Proclamations Adjusting Imports of Steel into the United States and Adjusting Imports of Aluminum into the United States; and the Filing of Objections to Submitted Exclusion Requests for Steel and Aluminum, Docket BIS-2018-0006, https://www.regulations.gov/. 58 Data obtained by CRS from Bureau of Industry and Security, Department of Commerce, August 18, 2020. 59 For example, see letters from Reps. H. Rogers, Kaptur, Guthrie, Comer, M. Rogers, Barr, Aderholt, Johnson, Gonzalez and Gibbs to President Trump, February 7, 2020, and from Sen. Toomey to Secretary Ross, February 5, 2020, related to exclusion requests from Allegheny Technologies Incorporated (ATI). Congressional Research Service 12 Section 232 Investigations: Overview and Issues for Congress Figure 3. Section 232 Exclusion Requests as of July 27, 2020 Source: CRS based on data from Department of Commerce. an exclusion request.⁵¹

Figure 3. Steel and Aluminum Product Exclusion Requests

Source: CRS based on data gathered by Mercatus. Note: Exclusion requests through December 6, 2019.

Companies have raised strong concerns about the intensive, time-consuming process to submit exclusion requests; the lengthy waiting period to hear back from Commerce, which has exceeded 90 days in some cases; what some view as an arbitrary nature of acceptances and denials; and that all exclusion requests to date have been rejected when a U.S. steel or aluminum producer has objected.⁵²60 Some steel companies who expected to benefit from the tariffs and whose exclusion requests have been denied are experiencing financial difficulty.⁵³

61 Several Members of Congress have raised concerns about the exclusion process. A bipartisan group of House Members, for example, raised concerns about the speed of the review process and the significant burden it places on manufacturers, especially small businesses.⁵⁴62 The Members included specific recommendations, such as allowing for broader product ranges to be included in a single request, allowing trade associations to petition, grandfathering in existing contracts to avoid disruptions, and regularly reviewing the tariffs'’ effects and sunsetting them if they have a "“significant negative impact."⁵⁵

”63 Commerce asserts it has taken several steps to improve the exclusion process, including increasing and organizing its staff "“to efficiently process exclusion requests,"” and "“expediting the grant of properly filed exclusion requests that receive no objections."” Commerce'’s Bureau of Industry and Security (BIS) is the lead agency involved in making final decisions regarding whether the requests are granted or denied. The agency'’s International Trade Administration (ITA) also became involved in the exclusion process by analyzing exclusion requests and 60 Ed Crooks and Fan Fei, “Trade war winners and losers grapple with Trump tariff chaos,” The Financial Times, July 23, 2018 and. Christine McDaniel and Joe Brunk, “Section 232 Steel and Aluminum Tariff Exclusion Requests Continue Apace,” Mercatus The Bridge, January 21, 2020. 61 Bryan Gruley and Joe Deaux, “The Biggest Fan of Trump’s Steel Tariffs is Suing Over Them,” Bloomberg, February 13, 2020. 62 MIL OSI - ForeignAffairs.co.nz, “MIL-OSI USA: Walorski Calls for Changes to Tariff Product Exclusion Process for Manufacturers,” ForeignAffairs.co.nz, May 8, 2018. 63 Ibid. Congressional Research Service 13 Section 232 Investigations: Overview and Issues for Congress objections to determine whether there is sufficient domestic production available to meet the requestor'requestor’s product needs.⁵⁶

64 On September 6, 2018, Commerce announced a new rule to allow companies to rebut objections to petitions.⁵⁷65 The rule, published September 11, 2018, included new rebuttal and counter-rebuttal procedures, more information about the exclusion submission requirements and process, the criteria Commerce uses in deciding whether to grant an exclusion request, and revised estimates of the total number of exclusion requests and objections that Commerce expects to receive.⁵⁸66 In June 2019, Commerce launched a newan online 232 Exclusions Portal for submitting and processing of steel and exclusion requests, objections, rebuttals, and sur-rebuttals.⁵⁹67 The portal is for all submissions as of June 13, 2019, while all prior submissions reside on regulations.gov. The portal may provide greater transparency of 232 submission documents, but does not necessarily impact Commerce'Commerce’s decision-making process.

Some Members have questioned the Administration'’s processes and ability to pick winners and losers through granting or denying exclusion requests. For example, Senator Ron JohnsonMembers have requested that Commerce provide specific statistics and information on the exclusion requests and process and provide a briefing to the Committee on Homeland Security and Governmental Affairs. House Ways and Means Committee Member Representative Walorski sent the Commerce Secretary multiple letters seeking further datahave sought greater transparency on the exclusion process. Senator Elizabeth Warren requested that the Commerce Inspector General investigate the implementation of the exclusion process, including a review of the procedures Commerce has established; how they are being followed; and if exclusion decisions are made on a transparent, individual basis, free from political interference. Senator Warren also requested evidence that the exclusions granted meet Commerce's stated goal of "protecting national security while also minimizing undue impact on downstream American industries," and that the exclusions granted to date strengthen the national security of the United States.⁶⁰ Pending legislation to revise Section 232 also addresses the process for excluding productsPending legislation in the 116th Congress to revise Section 232 also addresses the process for excluding products such as having the U.S. International Trade Commission (USITC) administer the process or establishing specific timelines (e.g., S. 287, , H.R. 940, , S. 2362).

). On October 29, 2018, the Commerce Inspector General'’s office (IG) initiated an audit of the agency'agency’s processes and procedures for reviewing and adjudicating product exclusion requests.⁶¹ 68 In July 2019, the Commerce IG determined that BIS had a large backlog of exclusion requests and that requests with objections had lower completion rates.⁶²69 In October 2019, the IG issued a Management Alert regarding "“a lack of transparency that contributes to the appearance of improper influence in decision-making for tariff exclusion requests."⁶³”70 The IG recommended that BIS take specific actions to ensure transparency. Commerce has not announceddid not announce any new changes to 64 U.S. Department of Commerce, Bureau of Industry and Security, “Interim Final Rule. Submissions of Exclusion Requests and Objections to Submitted Requests for Steel and Aluminum,” 83 Federal Register 46026, September 11, 2018. 65 Testimony by Department of Commerce Assistant Secretary For Export Administration Bureau of Industry and Security Richard Ashooh at Senate Subcommittee on Commerce, Justice, Science, and Related Agencies hearing on Conduct Oversight of Bureau of Industry & Security, International Trade Administration, & US International Trade Commission, September 6, 2018, https://www.appropriations.senate.gov/hearings/conduct-oversight-of-bureau-of-industry-and-security-international-trade-administration_us-international-trade-commission. 66 Department of Commerce, Bureau of Industry and Security, "Submissions of Exclusion Requests and Objections to Submitted Requests for Steel and Aluminum," 83 Federal Register 46026, September 11, 2018. 67 Portal is available at https://www.commerce.gov/page/section-232-investigations. 68 Letter from Carol Rice, Assistant Inspector General for Audit and Evaluation, to Daniel O. Hill, Acting Under Secretary of Commerce for Industry and Security, Bureau of Industry and Security, October 29, 2018. 69 Letter from Carol Rice, Assistant Inspector General for Audit and Evaluation, to Nazak Nikakhtar, Assistant Secretary for Industry and Analysis, Performing the Non-Exclusive Duties of the Under Secretary of Commerce for Industry and Security, Bureau of Industry and Security, July 1, 2019. 70 Letter from Carol Rice, Assistant Inspector General for Audit and Evaluation, to Secretary Ross, Management Alert: Certain Communications by Department Officials Suggest Improper Influence in the Section 232 Exclusion Request Review Process Final Memorandum No. OIG-20-003-M, October 28, 2019. Congressional Research Service 14 Section 232 Investigations: Overview and Issues for Congress any new changes to the exemption process or policy to further address the concerns noted in the IG report and by some Members.⁶⁴

71 In May 2020, Commerce issued a Federal Register notice requesting feedback on the exclusion process and “the appropriateness of the factors considered, and the efficiency and transparency of the process employed, in rendering decisions on requests for exclusions from the tariffs and quotas imposed on imports of steel and aluminum articles.”72 The notice also solicited comments on potential revisions to the process. Comments included recommendations to ensure more consistent application of Commerce regulations, rigorous claim verification, and adding derivative products to the exclusion process.73 Other recommendations included reversing the burden of proof for objections and requiring domestic steel manufacturers to show they can meet the needs of the downstream manufacturer who is requesting the exclusion.74 To ensure that Commerce follows through with improving the exclusion process, in the Consolidated Appropriations Act, 2019 (P.L. 116-6), signed on February 15, 2019, Congress provided funding for "“contractor support to implement the product exclusion process for articles covered by actions taken under section 232."⁶⁵”75 To ensure improvements to the exclusion process, Congress indicated that the additional money is to be "“devoted to an effective Section 232 exclusion process"” and required that Commerce submit quarterly reports to Congress.⁶⁶76 Congress mandated that the reports identify: 

• the number of exclusion requests received;
•  the number of exclusion requests approved and denied;
•  the status of efforts to assist small- and medium-sized businesses in navigating the exclusion process;
•  Commerce-wide staffing levels for the exclusion process, including information on any staff detailed to complete this task; and
•  Commerce-wide funding by source appropriation and object class for costs undertaken to process the exclusions.

The Commerce Federal Register notice requesting feedback on the process and potential revisions may be part of the agency’s implementation of the appropriation requirements. Tariffs Collected to Date As of August 12Tariffs Collected to Date

As of March 4, 2020, two full years since the Section 232 tariffs took effect, U.S. Customs and Border Protection assessed $6.8 billion and $2.0 billion from the tariffs on steel and aluminum, respectively. Roughly $4.5 billion and $1.5 billion of these duties on steel and aluminum, respectively,(CBP) assessed $7.3 billion in steel tariffs and $2.2 billion in aluminum tariffs About 63% of steel tariffs ($4.5 billion) and 68% of aluminum tariffs ($1.5 billion) were collected the first year the tariffs were in effect, highlighting the fact that revenue from thethese two Section 232 actions has been declining. This reflects bothcould reflect (1) the exemptions to Canada and Mexico in 71 For example, see Rep. Walorski Statement on Commerce OIG Finding “Improper Influence” in Section 232 Exclusion Process, October 30, 2019. 72 Bureau of Industry and Security, Commerce, "Notice of Inquiry Regarding the Exclusion Process for Section 232 Steel and Aluminum Import Tariffs and Quotas," 85 Federal Register 31441, May 26, 2020. 73 Letter from Representative Jackie Walorski to Secretary of Commerce Wilbur Ross, July 10, 2020. 74 Christine McDaniel, “Commerce Should Improve the Objection Process for the Section 232 Tariff Exclusion Requests,” Mercatus Center, George Mason University, July 13, 2020. 75 P.L. 116-6 Division C, Title I. 76 H.J.Res. 31, p. 609. Congressional Research Service 15 Section 232 Investigations: Overview and Issues for Congress May 2019 ( the exemptions to Canada and Mexico in May 2019, top suppliers of both metals), (2) the effect of exemptions granted to U.S. importers, and (3), and declining imports in response to the relatively higher import prices, an objective of the Administration'Administration’s actions.⁶⁷77 Re-imposed tariffs on Canadian aluminum could impact the trend in the future. In addition, CBP has assessed $18.8 million and $1 million from the tariffs on steel and aluminum derivative products. The tariffs collected are put in the general fund of the U.S. Treasury and are not allocated to a specific fund.

Additional Trump Administration Investigations

Automobiles and Parts⁶⁸

Parts78 Subsequent to the steel and aluminum investigations, the Trump Administration in May 2018 initiated a third Section 232 investigation into the import of passenger cars, SUVs, vans, light trucks, and automotive parts.⁶⁹79 Commerce held a public hearing to hear from stakeholders on the potential impact of these imports on national security, identifying a broad set of factors related to national defense and the national economy for consideration.⁷⁰80 As many foreign auto manufacturers have established facilities in the United States—accounting for 45% of employment in U.S. auto assembly and parts plants⁷¹plants81—Commerce specifically requested information on how the impact of auto imports on U.S. national security may differ when "“U.S. production by majority U.S.-owned firms is considered separately from U.S. production by majority foreign-owned firms."⁷²

”82 The value of U.S. imports potentially covered under the new investigation is significantly greater than that of steel and aluminum imports. In 2019, the United States imported more than eight million vehicles, with a value of $197 billion, and more than $155 billion in auto parts.⁷³83 With complex global supply chains, industry dynamics such as the large number of foreign-owned auto 77 According to the President’s proclamations implementing the Section 232 tariffs, one of the objectives of the tariffs is to “reduce imports to a level that the Secretary assessed would enable domestic steel (and aluminum) producers to use approximately 80 percent of existing domestic production capacity and thereby achieve long-term economic viability through increased production.” Presidential Proclamation 9704 of March 8, 2018, “Adjusting Imports of Aluminum into the United States,” 83 Federal Register 11619, March 15, 2018, and Proclamation 9705 of March 8, 2018, “Adjusting Imports of Steel Into the United States,” 83 Federal Register 11625, March 15, 2018. 78 CRS Specialist Bill Canis contributed to this section. 79 For a further discussion of the Section 232 auto industry investigation, see CRS In Focus IF10971, Section 232 Auto Investigation, coordinated by Rachel F. Fefer. 80 U.S. Department of Commerce, “Notice on Section 232 National Investigation of Imports of Automobiles and Automotive Parts,” 83 Federal Register 24735, May 30, 2018. 81 In 2017, employment in manufacture of motor vehicles, bodies and trailers, and vehicle parts was 972,000; of those, 431,000 worked in foreign-owned plants in the United States, according to the latest data from the U.S. Department of Commerce, Bureau of Economic Analysis (BEA), Activities of U.S. Affiliates of Foreign Multinational Enterprises, viewed on July 31, 2020, https://www.bea.gov/data/intl-trade-investment/activities-us-affiliates-foreign-mnes, and BEA, National Income and Product Accounts, Table 6.4D. Full-time and Part-Time Employees by Industry, viewed February 20, 2020, https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri=1&nipa_table_list=193&categories=survey. 82 U.S. Department of Commerce, “Notice on Section 232 National Investigation of Imports of Automobiles and Automotive Parts,” 83 Federal Register 24735, May 30, 2018. 83 Mexico, Japan, Canada, Germany, and South Korea accounted for 85% of vehicles imported by the United States in 2018; nearly 40% of automotive parts were imported from Mexico, with China, Canada, Japan, Germany, and South Korea accounting for an additional 43% of imports. U.S. Department of Commerce, International Trade Administration, Automotive Team: Industry Trade Data, https://legacy.trade.gov/td/otm/autostats.asp. Congressional Research Service 16 Section 232 Investigations: Overview and Issues for Congress complex global supply chains, industry dynamics such as the large number of foreign-owned auto manufacturing facilities in the United States, and the potential for further retaliation by trading partners if tariffs are imposed as a result of the investigation, the economic consequences could be substantial.⁷⁴84 For example, the 1.9 million vehicles exported from the United States in 2019—with a value of $59 billion—and $85 billion in parts exports could be targeted for retaliation by some trading partners, as could the vehicle assembly plants of U.S. controlled companies in overseas markets such as China and Europe.⁷⁵85 The Center for Automotive Research (CAR), a research and analysis group that studies issues affecting the automotive industry, estimated that a 25% tariff added to all imported vehicles and parts (including from Canada and Mexico) could raise the cost of U.S. vehicle assembly by 6%; if levied only against the post-Brexit European UnionEU, those costs would increase by less than 1%.⁷⁶

86 In its 2019 annual report, Ford Motor Company asserts that "“steps taken by the U.S. government to apply or consider applying tariffs on automobiles, parts, and other products and materials have the potential to disrupt existing supply chains, impose additional costs on our business, affect the demand for our products, and make us less competitive. Further, other countries attempting to retaliate by imposing tariffs would increase the cost for us to import our vehicles into such countries."⁷⁷

”87 The automotive supply chain has already been affected by steel and aluminum tariffs. According to CAR, U.S. vehicles and parts manufacturers account for 26% of U.S. steel consumption and 31% of aluminum consumption.⁷⁸88 The American Automotive Policy Council, an industry trade group that represents the policy interests of Fiat Chrysler Automobiles (FCA US), Ford, and General Motors, has estimated that the Section 232 steel and aluminum tariffs have added $400 to the price of a new vehicle.⁷⁹

89 Three groups voiced support for at least limited measures to specifically address auto imports: the United Automobile Workers, the United Steelworkers, and the Forging Industry Association.90 Some Members and auto industry representatives spoke out in opposition to any tariffs during the auto industry Section 232 investigation. The Driving American Jobs Coalition, created to oppose the potential tariffs, is comprised of industry groups representing auto manufacturers, parts suppliers, auto dealers, parts distributors, retailers, and vehicle service providers.⁸⁰91 Others view the use of this investigation and potential tariffs as a tactical move by the Administration to 84 To illustrate the complexity of auto negotiations, see CRS In Focus IF10835, NAFTA Motor Vehicle Talks Reopen Old Trade Debate, by Bill Canis. 85 EU members alone in 2019 purchased 350,201 U.S-made vehicles, worth $13.7 billion. Nearly three-quarters of U.S. automotive parts exports were to Mexico and Canada. U.S. Department of Commerce, International Trade Administration, Automotive Team: Industry Trade Data, https://legacy.trade.gov/td/otm/autostats.asp 86 Michael Schultz, et al., U.S. Consumer & Economic Impacts of U.S. Automotive trade Policies, Center for Automotive Research, February 2019, p. 26, https://www.cargroup.org/wp-content/uploads/2019/02/US-Consumer-Economic-Impacts-of-US-Automotive-Trade-Policies-.pdf 87 Ford Motor Company, 2019 Annual Report, Form 10-K, For the Year Ended December 31, 2019, p. 15, https://shareholder.ford.com/investors/financials/annual-reports/default.aspx. 88 Michael Schultz, et al., U.S. Consumer & Economic Impacts of U.S. Automotive trade Policies, Center for Automotive Research, February 2019, pp. 24-25. 89 Ryan Beene, “Auto industry unites to oppose Trump import tariffs,” Automotive News, March 29, 2019, https://www.autonews.com/automakers-suppliers/auto-industry-unites-oppose-trump-import-tariffs. 90 Doug Palmer and Megan Cassella, “U.S. allies warn of retaliation if Trump imposes auto tariffs,” PoliticoPro, July 19, 2018. 91 GT Staff, “Coalition Launches Campaign to Oppose Section 232 Auto Tariffs,” GlobalTrade Magazine, September 4, 2018, http://www.globaltrademag.com/global-trade-daily/coalition-launches-campaign-to-oppose-section-232-auto-tariffs. Congressional Research Service 17 link to page 42 Section 232 Investigations: Overview and Issues for Congress the use of this investigation and potential tariffs as a tactical move by the Administration to pressure trade negotiating partners as the President continues to threaten auto tariffs.⁸¹92 For example, since the initiation of trade negotiations with the EU, the President has repeatedly threatened to impose tariffs on U.S. auto imports in the absence of progress on the negotiations.⁸² As mentioned, the93 The EU has reportedly drafted a list of targets for retaliatory tariffs if the Administration moves forward with auto tariffs under Section 232.⁸³ Three groups voiced support for at least limited measures to address auto imports: the United Automobile Workers, the United Steelworkers, and the Forging Industry Association.⁸⁴

94 However, the president’s continued ability to impose tariffs under the 2018 investigation is unclear after recent court rulings stating that “temporal restrictions on the President’s power to take action pursuant to a [Commerce] report and recommendation by the Secretary is not a mere directory guideline, but a restriction that requires strict adherence.”95 Commerce submitted the final Section 232 report to the President on February 17, 2019, but the report has not been publicly released.⁸⁵ Some96 Some trade policy experts and Members have suggested that the deadline expired in November 2019, by which President Trump may act under the current Section 232 report;⁸⁶ expired in November 2019;97 the Administration disagrees.⁸⁷98 Some Members have asked for the report to be made public, and the Cause of Action Institute sued Commerce to release the report after an unsuccessful Freedom of Information Act request.⁸⁸99 On March 6, 2020, Senator Toomey and other Members of Congress filed an amicus brief with the district court arguing, among other things, that (1) Congress needed the report in order to exercise oversight over the authority it had granted to the executive branch in Section 232; and (2) the President could not invoke executive privilege to withhold disclosure of the document.⁸⁹100 The court has not issued a decision in the case.

To compel the Administration to release the report, Congress included an amendment in the Consolidated Appropriations Act, 2020 (H.R. 1158; ; P.L. 116-93) mandating that Commerce publish the report in the Federal Register and that it submit to Congress any portion of the report that contains classified information.⁹⁰101 The Administration has yet to release the report. A legal opinion by the Department of Justice cited executive privilege, noting that disclosure of the report "“would risk impairing ongoing diplomatic efforts to address a national-security threat and would risk interfering with executive branch deliberations,"” in apparent reference to ongoing 92 Jakob Hanke, et al., “Juncker and Trump’s transatlantic trade truce falters,” Politico, October 17, 2018. 93 “Trump threatens big tariffs on car imports from EU,” Reuters, January 22, 2020. 94 Jonathan Stearns and Irina Vilcu, “EU Ready to Target Caterpillar, Xerox If Trump Hits Cars, Official Says,” Bloomberg, February 22, 2019. 95 See “Domestic Court Challenges” discussion of Transpacific Steel LLC v. United States. 96 U.S. Department of Commerce, “Statement from the Department of Commerce on Submission of Automobiles and Automobile Parts Section 232 Report to the President,” Press Releases, February 17, 2019. 97 David Lawder, “Trump can no longer impose ‘Section 232’ auto tariffs after missing deadline: experts,” Reuters, November 19, 2020, and https://twitter.com/SenToomey. 98 “Wilbur Ross Says U.S. Has Had Constructive Talks With German Automotive,” Bloomberg Markets, January 23rd, 2020. 99 Eliana Johnson and Andrew Restuccia, “Trump administration withholds report justifying ‘shock’ auto tariffs,” PoliticoPro, March 20, 2019; Doug Palmer, “Watchdog group sues for release of Commerce auto tariff report,” PoliticoPro, March 21, 2019. 100 Senator Toomey, “Toomey Leading Bipartisan Amicus Brief Supporting Lawsuit Seeking Release of Commerce Department’s 232 Auto Report,” March 7, 2020, https://www.toomey.senate.gov/?p=op_ed&id=2591. 101 P.L. 116-93, Sec. 112. Congressional Research Service 18 Section 232 Investigations: Overview and Issues for Congress in apparent reference to ongoing negotiations with the EU and others.⁹¹102 Several Members, including Senate Finance Chair Senator Grassley have pushed back against the Administration'’s refusal to release the report.⁹²

103 Bills introduced in the House and Senate would require a report by the U.S. International Trade Commission (USITC)USITC on the economic importance of domestic automotive manufacturing before the President could impose import restrictions on the sector (S. 121, , H.R. 1710).

Uranium

). Uranium104 Unlike the self-initiated investigations into steel, aluminum, and auto imports, the Trump Administration opened two additional Section 232 investigations in response to industry petitions. In July 2018, Commerce launched a Section 232 investigation into uranium imports in response to a petition from two uranium producers (uranium mining and milling companies), and after consulting with industry, government officials, and a public comment period.⁹³105 The petitioners, the uranium producers Energy Fuels and Ur-Energy, requested limiting imports to guarantee 25% of the U.S. nuclear fuel market for U.S. uranium producers, and "“Buy American" ” provisions for government purchases of uranium to bolster the industry.⁹⁴

106 Compared to historical production, current uranium mining has become a relatively small-scale industry in the United States. The Energy Information Administration (EIA) reports U.S. production of uranium shrank to 1.6 million pounds in 2018, 33% less than 2017, and declined to 173,875 pounds in 2019.⁹⁵107 Kazakhstan accounted for 41% of the world'’s production of uranium; Canada and Australia supplied roughly a quarter of the world'’s production in 2017.⁹⁶108 China made up 3.5% of worldwide uranium production in 2018.⁹⁷

109 In April, 2019, Commerce submitted its report to the President, determining affirmatively that uranium imports threaten to impair U.S. national security.⁹⁸110 In July, the President expressed concerns regarding national security, calling for a "“fuller analysis of national security 102 Steven A. Engel, Assistant Attorney General Office Legal Counsel, “Publication of a Report to the President on the Effect of Automobile and Automobile-Part Imports on the National Security,” January 17, 2020, https://www.justice.gov/olc/opinion/file/1236426/download. 103 “Grassley says he intends to ‘pursue’ release of Section 232 autos report,” Inside U.S. Trade, February 11, 2020; Doug Palmer, “Toomey blasts Commerce decision not to release auto report,” PoliticoPro, January 21, 2020; letter from New Democrat Coalition to Pres. Trump dated February 13, 2020. 104 CRS Analyst Lance Larson contributed to this section. 105 Bureau of Industry and Security, Office of Technology Evaluation, U.S. Department of Commerce, “Notice of Request for Public Comments on Section 232 National Security Investigation of Imports of Uranium,” 83 Federal Register 35204, July 25, 2018. 106 Energy Fuels, “Energy Fuels and Ur-Energy Jointly File Section 232 Petition with U.S. Commerce Department to Investigate Effects of Uranium Imports on U.S. National Security,” press release, January 16, 2018, http://www.energyfuels.com/news-pr/energy-fuels-ur-energy-jointly-file-section-232-petition-u-s-commerce-department-investigate-effects-uranium-imports-u-s-national-security/. 107 Energy Information Administration (EIA), Domestic Uranium Production Report - Quarterly, February 13, 2020. [not finding content on EIA site, suggest we omit URL. Or could it now be in annual report??] 108 World Nuclear Association, World Uranium Mining Production, August 2019, http://www.world-nuclear.org/information-library/nuclear-fuel-cycle/mining-of-uranium/world-uranium-mining-production.aspx. 109 Ad Hoc Utilities Group, “Domestic Uranium Quotas Threaten America’s Economy, Energy, and Security,” https://www.ahuguranium.com/. 110 The White House, Memorandum on the Effect of Uranium Imports on the National Security and Establishment of the United States Nuclear Fuel Working Group, Presidential Memorandum, July 12, 2019, https://www.whitehouse.gov/presidential-actions/memorandum-effect-uranium-imports-national-security-establishment-united-states-nuclear-fuel-working-group/. Congressional Research Service 19 Section 232 Investigations: Overview and Issues for Congress fuller analysis of national security considerations with respect to the entire nuclear fuel supply chain."” The White House memorandum established a Nuclear Fuel Working Group, co-chaired by the Assistant to the President for National Security Affairs and the Assistant to the President for Economic Policy, with representatives from other executive branch agencies. The working group was directed to "“examine the current state of domestic nuclear fuel production to reinvigorate the entire nuclear fuel supply chain.”111 In April 2020, the working group released its “Strategy to Restore American Nuclear Energy Leadership” containing ideas to revive the uranium industry and drive U.S. exports, among other recommendations.112 fuel supply chain," and provide a report to the President within 90 days of the memorandum.⁹⁹ To date, the Nuclear Fuel Working Group has not publicly announced the completion of their report or recommendations to the President.¹⁰⁰

Titanium Sponge

Titanium Sponge In March 2019, Commerce launched another Section 232 investigation in response to a petition from a U.S. titanium firm.¹⁰¹113 In explaining the investigation, the Commerce Secretary stated, "“Titanium sponge has uses in a wide range of defense applications, from helicopter blades and tank armor to fighter jet airframes and engines."¹⁰²

”114 Titanium Metals Corporation (known as Timet) is currently the only producer of titanium sponge in the United States; U.S. Geological Survey (USGS) estimates that titanium sponge manufacturing employed 150 workers in 2019.¹⁰³115 In 2016, there were three such producers.¹⁰⁴116 For 2019, and the United States was 86% import reliant for titanium sponge, up from 73% the previous year.¹⁰⁵117 In 2019, Japan was the biggest supplier of titanium sponge to the United States, accounting for more than 90% of sponge imports; Kazakhstan was the second-leading supplier, making up 8% of imported titanium sponge.¹⁰⁶118 Although China was the world'’s largest producer of titanium sponge, producing 84 thousand tons in 2019, it is not an important source of sponge imports for the United States.¹⁰⁷119 In its 232 petition, Timet voiced concern that without protection, the U.S. defense and aerospace industries could become dependent on titanium sponge imports from "risky"“risky” sources such as China or Russia. Furthermore, the company noted that China is not certified as a producer of premium grade titanium sponge used in rotating parts of jet engines.¹⁰⁸

120 111 Ibid. 112 U.S. Department of Energy, “Strategy to Restore American Nuclear Energy Leadership,” April 23, 2020, https://www.energy.gov/strategy-restore-american-nuclear-energy-leadership. For more information on uranium enrichment, see CRS Report R45753, The Front End of the Nuclear Fuel Cycle: Current Issues, by Lance N. Larson. 113 U.S. Department of Commerce, “Notice of Request for Public Comments on Section 232 National Security Investigation of Imports of Titanium Sponge,” 84 Federal Register 8503, March 8, 2019. 114 U.S. Department of Commerce press release, March 2019, https://www.commerce.gov/news/press-releases/2019/03/us-department-commerce-initiates-section-232-investigation-titanium. 115 USGS, Titanium and Titanium Dioxide Mineral Commodity Summaries, January 2020, https://minerals.usgs.gov/minerals/pubs/commodity/titanium/. 116 USGS, Titanium Minerals Yearbook, January 2020, Table 2, p. 79.7., https://prd-wret.s3-us-west-2.amazonaws.com/assets/palladium/production/atoms/files/myb1-2016-titan.pdf 117 USGS, Titanium and Titanium Dioxide Mineral Commodity Summaries, January 2020, https://pubs.usgs.gov/periodicals/mcs2020/mcs2020-titanium.pdf. 118 Global Trade Atlas, based on U.S. import statistics for 8108.20.0010, Titanium Sponge. 119 USGS, Titanium and Titanium Dioxide Mineral Commodity Summaries, January 2020, https://minerals.usgs.gov/minerals/pubs/commodity/titanium/. 120 Petition of the Titanium metals Corporation Under Section 232 of the Trade Expansion Act of 1962 for relief from Imports of Titanium Sponge that Threaten National Security, September 27, 2018, p.19, https://www.timet.com/assets/local/documents/petition/Titanium-Sponge-232-Petition-Executive-Summary.pdf. Congressional Research Service 20 Section 232 Investigations: Overview and Issues for Congress Commerce submitted its report to the President in November 2019, but has not released it to Congress or to the public.¹⁰⁹121 On February 27, 2020, the President announced that he agreed with the Commerce finding that titanium sponge imports threaten to impair national security and also with the Commerce recommendation not to adjust imports.¹¹⁰122 Similar to the uranium case, the White House memorandum established a working group, in this case co-chaired by the Secretary of Defense and the Secretary of Commerce with heads from other executive branch agencies. The working group is to meet with counterpart agencies in Japan to "“agree upon measures to ensure access to titanium sponge in the United States for use for national defense and critical industries in an emergency."¹¹¹”123 Furthermore, the President instructed the Secretary of Defense "“to take all appropriate action… to increase access to titanium sponge for use for national defense and critical industries and to support domestic production capacity for the production of titanium sponge to meet national defense requirements."¹¹²”124 Timet is reportedly satisfied with the result of the investigation.125 Transformers and Components126 On May 4, 2020, Commerce self-initiated a Section 232 investigation into whether imports of certain electrical transformers or their parts, including laminations and cores made of grain-oriented electrical steel (GOES), threaten to impair national security. The existing Section 232 steel tariffs included the expanded derivative products and do not cover GOES derivative products, which had raised concerns among some Members of Congress who called the tariffs insufficient. They also argue that some firms had avoided tariffs by increasing imports of such derivative products from Mexico and Canada, which do not presently face tariff restrictions.127 Canada contested the circumvention allegation in its submission to Commerce. Canadian officials claimed that the North American supply chain was highly integrated, and that Canadian component manufacturers source some GOES inputs from U.S. suppliers. Furthermore, they wrote, restriction of Canadian imports might “adversely affect” the integrated North American electrical grid shared by the United States and Canada.128 AK Steel, with manufacturing operations in Pennsylvania and Ohio, is currently the sole domestic GOES producer.129 121 BIS, Section 232 Investigations: The Effects on Imports on National Security, https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote/section-232-investigations. 122 The White House, Memorandum on the Effect of Titanium Sponge Imports on the National Security, February 27, 2020, https://www.whitehouse.gov/presidential-actions/memorandum-effect-titanium-sponge-imports-national-security/. 123 Ibid. 124 Ibid. 125 Doug Palmer, “Trump won't restrict titanium sponge imports in name of national security,” PoliticoPro, February 28, 2020. 126 CRS Analyst Brian E. Humphreys contributed to this section. 127 Senator Portman, “Portman, Brown, Casey Ask President Trump to Prioritize Electrical Steel in Trade Remedy,” press release, March 8, 2018. 128 Government of Canada, Comments By the Government of Canada to the U.S. Department of Commerce, Request for Comment: The Effect of Imports of Laminations for Staked Cores for Incorporation Into Transformers, Stacked Cores for Incorporation Into Transformers, Wound Cores for Incorporation Into Transformers, and Transformer Regulators, An Investigation Under Section 232(B) of the Trade Expansion Act of 1962, as Amended U.S. Federal Register, Washington, DC, July 2, 2020, p. 15. 129 Representative Mike Kelly, “Reps. Kelly and Balderson Urge President Trump to Protect AK Steel, the Last Remaining U.S. Electrical Steel Producer,” press release, March 6, 2020. Congressional Research Service 21 Section 232 Investigations: Overview and Issues for Congress GOES products are incorporated into transformers used in critical energy infrastructure. Risk assessments for the U.S. energy infrastructure have generally focused on threats and hazards that may disable or permanently damage large numbers of high-voltage electric-power transformers (LPTs) that are critical to the movement of electricity. Because LPTs require long lead times for their manufacture, transport, and installation, the loss of these systems for any reason may have severe long-term consequences for electric reliability. Experts have expressed increasing concern about the threat of coordinated cyberattacks through the nation's networked control systems that might significantly impair the nation's electric grid by damaging LPTs and other bulk-power equipment.130 Widely recognized cyber supply chain vulnerabilities may increase cybersecurity risks to the electricity subsector.131 In 2016, the Federal Energy Regulatory Commission (FERC) directed the North American Energy Reliability Corporation (NERC) to develop a new reliability standard to address supply chain risk management issues affecting cybersecurity of bulk-power systems.132 The rule would require industry stakeholders to formalize cybersecurity risk management and implement more rigorous vetting of vendors and software, among other measures.133 In April 2020, FERC delayed implementation of the rule to October 1, 2020, due to COVID-19 contingencies.134 An affirmative Section 232 investigation might block procurement of bulk-power systems from certain foreign-owned vendors and subcontractors on national security grounds, rather than allowing industry stakeholders to purchase these systems and then assume corporate responsibility for carrying out risk mitigation measures mandated by applicable FERC reliability standards. The U.S. Chamber of Commerce and National Foreign Trade Council oppose potential action to limit imports under Section 232 and instead advocate for use of AD/CVD to limit targeted imports. There are currently duties assessed on transformer components imported from South Korea. The Commerce investigation is ongoing. Mobile Cranes135 On May 19, 2020, Commerce initiated an investigation on imports of mobile cranes136 on the basis of a petition filed by the Manitowoc Company, Inc.137 In its December 2019 petition, the 130 For more information, see CRS Report R45312, Electric Grid Cybersecurity, by Richard J. Campbell. 131 For more information see, NIST Cyber Supply Chain Risk Management, https://csrc.nist.gov/projects/cyber-supply-chain-risk-management. 132 North American Electric Reliability Corporation (NERC), Implementation Plan, Project 2016-03 Cyber Security Supply Chain Risk Management Reliability Standard, July 2017, p. 2. NERC “is a not-for-profit international regulatory authority whose mission is to assure the effective and efficient reduction of risks to the reliability and security of the grid.... NERC is the Electric Reliability Organization (ERO) for North America, subject to oversight by the Federal Energy Regulatory Commission (FERC) and governmental authorities in Canada.” See NERC, “About NERC”, https://www.nerc.com/AboutNERC/Pages/default.aspx. 133 North American Electric Reliability Corporation, “Reliability Standards for the Bulk Electric Systems of North America,” June 23, 2020. 134 U.S. Federal Energy Regulatory Commission, Order Granting Deferred Implementation of Certain NERC Reliability Standards, April 17, 2020, 171 FERC ¶ 61,052. 135 CRS Specialist Bill Canis contributed to this section. 136 Cranes are large machines that move heavy objects using a projecting beam. They are used to unload freight and place bridge sections over highways, and in construction and manufacturing applications. Cranes can be either stationary or mobile, with the latter mounted on wheels, crawler tracks, or trucks. 137 Bureau of Industry and Security, Office of Technology Evaluation, U.S. Department of Commerce, “Notice of Request for Public Comments on Section 232 National Security Investigation of Imports of Mobile Cranes,” 83 Congressional Research Service 22 Section 232 Investigations: Overview and Issues for Congress Wisconsin-based company asserted that lower-priced imports—particularly from Germany, Austria, and Japan—and intellectual property infringement138—by a Chinese competitor—have resulted in a 72% increase in imported cranes since 2014 and the closure of one of its two U.S. production facilities.139 According to its petition, Manitowoc is the “dominant supplier of mobile cranes to the U.S. military and has a long history of Department of Defense contract awards, having supplied a wide number of rough-terrain and self-propelled cranes through the Defense Logistics Agency and through direct sales to all military branches of service.”140 The company asserts that in 2019, it was the U.S. military’s exclusive supplier of all-terrain and boom truck cranes, and supplied half of the rough terrain cranes used by the services.141 Manitowoc also said that its cranes are essential to “strengthen and maintain secure, functioning, and resilient critical infrastructure” within the United States.142 Manitowoc is seeking the imposition of duties on some imported mobile cranes, though notably requests exclusions for imports of its own mobile cranes manufactured in Germany. The crane industry is split in its views on the Manitowoc petition: other mobile crane manufacturers and some crane users support the petition, while others have argued against it.143 Opponents to the Section 232 investigation, mostly those involved in crane rental, sales, and service, say that Kobelco and Tadano, two Japanese crane manufacturers that have invested in U.S. factories, make more reliable equipment with regards to safety, quality, service, and reliability, and are more competitively priced than their Manitowoc counterparts.144 One Texas crane importer asserted that, Manitowoc has not invested in its plants or in innovation through research and development (R&D) since the early 1990s, so that demand for its product has diminished.145 The investigation is ongoing. Federal Register 31439, May 26, 2020. 138 The International Trade Commission found in May 2015 that a Chinese crane manufacturer had violated Manitowoc patents and trade secrets with regard to certain crawler cranes and excluded them from entry into the United States. In the Matter of Certain Crawler Cranes and Components Thereof, Investigation No. 337-TA-887 1-4 (U.S. International Trade Commission). 139 While the company headquarters and engineering remain in Wisconsin, its sole crawler crane manufacturing facility was moved in 2016 to Shady Grove, Penn. Manitowoc Company, Inc., Petition of the Manitowoc Company, Inc. under Section 232 of the Trade Expansion Act of 1962 for the Relief from Imports of Mobile Cranes that Threaten National Security, December 19, 2019. 140 Ibid. 141 Ibid. 142 Ibid. 143 D. Ann Shiffler, “Global crane community responds to Manitowoc petition for tariffs,” International Cranes and Specialized Transport, July 18, 2020, at https://www.khl.com/international-cranes-and-specialized-transport/global-crane-community-responds-to-manitowocs-petition-for-tariffs/145129.article. 144 Public comments of Scott Cummins, CEO of Scott Equipment Company, LLC, July 17, 2020, https://www.regulations.gov/document?D=BIS-2020-0009-0008. 145 Public comments of Don Udelson, President of G.P., Lift Source Machinery, LTD., https://www.regulations.gov/document?D=BIS-2020-0009-0025. Congressional Research Service 23 Section 232 Investigations: Overview and Issues for Congress Vanadium146 On May 28, 2020, Commerce, in response to a petition, initiated an investigation to determine the effects on U.S. national security from imports of vanadium.147 Vanadium is a metal used in the production of metal alloys, and is designated a critical mineral by the Department of the Interior.148 Vanadium is most often used as a strengthening agent for steel and is especially valued for its strength-to-weight ratio.149 Uses potentially important for national security include the manufacture of components of aircraft, jet engines, ballistic missiles, and batteries for energy storage.150 Vanadium is also used in the manufacture of steel alloys, which are commonly sold as steel plate, sheet, beams, bars, pipes, and tubes, among others, and can be used as a catalyst for the production of some acids. Other minerals can often serve as substitutes for vanadium. AMG Vanadium (Cambridge, OH)151 and U.S. Vanadium, LLC (Hot Springs, AR)152 filed the 232 petition. The petitioners assert that the U.S. vanadium industry is “adversely impacted by unfairly priced imports, limited exported markets due to value-added-tax regimes, and the distortionary effects of Chinese and Russian industrial policies.”153 AMG Vanadium and other U.S. producers of ferrovanadium are protected by antidumping orders on imports of ferrovanadium from China and South Africa that have been in place since 2003.154 Opponents of the Section 232 investigation point out that there is no primary production of vanadium in the United States, and that both of the U.S. petitioners rely on secondary sources of vanadium, including imports of spent catalysts from oil refiners, fly ash from industrial boilers and power plants, and vanadium-bearing steelmaking slag.155 Another U.S. manufacturer that uses vanadium pentoxide to produce ferrovanadium, objected to any Section 232 action because the limited production of vanadium pentoxide in the United States makes it necessary to rely on 146 CRS Analyst Brandon S. Tracy contributed to this section. 147 Bureau of Industry and Security, Office of Technology Evaluation, U.S. Department of Commerce, “Notice of Request for Public Comments on Section 232 National Security Investigation of Imports of Vanadium,” 85 Federal Register 34179, June 3, 2020. 148 Office of the Secretary, Interior, “Final List of Critical Minerals 2018,” 83 Federal Register 23295, May 18, 2018. 149 U.S. Vanadium, LLC, https://usvanadium.com. 150 “U.S. Secretary of Commerce Wilbur Ross Initiates Section 232 Investigation into Imports of Vanadium,” Press Release, June 2, 2020. 151 AMG Vanadium reclaims spent steel refinery and other vanadium-bearing residues, which it converts to ferrovanadium as well as a ferronickel-molybdenum alloy that are marketed and sold to the carbon and stainless steel industries; AMG Vanadium, https://amg-v.com/. 152 U.S. Vanadium LLC is a processor of vanadium that makes high-purity vanadium oxides and downstream vanadium chemicals that it markets to the catalyst, chemical, titanium, and energy storage industries. U.S. Vanadium LLC, https://usvanadium.com/news/f/us-vanadium-llc-announces-agreement-to-acquire-evraz-stratcor. 153 Department of Commerce, “U.S. Secretary of Commerce Wilbur Ross Initiates Section 232 Investigation on Imports of Vanadium,” Press Release, June 2, 2020. 154 International Trade Administration, Department of Commerce, “Notice of Antidumping Order: Ferrovanadium from the Republic of South Africa,” 68 Federal Register 4169, January 28, 2003, and “Notice of Amended Final Antidumping Duty Determination of Sales at Less than Fair Value and Antidumping Duty Order: Ferrovanadium from the People’s Republic of China,” 68 Federal Register 4168, January 28, 2003. In these antidumping orders, the scope included all ferrovanadium, but specifically excluded all vanadium additives, such as nitride vanadium, vanadium-aluminum master alloys, vanadium chemicals, vanadium oxides, vanadium waste and scrap, and vanadium-bearing raw materials (slag, boiler residues, and fly ash). 155 Julie C. Mendoza et al., Comments of Bushveld Minerals, Limited, Morris, Manning & Martin LLP, Section 232 National Security Investigation of Imports of Vanadium, July 20, 2020, https://www.regulations.gov/document?D=BIS-2020-0002-0013. Congressional Research Service 24 link to page 31 link to page 33 Section 232 Investigations: Overview and Issues for Congress vanadium imports for its feedstock. The company suggested that if the investigation resulted in tariffs on all vanadium imports, it could critically reduce the amount of vanadium available for steelmaking.156 Other downstream producers, including manufacturers of vanadium flow batteries and of titanium mill products for the aerospace industry, also opposed the Section 232 measure.157 The investigation is ongoing. Section 232 Tariffs and International Trade158 The Trump Administration’s increased tariffs on steel (25%) and aluminum (10%) under Section 232 currently affect $23.3 billion of U.S. annual imports (Figure 4), excluding countries currently exempted from the additional tariffs. The scale of imports affected by the actions declined in 2019, as the Administration exempted Canada and Mexico from increased tariffs on both metals—Canada and Mexico accounted for one-third of relevant U.S. steel and aluminum imports in 2019. However, in February 2020, President Trump expanded the steel and aluminum tariffs to cover additional derivative products, and more significantly, on August 16, 2020, reinstated tariffs on selected aluminum imports from Canada, accounting for $2.5 billion of annual U.S. imports. The Trump Administration has also proposed or is investigating potential increased tariffs on several additional products under Section 232 authority. Among these products, the most economically significant are U.S. auto imports from the European Union ($62 billion in 2019).159 U.S. trading partners have responded to the U.S. tariff actions with retaliatory tariffs on approximately $6.5 billion in U.S. annual exports (see “Retaliatory Tariffs”). 156 Comments of David F. Carey, General Manager, Bear Metallurgical Company, July 20, 2020, https://www.regulations.gov/document?D=BIS-2020-0002-0015. 157 See comments in https://regulations.gov, BIS-2020-0002. 158 U.S. trade data cited throughout this section is from the U.S. Census Bureau accessed via Trade Data Monitor. Calculations based on products included in the Administration’s various tariff proclamations, and adjusted for exempted countries as noted. 159 President Trump’s proclamation under Section 232 declaring auto and parts imports a national security threat, focused on U.S. imports from the European Union and Japan. However, following the January 2020 entry into force of the U.S.-Japan Trade Agreements, the Trump Administration has stated it has no intent to pursue auto tariffs with Japan at this time. For more information, see CRS Report R46140, “Stage One” U.S.-Japan Trade Agreements, coordinated by Brock R. Williams. Congressional Research Service 25 link to page 69 link to page 69 Section 232 Investigations: Overview and Issues for Congress Figure 4. U.S. Trade Affected by Section 232 Tariffs (U.S. dollars) Source: CRS calculations with data from the U.S. Census Bureau sourced through Trade Data Monitor. Notes: Based on annual 2019 trade values. Excludes exempted countries (aluminum imports from Canada under HTS 760110 included). Motor vehicles and parts import figure includes only U.S. imports from the European Union (EU). Proposed retaliatory tariffs consist of Canada’s proposed retaliation to the Trump Administration’s reinstated tariffs on certain aluminum imports from Canada. (*) Derivative data excludes two products covered by the expanded tariffs, notably 8HTS codes 87081030 and 87082921, because only a portion of 2019 trade under these product categories is subject to the tariff actions. The USITC created new 10HTS codes for the covered products and data are available from February 2020. Steel and Aluminum Trade160 In 2019, U.S. imports of steel and aluminum products covered by the Section 232 tariffs totaled $23.8 billion and $15.8 billion, respectively, including all U.S. trading partners.161investigation.¹¹³

U.S. Steel and Aluminum Industries and International Trade

In 2019, U.S. imports of steel and aluminum products covered by the Section 232 tariffs totaled $23.9 billion and $15.7 billion, respectively (see Table D-1). Over the past decade, steel imports have fluctuated significantly, by value and quantity. Imports of aluminum have generally increased through 2018, but saw a slight decline in 2019 (see Figure 4). Compared to 2017, imports of both metals have decreased, by value and quantity. Steel imports have decreased 17.78% by value (-$5.12 billion) and 24.0% by quantity (-8.3 million metric tons). Aluminum imports have decreased 8.5% in9.2% by value (-$1.56 billion), and 12.57% by quantity (-0.9 million metric tons).

U.S. imports from individual countries fluctuated since the tariffs went into effect (see Appendix D). Table D-1).¹¹⁴ When comparing 2019 trade data to 2017, before the tariffs took effect, the largest declines in U.S. steel imports were from Turkey (-$994.6995.1 million, -83.3%), the European Union (-$894.4 891.8 million, -14.9%), Russia (-$812.9815.3 million, -57.56%), and South Korea (-$537554.7 million, -19.39%), with notable increases in trade from Brazil (+$250.4248.9, +10.2%) and Mexico (+$148.2, +5.9173.4, +7.0%). The largest declines in aluminum imports were from Canada (-$1,388.4410.9 million, -19.820.0%), China (-$1,064099.4 million, -60.759.4%), Russia (-$1,024.58 million, -62.8%), and Argentina (-$134.7 million, -24.6%). Aluminum imports increased by value from Australia (+$361.41 million, +170.2169.1%), the European Union (+$607.7581.6 million, +50.146.6%), and Turkey (+$196.3195.6 million, +390.6%).

389.1%). 160 Data in this section from the U.S. Census Bureau accessed via Trade Data Monitor. 161 Figures include countries currently exempted from the Section 232 tariffs. Congressional Research Service 26 link to page 33 Section 232 Investigations: Overview and Issues for Congress The countries with permanent exclusions from the tariffs accounted for 52.5% of U.S. steel imports in 2019 and 4327.1% of U.S. aluminum imports.

162 Figure 45. U.S. Steel and Aluminum Imports

Source: CRS compiled from U.S. Census Bureau data, based on the HTS codes listed in the 2018 Section 232 proclamations. Notes: Data includes U.S. imports from all trading partners, but does not include derivative products. Notes: Data does not include derivative products.

As mentioned, in February 2020, the Administration declared that while steel and aluminum imports decreased, a perceived increase in imports of certain derivatives of steel and aluminum undermined the purpose of the Section 232 steel and aluminum actions.¹¹⁵163 In response, the President proclaimed tariffs on selected derivatives products, namely steel nails, and aluminum wire, as well as certain wire, automobile bumpers, and body stampingstampings for tractors. made of steel and aluminum. An examination of U.S. trade data shows that U.S. imports of both steel nails and aluminum wire increased from 2017 to 2019 (Figure 6).164 In 2019, the United States imported a total of $347.6 million of steel nails, and $46.1 million of aluminum wiretotal of $831.8 million worth of these selected derivative products. In comparison to 2017, imports of steel nails have increased by 37% ($94.1 million), while imports of aluminum wire have increased by 104.6% ($23.5 million). 162 On August 16, 2020, the Trump Administration reinstated tariffs on aluminum imports from Canada under HTS 760110. The aluminum figure for exempted countries, reflects the fact that Canada is only partially exempted from the Section 232 tariffs. 163 Presidential Proclamation 9980 of January 24, 2020, “Adjusting Imports of Derivative Aluminum Articles and Derivative Steel Articles Into the United States.” 164 Historic data on U.S. imports of bumpers (HTS 87081030) and body stampings for tractors (HTS 87082921) subject to the tariffs are not available, because only a portion of trade under these product categories is covered by the tariff actions. The USITC created two new 10HTS codes for the covered products and data are available from February 2020. Congressional Research Service 27 link to page 34 Section 232 Investigations: Overview and Issues for Congress Figure 6imports of these selected derivative products increased overall by 9.8% ($74.5 million); however, import trends differed by each derivative group. For example, the majority of the overall increase was due to increased imports of steel nails (38.6% increase, $97.9 million, as compared to 2017). Conversely, imports of automobile bumpers decreased 10.6% (-$50.3 million) during the same period (see Figure 5).

Figure 5. U.S. Imports of Select Derivative Products

. U.S. Imports of Select Derivative Products Source: CRS compiled from U.S. Census Bureau data for HTS codes listed in Presidential Proclamation 9980 (January 24, 2020) on steel and aluminum derivative products. Notes: Illustrates total U.S. imports of the steel and aluminum derivative products identified in the Presidential Proclamation 9980. Steel nails consist of HTS codes: 73170030, 7317005503, 7317005505, 7317005507, 7317005560, 7317005580, and 7317006560, and aluminum wire consists of HTS 76141050, 76149020, 76149040, and 76149050. Bumpers (HTS 87081030) and body stampings for tractors (HTS 87082921) were also included in the new derivatives tariffs, but historical data for the portion of these product categories covered by the tariffs are not available. Retaliatory Tariffs As noted above, several major U.S. trading partners who are challenging the Section 232 actions on steel and aluminum in the WTO are imposing retaliatory tariffs (see Figure 7).165 Retaliatory tariffs are currently in effect on approximately $6.5 billion of U.S. annual exports (2019 value).166 The scale and scope of annual U.S. exports targeted for retaliation declined significantly during the past year as Canada and Mexico withdrew their retaliatory tariffs (covering U.S. exports of 165 Products targeted by retaliatory tariffs were identified in countries’ World Trade Organization notifications (China (G/L/1218, March 29, 2018); India (G/L/1237/Rev 1, June 13, 2018); EU (G/L/1237, May 18, 2018); Turkey (G/L/1242/Supplement 2, May 22, 2019); Russia (G/L/1241, May 22, 2018), and in the notices published by Canada, Mexico, Russia, and India on their own government websites. Canada: Department of Finance (Canada), “Countermeasures in Response to Unjustified Tariffs on Canadian steel and aluminum products,” June 29, 2018, https://www.canada.ca/en/department-finance/programs/international-trade-finance-policy/measures-steel-aluminum-businesses/countermeasures-response-unjustified-tariffs-canadian-steel-aluminum-products.html; Mexico: Ministry of Finance (Mexico), Diario Oficial de la Federacion, June 5, 2018, http://www.dof.gob.mx/nota_detalle.php?codigo=5525036&fecha=05/06/2018; Russia: Russian Federation, “Approval of rates of import duties in respect to certain goods from the United States,” Decision no. 788, July 6, 2018, http://publication.pravo.gov.ru/Document/View/0001201807060023; India: Ministry of Finance (India), Notification no. 17, June 15, 2019, https://www.cbic.gov.in/resources//htdocs-cbec/customs/cs-act/notifications/notfns-2019/cs-tarr2019/cs17-2019.pdf. Canada’s proposed retaliatory tariffs in response to the Trump Administration’s reinstatement of Section 232 tariffs on certain aluminum products are available at https://www.canada.ca/en/department-finance/programs/consultations/2020/notice-intent-impose-countermeasures-action-against-united-states-response-tariffs-canadian-aluminum-products.html. 166 U.S. exports are estimated using partner country import data in order to match trade values with retaliatory tariff lists. Congressional Research Service 28 link to page 48 link to page 33 Section 232 Investigations: Overview and Issues for Congress $14.1 billion in 2019) following the Trump Administration’s May 2019 decision to exempt both countries from Section 232 steel and aluminum duties. The EU, however, slightly expanded its retaliatory tariffs (covering additional U.S. exports of $42 million in 2019), effective May 8, 2020, in response to the Trump Administration’s decision to expand the U.S. steel and aluminum tariffs to derivative products.167 Most recently, Canada has announced new proposed retaliatory tariffs on approximately $2.5 billion of U.S. exports, effective September 16, 2020, in response to the Trump Administration’s decision to reinstate Section 232 tariffs on certain aluminum imports from Canada. U.S. exports subject to retaliatory tariffs have declined significantly compared to their 2017 pre-tariff levels, suggesting the tariffs have had a negative impact on several U.S. industries (see “Retaliation”). Figure 7. Retaliatory Actions by U.S. Trading Partners Source: CRS analysis of Trade Data Monitor trade data. Retaliatory tariff lists sourced from WTO notifications and partner country notifications. See footnote 165 for complete sourcing. Notes: U.S. exports approximated by using partner country import data. Steel and aluminum are among the top exports facing retaliation by several U.S. trading partners as highlighted above. Canada’s proposed retaliatory tariffs are in response to the Trump Administration’s reinstatement of tariffs on selected aluminum imports from Canada, effective August 16, 2020. They are to take effect September 16, 2020 and cover a value of U.S. exports commensurate with the U.S. action. (1) The EU expanded its retaliatory tariffs to cover additional products in May 2020 in response to the Trump Administration’s expansion of U.S. tariffs to include steel and aluminum derivative products. 167 European Commission, Commission Implementing Regulation (EU) 2020/502, April 6, 2020, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32020R0502&from=EN. Congressional Research Service 29 link to page 12 link to page 37 Section 232 Investigations: Overview and Issues for Congress (2) Turkey temporarily increased its retaliatory tariffs up to 140% in August 2018 in response to the Trump Administration’s tariff increase on Turkish steel to 50%, but in May 2019 both countries withdrew the additional increases. (3) India’s retaliatory tariffs were first announced in June 2018, but were repeatedly postponed until June 2019. (4) Russia published its list of retaliatory tariffs rates and products on July 6, 2018. The tariffs appear to have gone into effect within 30 days of the publication. and 7317006560. Bumpers consist of HTS 87081030. Body stamping for tractors consist of HTS 87082921, and Aluminum wire consists of HTS 76141050, 76149020, 76149040, and 76149050.

U.S. Steel and Aluminum Manufacturing and Employment

Employment As discussed earlier (see "“Commerce Findings and Recommendations”"), a stated goal of the metal tariffs is to spur U.S. producers of steel and aluminum to operate at an average of 80% or more of their production capacity. Commerce'’s Section 232 reports deemed this as necessary to sustain adequate profitability, to reopen idled capacity, and to continue capital investment in both manufacturing sectors.¹¹⁶168 Currently, domestic steel producers operate at 80% or less of production capacity (it was 64% over the first half of 2020, 77.1% in 2019, and about the same in 2018).¹¹⁷ 169 Domestic producers of primary aluminum operated at an estimated 60% of production capacity in 2019, a rise from about 55% of capacity in 2018.¹¹⁸

170 Domestic Steel Manufacturing

U.S. raw steel production increased to 87 million metric tons in 2019, compared to 82 million metric tons in 2017, the year before the Section 232 trade action took effect.¹¹⁹171 According to the USGS, nationwide in 2019 three companies in nine locations operated large integrated steel mills—once the chief method of producing steel in the United States—and 50 companies operated 98 minimills—with lower capital and energy costs and a largely nonunion workforce.¹²⁰

172 One effect of the steel tariff is that U.S. hot-rolled band steel prices initially rose, registering a 10-year high of more than $1,000 per metric ton at the beginning of July 2018. Since then, the domestic price of steel has been dropping, reaching around $650570 per metric ton in FebruaryJune 2020, which was lower than before the United States applied the steel tariff.¹²¹173 One reason is slowing global demand for steel products from major steel-using sectors, such as automotive, in recent months, thus lessening the effect of the steel tariff. U.S. downstream industries that use steel have had to contend, at least for a time, with higher costs of inputs into production. Any price increases may put U.S. exporters of products made of steel at a disadvantage as they compete against foreign rivals who may pay a lower price for steel in the global market when buying materials for production.

Figures from the U.S. government show a modest increase in steel manufacturing jobs, and it is possible that the tariffs may have prevented some additional steel jobs from disappearing. U.S. steelmakers directly employed 144,000 workers in 2019 (see Figure 6)8), accounting for 1.1% of the nation'’s 12.8 million factory jobs. Steel manufacturers added a total of 6,600 jobs in 2018 and 168 Steel Report, p. 4, and Aluminum Report, p. 107. 169 The U.S. Federal Reserve Board publishes industrial production and capacity utilization data by industry. 170 U.S. Geological Survey (USGS), Mineral Commodity Summary, Aluminum, 2019 and 2020. 171 USGS, Mineral Commodity Summary, Iron and Steel, 2020. 172 Ibid.. 173 World Steel Dynamics, Steelbenchmarker: Price History, Tables and Charts, February 10, 2020. Congressional Research Service 30 link to page 21 Section 232 Investigations: Overview and Issues for Congress 2019, a rise of 4.8% from 2017.1742019, a rise of 4.8% from 2017.¹²² Nevertheless, steelmakers employed 7,300 fewer people than in 2014. Despite the recent uptick, the U.S. government expects steel industry employment to shrink to 124,100 jobs by 2028.¹²³175 In the first five months of 2020, there were 7% fewer steel industry jobs compared to the same period in the previous year. What is not yet known and difficult to assess is the employment effect of increased input costs on other U.S. manufacturing industries that use steel intensively, such as manufacturers of automobiles and parts, household appliances, and farm machinery. The possible effects of the steel and aluminum tariffs on the automotive supply chain are discussed in the section "“Automobiles and Parts".

”. Beyond the various U.S. tariff actions over the years meant to protect the industry from foreign competition, employment in the steel industry has been affected by new technology, particularly the increased use of electric arc furnaces to make steel, which has reduced the demand for workers.¹²⁴ 176 According to the Bureau of Labor Statistics, labor productivity in steelmaking nearly tripled since 1987 and rose 10% over the past decade.¹²⁵177 Hence, even a significant increase in domestic steel production is likely to result in a relatively small number of additional jobs.

In the past two years, a few steel plant expansions have been realized or announced, and some blast furnaces have reopened.¹²⁶178 Nevertheless, industry experts are skeptical domestic steelmakers will make long-term capital expenditures solely on the basis of trade and tariff policy that could change or be eliminated in the future at the President'’s discretion. Some analysts argue the uncertainty associated with the tariff actions could discourage steelmakers from adding new capacity.¹²⁷179 Over the same period, other steelmakers have closed mills, idled employees, or cut back on work hours.180 174 Bureau of Labor Statistics (BLS), Current Employment Statistics (CES), Iron and Steel Mills (NAICS 3311) and Steel Products (NAICS 3312), accessed July 15, 2020, https://www.bls.gov/ces/. 175 BLS, Employment and Output by Industry, Table 2.7, September 4, 2019, https://www.bls.gov/emp/tables/industry-employment-and-output.htm. 176 See CRS In Focus IF10902, Trade Actions and U.S. Steel Manufacturing, by Michaela D. Platzer, for a related discussion on the domestic steel industry. 177 BLS, Industry Productivity and Costs, https://www.bls.gov/lpc/. 178 Bob Tita, “U.S. Steel’s Turnaround Plan Runs Through Big River Mill,” Wall Street Journal, February 20, 2020. 179 Shawn Donnan and Joe Deaux, “Trump’s Tariffs Revived a Steel Town, but Industry is Unforgiving,” Bloomberg News, December 18, 2019. 180 As one example, AK Steel’s plant in Ashland, KY, closed permanently at the end of 2019. Congressional Research Service 31 link to page 13 Section 232 Investigations: Overview and Issues for Congress Figure 8. Steel and Aluminum Manufacturing Employment hours.¹²⁸

Figure 6. Steel and Aluminum Manufacturing Employment

Source: Bureau of Labor Statistics, Current Employment Survey for North American Industry Classification System (NAICS) 3311 (iron and steel millsmil s), 3312 (steel products), and NAICS 3313 (aluminum).

Domestic Aluminum Manufacturing

Figures from the USGS indicate that domestic production of raw aluminum has risen over the past two years, reaching 1.1 million metric tons in 2019, up from 741,000 metric tons in 2017, the lowest level since 1951. Three companies operated eight primary aluminum smelters in the United States in 2019, compared with five companies that operated nine primary aluminum smelters in 2010.¹²⁹ U.S. production of aluminum accounted for a tiny fraction of the world'181 In April 2020, Alcoa, the largest domestic producer, announced that it would curtail its Intalco aluminum smelting facility in Washington State by August 2020, thereby reducing its U.S. production of primary aluminum by 230,000 metric tons.182 The action suggests that the 10% tariff has not been enough of a factor to allow Alcoa to maintain its current domestic capacity or to reopen curtailed capacity. Century Aluminum, the main proponent of the tariff and chiefly a domestic producer, has restarted some of its U.S. production capacity since the imposition of the tariff, but it has not led to a substantial rebuild of its domestic production of primary aluminum.183 U.S. production of aluminum accounted for a tiny fraction of the world’s primary aluminum production at 1.7% in 2019, whereas China constituted more than half.¹³⁰184 A main source of imported aluminum for the United States is Canada, which was exempted from the aluminum tariff in mid-May 2019.¹³¹

185 However, as noted, on August 6, 2020 President Trump re-imposed the tariff on some aluminum imports from Canada.186 One aim of the 10% tariff was to raise the price of imported aluminum as a way to encourage domestic manufacturers to restart idled capacity. In October 2019March 2020, the average spot price of primary aluminum ingot produced in the United States was $2,1231,909 per metric ton, or 2419% higher 181 USGS, Mineral Commodity Summary, Aluminum, January 2011 and January 2020. 182 Alcoa, "Alcoa Corporation Reports First Quarter 2020 Results," press release, April 22, 2020, https://investors.alcoa.com/news-releases/2020/04-22-2020-210941017. 183 Century Aluminum, 2020 Chairman’s Letter, April 28, 2020. 184 USGS, Mineral Commodity Summary, Aluminum, January 2019. 185 The Section 232 U.S. aluminum tariffs on Canada and Mexico applied from June 1, 2018 to May 19, 2019. 186 See “Country Exemptions” Congressional Research Service 32 link to page 37 Section 232 Investigations: Overview and Issues for Congress % higher than the London price (the global price of aluminum). However, in the first 10three months of 2019, 2020, the average price of primary aluminum in the United States fell by 78.4%, according to USGS.¹³²

187 Aluminum manufacturers directly employed 59,800 workers in 2019, 2,200 more than in 2017, and an increase of 1,100 jobs from 2014 (seesee Figure 68).188 According to federal employment figures, aluminum industry employment shrank nearly 7% in the first five months of 2020, compared to the same period in 2019.189). Similar to the trend in steelmaking, the U.S. Bureau of Labor Statistics (BLS) expects employment in aluminum manufacturing to shrink, falling to 52,800 jobs by 2028.¹³³190 A reason for this is that domestic smelting of aluminum from bauxite ore, which requires large amounts of electricity, has been in long-term decline, and secondary aluminum produced from recycled scrap melted in a smelter now accounts for the majority of domestic aluminum production.¹³⁴191 Secondary aluminum production, which has been fairly steady over the past two decades, accounted for three-fourths of U.S. aluminum production in 2019, and the United States was the world'’s largest producer of secondary aluminum.¹³⁵192 China ranked second. Imports of secondary unwrought aluminum are not covered by the Section 232 aluminum trade action.¹³⁶

193 Another development affecting aluminum is that the President'’s Commerce budget request for FY2021 published in February 2020 seeks funds to create a formal aluminum import monitoring system "“to track imports of aluminum products and provide an early warning system for import surges."¹³⁷”194 The aluminum program would be similar to the import monitoring and analysis system for steel administered by ITA'’s Enforcement and Compliance unit.¹³⁸

195 In April 2020, Commerce requested comments on its proposed rule for a new Aluminum Import Monitoring and Analysis (AIM) system.196 Global Production Trends Global Production Trends

Tariffs to protect the domestic steel industry do not address the underlying issue of global overcapacity. The steel committee of the Organisation for Economic Co-operation and Development (OECD) estimates global steel overcapacity was at 440 million metric tons in 2019.¹³⁹197 Although China is the world'’s largest steel producer, accounting for roughly 45% of 187 USGS, Aluminum Mineral Industry Survey, Table 6, March 2020. 188 (BLS), Current Employment Statistics (CES), Alumina and aluminum production (NAICS 3313), accessed July 15, 2020, https://www.bls.gov/ces/. 189 CRS analysis of average employment data for 2020 are from BLS’s CES program. 190 BLS, Employment and Output by Industry, Table 2.7, September 4, 2019. 191 For more information on domestic aluminum manufacturing, see CRS In Focus IF10998, Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing, by Michaela D. Platzer. 192 Secondary aluminum can be substituted for primary aluminum in most uses, although primary aluminum is favored in some applications, such as electronics or aerospace manufacturing. 193 Section 232 trade action includes certain semi-finished wrought aluminum products, such as bars, rods, foil, and wire, which can be manufactured using primary aluminum, secondary aluminum, or a combination of the two. 194 U.S. Department of Commerce, International Trade Administration (ITA), Budget Estimates Fiscal Year 2021, February 24, 2020, p. 41. 195 See Steel Import Monitoring and Analysis (SIMA) system, https://enforcement.trade.gov/steel/license/index.html. 196 Department of Commerce, Enforcement and Compliance, International Trade Administration, “Aluminum Import Monitoring and Analysis System,” 85 Federal Register 23748, April 29, 2020. 197 See Fabien Mercier, Valentina Burrai, and Daichi Mabashi, Steel Market Developments Q4 2019, OECD, 2019, p. 38, https://www.oecd.org/sti/ind/steel-market-developments.htm; and, G20 Global Forum on Steel Excess Capacity, Ministerial Report, September 20, 2018, p.6, https://www.meti.go.jp/english/press/2018/pdf/0921_003a.pdf. Congressional Research Service 33 link to page 69 Section 232 Investigations: Overview and Issues for Congress s largest steel producer, accounting for roughly 45% of global capacity in 2018, relatively little Chinese steel enters the U.S. market directly, due to extensive U.S. AD/CVD duties, but the large amount of Chinese production depresses prices globally. China has indicated that it plans to reduce its crude steelmaking capacity by 100-150 million metric tons over the five-year period from 2016 to 2020.¹⁴⁰198 According to the Chinese government, the country'’s crude steel capacity has fallen by more than 120 million metric tons since it announced its steel reduction goal in 2016.¹⁴¹

199 No OECD or other multinational forum has been established to monitor global aluminum overcapacity, though aluminum industry groups have called for such a forum.¹⁴²200 Although China accounted for more than half of the world'’s primary aluminum production in 2019, it does not export aluminum in commodity form to the United States.¹⁴³201 China ships semi-finished aluminum such as bars, rods, and wire to the United States. These are subject to the Section 232 tariffs.¹⁴⁴

202 Metals imports should be put in the context of U.S. production. In 2019, the United States produced more than three times the amount of steel it imported.¹⁴⁵203 According to Commerce, import penetration—the share of U.S. demand met by steel imports—rose to 28.3% in 2018, from 23% in 2009.¹⁴⁶204 Some segments of the domestic steel industry, such as slab converters, import a sizable share of their semi-finished feedstock from foreign suppliers, totaling nearly 6.1 million tons in 2019.¹⁴⁷205 In the primary aluminum market, U.S. net import reliance fell to 22% in 2019 from 41% in 2015, according to USGS.¹⁴⁸206 Most U.S. foreign trade in steel and aluminum is with Canada (seesee Appendix D).

. International Efforts to Address Overcapacity

OECD analysis has found that ongoing global steel overcapacity and excess production are largely caused by government intervention, subsidization, and other market-distorting practices, although these are not the only factors.¹⁴⁹207 Other reasons for excess capacity include cyclical market downturns. The situation is similar in the aluminum industry, where government financial support for large aluminum stockpiles has delayed the response to lower demand.

Past Previous U.S. Administrations worked to address the issue of steel overcapacity. President George W. Bush, for example, initiated international discussions on global capacity reduction and improved trade disciplines in the steel industry as part of his general steel announcement of 2001.¹⁵⁰ 198 OECD, Latest Developments in Steelmaking Capacity, July 2019, p. 11, https://www.oecd.org/sti/ind/steelcapacity.htm. 199 In October 2019, China blocked the continuation of the Global Forum on Excess Capacity in the G20; however, more than 30 countries, including the United States, have pledged to continue the work of the Global Forum to reduce the global overcapacity of this metal. G20 Global Forum on Steel Excess Capacity, Ministerial Report, September 20, 2018, p. 10. 200 European Aluminum, G7 Makes Explicit Urgency to Avoid Aluminum Overcapacity, June 10, 2018. 201 USGS, Aluminum, Mineral Commodity Summaries, January 2020, p. 2. 202 CRS In Focus IF10998, Effects of U.S. Tariff Action on U.S. Aluminum Manufacturing, by Michaela D. Platzer. 203 USGS, Mineral Commodity Summaries, Iron and Steel, January 2020. 204 DOC, ITA, Steel Imports Report: United States, Global Steel Trade Monitor, September 2019, p. 6. 205 DOC, ITA, Enforcement & Compliance, U.S. Steel Import Monitor, Import by Country and Product Category, 2019. 206 USGS, Mineral Commodity Summaries, Iron and Steel, January 2020. 207 OECD, “Excess Capacity in the Global Steel Industry: The Current Situation and Ways Forward,” 2015, p. 4, https://www.oecd.org/sti/ind/excess-capacity-in-the-global-steel-industry.pdf. Congressional Research Service 34 Section 232 Investigations: Overview and Issues for Congress 2001.208 Other governments agreed to join the Bush Administration in discussing overcapacity and trade issues at the OECD in a process that started in mid-2001. The industrial, steel-producing members of the OECD were joined by major non-OECD steel producers, such as India, Russia, and, during later stages of the talks, China. Negotiations were suspended indefinitely in 2004, and by 2005, the OECD had abandoned this effort to negotiate an agreement among all major steel-producing countries to ban domestic subsidies for steel mills.

The Obama Administration also participated in international efforts to curb steel imports, including the launch of the G-20 Global Forum on Steel Excess Capacity in 2016, another venue that sought to address the challenges of excess capacity in steel worldwide.¹⁵¹209 In December 2016, the G-20 convened its first meeting of more than 30 economies—all G-20 members plus interested OECD members—as a global platform to discuss steel issues among the world'’s major producers.¹⁵²210 The same year, as part of the U.S.-China Strategic and Economic Dialogue (SE&D) established in 2009, the Obama Administration agreed to address excess steel production and also to communicate and exchange information on surplus production in the aluminum sector.¹⁵³

211 In September 2018, the OECD Forum agreed on a process to identify and remove subsidies and take other measures to reduce the global steel overcapacity. The OECD issued a consensus report outlining six principles and specific policy recommendations to address excess steel capacity.¹⁵⁴ 212 The USTR, while supportive of the recommendations, questioned the Forum'’s ability to pursue effective implementation and did not rule out unilateral action.¹⁵⁵213 Some Members have expressed support of U.S. participation in the Forum and other global coalitions to address overcapacity.¹⁵⁶ 214 Despite calls from international steel industry associations and most Forum members, including the United States, the G-20 was unable to overcome objections by China to extend the Forum's ’s mandate past November 2019.¹⁵⁷215 However, the Chair noted that a large majority of members agreed to continue and USTR stated that it "“will continue to work with like-minded partners to seek long-term solutions"” to global overcapacity.¹⁵⁸

216 The aluminum industry argues it is also suffering because of China'’s excess production of primary aluminum. According to the aluminum associations of Japan, Europe, Canada, and the United States, global overcapacity amounted to 11 million metric tons in 2017. A June 2019 OECD report found that subsidies, especially in China and the countries of the Gulf Cooperation Council, and other market-distorting practices impact global competition in the aluminum industry.¹⁵⁹As 208 President George W. Bush, Statement by the President Regarding a Multilateral Initiative on Steel, June 5, 2001, https://georgewbush-whitehouse.archives.gov/news/releases/2001/06/20010605-4.html. 209 The White House, Fact Sheet: The 2016 G-20 Summit in Hangzhou, China, September 5, 2016, https://obamawhitehouse.archives.gov/the-press-office/2016/09/05/fact-sheet-2016-g-20-summit-hangzhou-china. 210 European Commission, Steel: Commission Welcomes New Global Forum to Tackle Root Causes of Overcapacity, December 16, 2016, http://europa.eu/rapid/press-release_IP-16-4435_en.pdf. 211 U.S. Department of the Treasury, 2016 U.S.-China Strategic and Economic Dialogue U.S.-Fact Sheet, June 7, 2016, https://www.treasury.gov/press-center/press-releases/Pages/jl0485.aspx. 212 Global Forum on Excess Steel Capacity, Ministerial Report, September 20, 2018,. 213 The U.S. Trade Representative, “USTR Statement on Meeting of the Global Forum on Steel Excess Capacity,” USTR Press Releases, September 2018. 214 Senators Portman, Brown, Braun, and Casey, “Portman, Brown, Braun, Casey Urge USTR to Prioritize Extension of the Global Forum on Steel Excess Capacity,” October 24, 2019. 215 G-20 Chair, Japanese Ministry of Economy, “Trade and Industry, Ministerial Meeting on the Global Forum on Steel Excess Capacity (GFSEC) Held,” October 26, 2019, https://www.meti.go.jp/english/press/2019/1026_001.html. 216 USTR, “USTR Statement on Meeting of the Global Forum on Steel Excess Capacity,” October 26, 2019. Congressional Research Service 35 Section 232 Investigations: Overview and Issues for Congress industry.217As noted, the U.S. Aluminum Association and some of its international counterparts seek to establish a global forum to address aluminum excess capacity.

The Trump Administration'’s Section 232 actions have led multiple U.S. trading partners, such as the EU, the UK, and Canada, to initiate their own safeguard investigations and quota restrictions to prevent dumping of steel and aluminum exports and protect domestic industries. Unlike the OECD efforts, the individual country safeguard actions are uncoordinated.

In addition to the Section 232 action, the Trump Administration is pursuing joint action on industrial overcapacity in other forums. The USTR began meeting with EU and Japanese counterparts in May 2018,  to address "“nonmarket-oriented policies and practices that lead to severe overcapacity, create unfair competitive conditions for our workers and businesses, hinder the development and use of innovative technologies, and undermine the proper functioning of international trade."¹⁶⁰”218 The parties also agreed to cooperate on their concerns with third parties' ’ technology transfer policies and practices¹⁶¹practices219 and issued a joint statement containing a list of factors that identify if market conditions for competition exist.¹⁶²220 In January 2020, the three parties issued a statement with specific recommendations and proposed reforms to strengthen the existing WTO Agreement on Subsidies and Countervailing Measures (ASCM) rules.¹⁶³ 221 Some analysts suggested that the UK might join the trilateral effort once it is no longer part of the EU trade regime. China opposes several of the proposed ASCM reforms.222 In addition, in November 2018, the United States, the EU, Japan, Argentina, and Costa Rica put forward a joint proposal in the WTO to increase transparency, proposing incentives for compliance or penalties for noncompliance with WTO notification reporting requirements regarding subsidies.¹⁶⁴223 U.S. unilateral tariff actions, however, may limit other countries' ’ willingness to participate or support U.S. reform proposals in multilateral forums.

Policy and Economic Issues

Section 232 tariffs on steel and aluminum imports into the United States raise a number of issues for Congress. The economic repercussions of U.S. and foreign actions may be felt not only by domestic steel and aluminum producers, but by downstream manufacturers or other industries targeted for retaliation, and consumers. Some companies have challenged the president'’s actions through domestic litigation,¹⁶⁵224 and may also seek alternative markets for their own products to avoid U.S. tariffs.

217 OECD (2019), “Measuring Distortions in International Markets: the Aluminum Value Chain”, OECD Trade Policy Papers, No. 218, OECD Publishing, Paris, https://doi.org/10.1787/c82911ab-en. 218 U.S. Trade Representative, “Joint Statement on Trilateral Meeting of the Trade Ministers of the United States, Japan, and the European Union,” May 2018. 219 Ibid, Annex Statement 2, Joint Statement on Technology Transfer Policies and Practices. 220 Ibid, Annex Statement 3, Joint Statement on Market Oriented Conditions. 221 U.S. Trade Representative, “Joint Statement on Trilateral Meeting of the Trade Ministers of Japan, the United States and the European Union,” January 14, 2020. 222 Statement by Zhang Xiangchen, China's Ambassador and Permanent Representative to the WTO, July 15, 2020. 223 “Procedures to Enhance Transparency and Strengthen Notification Requirements Under WTO Agreements,” JOB/GC/204, November 1, 2018. 224 See, e.g., Am. Inst. for Int’l Steel, Inc. v. United States, No. 18-00152 (Ct. Int’l Trade filed June 27, 2018); Severstal Exp. GmbH v. United States, No. 18-00057 (Ct. Int’l Trade May 3, 2018) (order granting joint stipulation of dismissal). Congressional Research Service 36 Section 232 Investigations: Overview and Issues for Congress The response by other countries can have implications for the U.S. economy and multilateral world trading system. Also, other countries may be hesitant in the future to cooperate with the United States to address broader global issues, including steel and aluminum overcapacity, if their exports are subject to U.S. tariffs. U.S. trading partners'’ responses to Section 232 actions have varied based on the country'’s relationship with the United States. Some countries are pursuing direct negotiations, while keeping other countermeasures in reserve, and raising actions at the WTO (see below). Others have proposed or pursued retaliation with their own tariffs.

Domestic Court Challenges

The President'’s actions under Section 232 have resulted in legal challenges in the U.S. domestic court system. Specifically, the Section 232 actions on steel and aluminum have been challenged in cases before the U.S. Court of International Trade (CIT). In one case, Severstal Export GmbH, , a U.S. subsidiary of a Russian steel producer, sought a preliminary injunction from the CIT to prevent the United States from collecting the import tariffs on certain steel products.¹⁶⁶225 The company and its Swiss affiliate argued that the President acted outside of the authority delegated by Congress because the tariffs were not truly imposed for national security purposes.¹⁶⁷226 The court denied the motion, determining that the plaintiffs were unlikely to prevail on the merits of their challenge.¹⁶⁸227 According to the case docket, the parties agreed to dismiss the case in May 2018.

In another case, which was heard by a three-judge panel of the CIT, the American Institute for International Steel (AIIS), a trade association, challenged the constitutionality of Congress's ’s delegation of authority to the President under Section 232.¹⁶⁹228 The plaintiffs argued that "“Congress created an unconstitutional regime in section 232, in which there are essentially no limits or guidelines on the trigger or the remedies available to the President, and no alternative protections to assure that the President stays within the law, instead of making the law himself."¹⁷⁰

”229 On March 25, 2019, the CIT issued an opinion rejecting the plaintiffs'’ arguments that Congress delegated too much of its legislative power to the President in Section 232 in violation of the Constitution’s separation of powers established in the Constitution.¹⁷¹.230 In granting the United States'’ motion for judgment on the pleadings, the CIT held that it was bound by a 1976 Supreme Court precedent determining that Section 232 did not amount to an unconstitutional delegation because it established an "“intelligible principle"” to guide presidential action.¹⁷²231 One member of the three-judge panel, Judge Katzmann, wrote separately to express his significant concerns about the ruling without openly dissenting.¹⁷³232 Judge Katzmann wrote that he was bound to follow Supreme 225 See Severstal Export GmbH v. United States, No. 18-00057, 2018 WL 1705298, at *2 (Ct. of Int’l Trade April 5, 2018). 226 See ibid. at *9. 227 See ibid. at *10. Another case filed in December 2019 against the steel and aluminum tariffs challenges the executive branch’s alleged failure to meet Section 232’s statutory requirements, and its purportedly overbroad interpretation of “threat to national security” in Section 232. Complaint at 14-17, Universal Steel Prods., Inc. v. United States, No. 19-00209 (Ct. Int’l Trade Dec. 3, 2019). The case remains pending before the court. 228 Am. Inst. for Int’l Steel, Inc. v. United States, 376 F. Supp. 3d 1335, 1337 (Ct. Int’l Trade 2019), aff’d, No. 2019-1727, 2020 WL 967925 (Fed. Cir. February 28, 2020). 229 Memorandum in Support of Plaintiffs’ Motion for Summary Judgment, at 3–4, Am. Inst. for Int’l Steel, Inc. v. United States, No. 18-00152 (Ct. Int’l Trade July 19, 2018). 230 Am. Inst. for Int’l Steel, 376 F. Supp. 3d at 1344–45. 231 Ibid. at 1340–41 (citing Fed. Energy Admin. v. Algonquin SNG Inc., 426 U.S. 548, 559–60 (1976)). 232 Ibid. at 1345 (Katzmann, J., dubitante). Congressional Research Service 37 Section 232 Investigations: Overview and Issues for Congress Judge Katzmann wrote that he was bound to follow Supreme Court precedent and uphold the delegation, but questioned whether the nondelegation doctrine retained any significant meaning if a delegation as broad as that in Section 232 was permissible.¹⁷⁴233 On appeal, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) affirmed the case, agreeing with the CITCIT’s decision, agreeing that the case was controlled by the Supreme Court precedent that "“declare[d] section 232 not to violate the nondelegation doctrine."¹⁷⁵”234 AIIS has asked the Supreme Court to review the Federal Circuit'’s decision.¹⁷⁶

, but in June 2020, the Court declined to hear the case, denying AIIS’s petition for a writ of certiorari.235 More recently, the CIT issued a preliminary decision in a case in which U.S. importers of Turkish steel alleged that the President'’s increase of the Section 232 steel tariffs from 25% to 50% on U.S. imports from Turkey did not have a sufficient national security rationale, did not follow statutory procedural mandates, and violatesviolated the plaintiffs'’ Fifth Amendment Due Process rights because the action "“creates an arbitrary distinction between importers of steel products from Turkey and importers of steel products from all other sources."¹⁷⁷”236 In a decision denying the United States'’ motion to dismiss the company'’s complaint in Transpacific Steel LLC v. United States, the CIT indicated that the President'’s power to impose tariffs under Section 232, while broad, is not unlimited.¹⁷⁸237 Specifically, the court suggested that the President must closely adhere to the procedural requirements of the statute when exercising such authority.¹⁷⁹238 The court also determined that the company raised a plausible argument that the Executive violated constitutional guarantees of equal protection protected by the Fifth Amendment'’s Due Process Clause when imposing, without a rational basis, the additional steel tariffs only on imports from Turkey.¹⁸⁰

239 In a July 2020 opinion, the CIT ruled that the President violated Section 232’s mandated procedures and the Fifth Amendment’s Equal Protection guarantees when issuing the proclamation doubling the tariffs on steel imports from Turkey.240 The decision in Transpacific Steel indicates that courts might scrutinize whether the executive branch has followed the proper procedures, including meeting statutory deadlines, when exercising Section 232 authority.¹⁸¹241 Presidential action that does not follow these statutory procedures may be deemed in excess of the President'’s authority.¹⁸²

242 233 Ibid. at 1352. 234 Am. Inst. for Int’l Steel, Inc. v. United States, No. 2019-1727, 2020 WL 967925, at *1 (Fed. Cir. February 28, 2020). 235 Am. Inst. for Int’l Steel, Inc. v. United States, No. 19-1177, 2020 U.S. LEXIS 3353, at *1 (S. Ct. June 22, 2020). See also Sarah Martinson, “Steel Importers Take National Security Tariff Fight To Justices,” Law360, March 25, 2020. 236 Complaint at 1-3, Transpacific Steel LLC v. United States, No.19-00009 (Ct. Int’l Trade January 17, 2019). 237 Transpacific Steel LLC v. United States, 415 F. Supp. 3d 1267, 1276 (Ct. of Int’l Trade 2019). 238 Ibid. at 1275–76. 239 Ibid. at 1270. 240 Opinion at 22, Transpacific Steel LLC v. United States, No. 19-00009 (Ct. of Int’l Trade July 14, 2020). 241 See ibid. at 1276. 242 See ibid. At least one U.S. importer has challenged the Department of Commerce’s exclusion process for Section 232 tariffs. In JSW Steel, Inc. v. United States, the plaintiff argues that Commerce’s failure to grant the company’s products an exclusion from the steel tariffs violated the Administrative Procedure Act because the Agency improperly determined that the U.S. market could furnish the products “in a sufficient quantity or quality on a timely basis to replace the steel slab [the plaintiff] currently imports.” Complaint at 13-14, JSW Steel, Inc. v. United States, No. 19-00133 (July 30, 2019). On August 5, 2020, the CIT remanded the case to the Department of Commerce, instructing the agency to (1) supplement the administrative record that it relied upon when denying the company’s exclusion requests, and (2) to reconsider its decisions on those requests. Congressional Research Service 38 Section 232 Investigations: Overview and Issues for Congress Proclamation Imposing Tariffs on Steel-Derivative Products Proclamation Imposing Tariffs on Steel-Derivative Products

As noted, in a January 2020 proclamation, President Trump expanded the steel and aluminum tariffs to cover derivative products (e.g., steel nails, tacks, drawing pins, and stranded wire).¹⁸³243 On February 4, 2020, a U.S. importer of steel-derivative products sued the United States in the CIT, seeking a temporary restraining order preventing U.S. Customs and Border Protection (CBP)CBP from collecting the additional duties.¹⁸⁴ 244 The company argues that the President'’s imposition of the tariffs failed to follow required statutory procedures; occurred after the statutory deadline for action; and violated the company's ’s constitutional rights, among other things.¹⁸⁵245 On February 13, with the consent of both parties, a judge issued an order enjoining CBP from collecting the additional duties and requiring the plaintiff-company to post a bond for the duties until the CIT reaches a final judgment on the merits of the plaintiff'’s complaint.¹⁸⁶246 The case remains pending before the CIT.¹⁸⁷

247 WTO Cases

The President'’s imposition of tariffs on certain imports of steel and aluminum products,¹⁸⁸248 as well as Commerce'’s exemption of certain WTO members'’ products from such tariffs, may also have implications for the United States under WTO agreements. As an example, on April 9, 2018, China took the first step in challenging the executive branch'’s actions as violating U.S. obligations under the WTO agreements (particularly the Agreement on Safeguards) by requesting consultations with the United States.¹⁸⁹249 Under WTO dispute settlement rules, members must first attempt to settle their disputes through consultations. If consultations fail, the member initiating a dispute may request the establishment of a dispute settlement panel composed of trade experts to determine whether a country has violated WTO rules.¹⁹⁰250 In October 2018, China requested the formation of such a panel.¹⁹¹251 Other WTO members have requested consultations with the United 243 Presidential Proclamation 9980 of January 24, 2020, Adjusting Imports of Derivative Aluminum Articles and Derivative Steel Articles into the United States, 85 Federal Register 5281 (January 29, 2020). 244 Motion for Temporary Restraining Order at 1-6, PrimeSource Bldg. Prods., Inc. v. United States, No. 20-00032 (February 4, 2020). 245 Id. 246 Order at 1-3, PrimeSource Bldg. Prods., Inc. v. United States, No. 20-00032 (February 13, 2020). 247 Several other companies have also filed cases at the CIT challenging the President’s January 2020 Proclamation imposing tariffs on steel- and aluminum- derivative products. See, e.g., Complaint at 19-25, J. Conrad Ltd. V. United States, No. 20-00052 (Ct. Int’l Trade Mar. 2, 2020); Complaint at 17-23, Aslanbas Nail & Wire Co. v. United States, No. 20-00049 (Ct. Int’l Trade Feb. 26, 2020). In June 2020, the court denied the plaintiffs’ motions for temporary restraining orders and preliminary injunctions against implementation of the proclamation in the J. Conrad case, stating that the plaintiffs could not demonstrate the likelihood of irreparable harm from the proclamation. Slip op. at 2, J. Conrad Ltd. V. United States, No. 20-00052 (Ct. Int’l Trade June 1, 2020). 248 For legal background on the tariff measures, see CRS Legal Sidebar LSB10097, UPDATE: Threats to National Security Foiled? A Wrap Up of New Tariffs on Steel and Aluminum, by Brandon J. Murrill. 249 Request for Consultations by China, U.S.—Certain Measures on Steel and Aluminum Products, WT/DS/544/1 (Apr. 9, 2018) [hereinafter Request for Consultations]. This report does not examine potential implications under other international agreements to which the United States is a party, such as other U.S. free trade agreements. 250 WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) arts. 3-6. A WTO Member may appeal a panel’s report to the WTO Appellate Body, id. art. 17(1), however that Body stopped functioning as of December 11, 2019, when it lost its quorum, see CRS Legal Sidebar LSB10385, The WTO’s Appellate Body Loses Its Quorum: Is This the Beginning of the End for the “Rules-Based Trading System”?, by Brandon J. Murrill. The text of the DSU and other WTO agreements discussed in this report are available at https://www.wto.org/english/docs_e/legal_e/final_e.htm. 251 Items proposed for consideration at the next meeting of the Dispute Settlement Body, WTO/AIR/DSB/70, Oct. 19, 2018. Congressional Research Service 39 link to page 48 Section 232 Investigations: Overview and Issues for Congress Other WTO members have requested consultations with the United States, or have joined existing requests, and panels have been composed to hear the cases (see Figure 7).

9). In its request, China alleged that the U.S. tariff measures and exemptions are contrary to U.S. obligations under several provisions of the GATT, the foundational WTO agreement that sets forth binding rules on international trade in goods.¹⁹²252 In particular, China alleged that the measures violate GATT Article II, which generally prohibits members from imposing duties on imported goods in excess of upper limits to which they agreed in their Schedules of Concessions and Commitments.¹⁹³253 It further alleged that Commerce'’s granting of exemptions from the import tariffs to some WTO member countries, but not to China, violates GATT Article I, which obligates the United States to treat China'’s goods no less favorably than the goods of other WTO members (i.e., the so-called most-favored-nation treatment principle).¹⁹⁴254 China also maintained that the Section 232 tariff measures are "“in substance"” a safeguard measure intended to alleviate injury to a domestic industry from increased quantities of imported steel that compete with domestic steel, but that the United States did not make the proper findings and follow the proper procedures for imposing such a measure, as required by the GATT and WTO Safeguards Agreement.¹⁹⁵

255 The United States has invoked the so-called national security exception in GATT Article XXI in defense of the steel and aluminum tariffs. GATT Article XXI states, in relevant part, that the GATT¹⁹⁶ will not

be construed ... (b) to prevent any [member country] from taking any action which it GATT256 will not be construed ... (b) to prevent any [member country] from taking any action which it considers necessary for the protection of its essential security interests

(i) relating to fissionable materials or the materials from which they are derived;

(ii) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on directly or indirectly for the purpose of supplying a military establishment; [or]

(iii) taken in time of war or other emergency in international relations.

While some analysts argue that a WTO panel may evaluate whether a WTO member's use of the 252 General Agreement on Tariffs and Trade 1994 (GATT) art. II. 253 GATT Article II limits the charges that WTO Members can impose in connection with the import of products. It provides that a WTO Member shall not impose “ordinary customs duties” in excess of the bound tariff rates set forth in that Member’s Schedule of Concessions. It also bars “other duties and charges of any kind imposed in connection with the importation” of products in excess of charges levied on the date of the tariff concession. A member’s schedule is a list of specific commitments as to tariffs and other trade barriers. Goods Schedules: Members’ Commitments, WORLD TRADE ORG, https://www.wto.org/english/tratop_e/schedules_e/goods_schedules_e.htm. The GATT provides limited ways in which WTO members may modify the bound tariff rates. E.g., GATT art. XXVIII (establishing procedures for negotiations among WTO members on changes to a member’s bound tariff rates in its schedules). 254 Request for Consultations at 2; GATT art. I:1 (“With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation ..., and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation ... any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.”). China also alleged that the measures violate GATT Article X:3(a), arguing that the United States “failed to administer its laws, regulations, decisions, and rulings in relation to the measures at issue in a uniform, impartial and reasonable manner.” 255 Request for Consultations at 2. 256 As noted, China has also alleged that the United States’ imposition of steel and aluminum tariffs violated the WTO Safeguards Agreement, which lacks an exception for national security interests. This report does not analyze whether the United States could invoke the GATT’s national security exception to justify a violation of the Safeguards Agreement. Congressional Research Service 40 Section 232 Investigations: Overview and Issues for Congress While some analysts argue that a WTO panel may evaluate whether a WTO member’s use of the national security exception falls within one of the three provisions listed above, historically, the United States has taken the position that this exception is self-judging—or, in other words, once a WTO member has invoked the exception to justify a measure potentially inconsistent with its WTO obligations, a WTO panel may not proceed to the merits of the dispute to evaluate whether the WTO member'’s use of the exception is proper.¹⁹⁷257 In the past, however, WTO members have expressed concern that overuse of the exception will undermine the world trading system because countries might enact a multitude of protectionist measures under the guise of national security.¹⁹⁸

258 In April 2019, a WTO panel interpreted the national security exception in Article XXI of the GATT for the first time. In Russia—Measures Concerning Traffic in Transit, the panel determined that it had jurisdiction to review whether a member'’s actions were justified under Article XXI's ’s national security exception and whether the member satisfied the requirements for invoking the exception.¹⁹⁹259 As of December 11, 2019, however, the WTO'’s Appellate Body lost its quorum of three members necessary for the Body to decide appeals of WTO dispute settlement panel decisions and issue final reports.²⁰⁰260 Because of this, the Dispute Settlement Body (DSB) (i.e., the committee composed of all WTO members that oversees the dispute settlement mechanism) can no longer adopt panel reports in line with the WTO'’s Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU).²⁰¹261 Consequently, unless WTO members agree to consider unadopted dispute reports as final, the DSB cannot oversee the losing member's ’s implementation of a panel ruling or authorize the prevailing member to engage in trade retaliation if the losing member ignores the dispute panel'’s recommendations. Thus, even if the United States or one of its trading partners prevails in a dispute over the Section 232 or retaliatory tariffs, there are significant doubts as to whether the ruling would be enforceable under WTO procedures.

Prior to December 2019, if one of the WTO panels had rendered an adverse decision against the United States, the United States would be expected to remove the tariffs, generally within a reasonable period of time, or face the possibility of paying compensation to the complaining member or be subject to certain countermeasures allowed under the rules.²⁰² Such 262 Such 257 See, e.g., Dispute Settlement Body, Minutes of Meeting Held in the Centre William Rappard on October 23, 2017, ¶ 4.9, WT/DSB/M/403 (Feb. 20, 2018) (noting that a U.S. representative, in commenting on the United Arab Emirates’ invocation of national security exceptions in a dispute with Qatar, had maintained that national security issues “were political and were not matters appropriate for adjudication in the WTO dispute settlement system”); GATT Panel Report, United States—Trade Measures Affecting Nicaragua, ¶ 1.2, L/6053 (October 13, 1986) (noting the United States’ argument that the national security exception in the GATT “left it to each [GATT party] to judge what actions it considered necessary for the protection of its essential security interests” and that “[a] panel could therefore not address the validity of, nor the motivation for, the United States’ invocation of [the exception]”). 258 See, e.g., WTO Council for Trade in Goods, National Security Cited in Two Trade Concerns at Goods Council Meeting, WORLD TRADE ORG., https://www.wto.org/english/news_e/news17_e/good_10jul17_e.htm (June 30, 2017) (discussing potential systemic risks to the world trading system from overuse of the national security exception). 259 Report of the Panel at ¶¶ 8.1(d)(i)-(iv), Russia—Measures Concerning Traffic in Transit, WT/DS512/R (Apr. 5, 2019). 260 Alan H. Price, Real WTO Reform Now Possible With Demise of Appellate Body, BLOOMBERG LAW (Dec. 20, 2019). For more on this issue, see CRS Legal Sidebar LSB10385, The WTO’s Appellate Body Loses Its Quorum: Is This the Beginning of the End for the “Rules-Based Trading System”?, by Brandon J. Murrill. 261 WTO Dispute Settlement Understanding art. 16, https://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm#16. 262 DSU arts. 21-22. Members whose measures are deemed inconsistent with its WTO obligations and unjustified under one of the GATT exceptions are expected to implement the panel and/or Appellate Body’s report. Id. art. 21.3. That is, the defending member must withdraw, modify, or replace its violative measures. See id. If a disagreement arises as to whether the defending member has, in fact, implemented the report, a WTO panel may be convened to hear a dispute over compliance issues. Id. art. 21.5. The WTO Appellate Body hears appeals of these compliance panel reports. Id. art. Congressional Research Service 41 Section 232 Investigations: Overview and Issues for Congress countermeasures might include the complaining member imposing higher duties on imports of selected products from the United States.²⁰³263 Nonetheless, several trading partners have already imposed retaliatory duties on selected U.S. exports without awaiting the outcome of a dispute settlement proceeding.²⁰⁴

264 In turn, the United States has argued that unilateral imposition of tariffs in response to the U.S. Section 232 measures cannot be justified under WTO rules.²⁰⁵265 On July 16, 2018, the United States filed its own WTO complaints over the retaliatory tariffs imposed by five countries (Canada, China, the EU, Mexico, and Turkey) in response to U.S. actions; in late August 2018, it filed a similar case against Russia;²⁰⁶266 and in July 2019, it filed a similar case against India.²⁰⁷267 Canada, Mexico, and the United States withdrew their cases regarding the Section 232 tariffs and corresponding retaliatory measures in May 2019 when the parties agreed to settle the disputes.²⁰⁸ 268 Dispute settlement panels have been composed to hear the other cases, but, as noted, there are questions about the viability of the WTO'’s dispute settlement system because the Appellate Body has suspended its operations. 17.1. 263 See id. art. 22.3. Ultimately, when a defending member fails to implement a panel or Appellate Body report within the established compliance period, the prevailing member may request that the defending member negotiate a compensation agreement. Id. art. 22.2. If such negotiations are not requested, or if an agreement is not reached, the prevailing member may also request authorization to impose certain trade sanctions against the noncomplying member. Id. art. 22.2-22.3. Specifically, the WTO may authorize the prevailing member to suspend tariff concessions or other trade obligations that it otherwise owes the noncomplying member under a WTO agreement. Id. 264 Charles Hutzler, China Retaliates Against Trump Tariffs with Duties on American Meat and Fruit, WALL STREET J. (April 1, 2018), https://www.wsj.com/articles/china-retaliates-with-new-tariffs-on-u-s-meat-and-other-products-1522618533. 265 See, e.g., Committee on Safeguards, Imposition of a Safeguard Measure by the United States on Imports of Aluminum and Steel: Communication from the United States in Response to China’s Requests Circulated on 26 March 2018, 1-2, G/SG/161/Suppl.1 (Apr. 4, 2018) (“Because the actions under the Steel and Aluminum Proclamations are not safeguard measures, the United States considers that Article 8.2 of the Agreement on Safeguards does not justify China’s suspension of concessions or other obligations. China has asserted no other justification for its measures, and the United States is aware of none. Therefore, it appears that China’s actions have no basis under WTO rules.”). 266 USTR, “United States Challenges Five WTO Members Imposing Illegal Tariffs Against U.S. Products,” press release, July 2018, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/july/united-states-challenges-five-wto. 267 Request for Consultations at 1-2, India—Additional Duties on Certain Products from the United States, WT/DS585/1 (July 4, 2019). 268 Notification of a Mutually Agreed Solution, Mexico—Additional Duties on Certain Products from the United States, WT/DS560/4 (June 3, 2019); Notification of a Mutually Agreed Solution, United States—Certain Measures on Steel and Aluminum Products, WT/DS551/13 (June 3, 2019); Notification of a Mutually Agreed Solution, Canada—Additional Duties on Certain Products from the United States, WT/DS557/4 (May 27, 2019); Notification of a Mutually Agreed Solution, United States—Certain Measures on Steel and Aluminum Products, WT/DS550/13 (May 27, 2019). Congressional Research Service 42 Section 232 Investigations: Overview and Issues for Congress Figure 9. WTO Cases Challenging the United States’ Section 232 Actions Source: CRS based on WTO filings. Notes: The UK is included as a member of the EU for cases filed prior to January 31, 2020. Independent of the EU, the UK has not been a complainant or third party in the WTO Section 232 disputes. Retaliation has suspended its operations.

Figure 7. WTO Cases Challenging the United States' Section 232 Actions

Source: CRS based on WTO filings. Notes: The UK is included as a member of the EU for cases filed prior to January 31, 2020. Independent of the EU, the UK has not been a complainant or third party in the WTO Section 232 disputes.

Retaliation

As noted, several major U.S. trading partners who are challenging the Section 232 actions on steel and aluminum in the WTO are imposing retaliatory tariffs (see Figure 8).²⁰⁹ Retaliatory tariffs are currently in effect on approximately $9.0 billion of U.S. annual exports (2018 value).²¹⁰ The scale and scope of annual U.S. exports targeted for retaliation declined significantly during the past year (more than 50% by value), however, as Canada and Mexico withdrew their retaliatory tariffs following the Trump Administration's May 2019 decision to exempt both countries from Section 232 steel and aluminum duties. The EU announced it will expand its retaliatory tariffs, effective May 8, in response to the Trump Administration's decision to expand the U.S. steel and aluminum tariffs to derivative products. ²¹¹

Figure 8. Retaliatory Actions by U.S. Trading Partners

Source: CRS analysis of Global Trade Atlas IHS Markit trade data. Retaliatory tariff lists sourced from WTO notifications and partner country notifications. See footnote 209 for complete sourcing. Notes: U.S. exports approximated by using partner country import data. Steel and aluminum are among the top exports facing retaliation by several U.S. trading partners as highlighted above. (*) Turkey temporarily increased its retaliatory tariffs up to 140% in August 2018 in response to the Trump Administration's tariff increase on Turkish steel to 50%, but in May 2019 both countries withdrew the additional increases. (**) India's retaliatory tariffs were first announced in June 2018, but were repeatedly postponed until June 2019. (***) Russia published its list of retaliatory tariffs rates and products on July 6, 2018. The tariffs appear to have gone into effect within 30 days of the publication.

The process of retaliation is complex given multiple layers of relevant international rules and the potential for unilateral action, which may or may not adhere to those existing rules. Both through agreements at the WTO and in bilateral and regional free trade agreements (FTAs), the United States and its trading partners have agreed to maintain certain tariff levels. Those same agreements include rules on potential responses, including formal dispute settlement procedures and in some cases commensurate tariffs, when one party increases its tariffs above agreed-upon limits.²¹²269 In addition to the national security considerations, the Trump Administration has cited as justification for its Section 232 actions, increased tariffs are permitted under these agreements, under specific circumstances, including for example, antidumping tariffs, countervailing duties, and safeguard tariffs.²¹³

270 269 Chad P. Bown, Trump’s Steel and Aluminum Tariffs: How WTO Retaliation Typically Works, Peterson Institute for International Economics, March 5, 2018, https://piie.com/blogs/trade-investment-policy-watch/trumps-steel-and-aluminum-tariffs-how-wto-retaliation-typically. 270 Antidumping duties are imposed when a domestic industry is materially injured, or threatened with material injury, by sales found to be at less than fair value in the U.S. market; countervailing duties are imposed when a domestic industry is materially injured, or threatened with material injury, as a result of sales in the U.S. market of products found to be subsidized by a foreign government or other public entities; and safeguards are provided in response to injury to a domestic industry from a sharp increase in imports. For more information, see CRS In Focus IF10786, Safeguards: Section 201 of the Trade Act of 1974, by Vivian C. Jones, and CRS In Focus IF10018, Trade Remedies: Antidumping and Countervailing Duties, by Vivian C. Jones. Congressional Research Service 43 link to page 44 Section 232 Investigations: Overview and Issues for Congress Retaliatory actions have magnified the effects of U.S. Section 232 tariffs. From an economic perspective, retaliation increases the scope of industries affected by the tariffs. U.S. agricultural exports, for example, are among the largest categories of U.S. exports targeted for retaliation, which may have contributed to reduced sales of certain U.S. farm products.²¹⁴271 Given the scale of U.S. motor vehicle and parts imports, if the Trump Administration moves forward with Section 232 tariffs on that sector, and U.S. trading partners respond with retaliation of a similar magnitude, it could have significant negative effects on U.S. exporters. For example, the United States imported roughly $5062 billion of motor vehicles and parts from the EU in 2019,²¹⁵272 and the EU has announced potential retaliatory tariffs on nearly $40 billion of U.S. exports should the United States decide to impose Section 232 auto tariffs.²¹⁶

273 Retaliatory actions may also heighten concerns over the potential strain the U.S. Section 232 tariffs place on the international trading system. Many U.S. trading partners view the Section 232 actions as protectionist and in violation of U.S. commitments at the WTO and have initiated WTO dispute settlement proceedings against the United States, while the Trump Administration views the actions within its rights under those same commitments (see "“WTO Cases").²¹⁷”).274 The retaliating countries notified their retaliation to the WTO pursuant to the WTO Agreement on Safeguards, arguing that U.S. steel and aluminum tariffs are intended to protect U.S. industry and therefore are effectively safeguard tariffs, the tariffs have not been authorized by a WTO dispute settlement panel.²¹⁸275 The Trump Administration argues, in turn, that the retaliation violates WTO rules and has responded by initiating additional WTO disputes. If the WTO dispute settlement process cannot satisfactorily resolve this conflict, it could lead to further unilateral actions and increasing retaliation.

Economic Impacts

The Section 232 steel and aluminum tariffs and resulting retaliation affect various stakeholders in the U.S. economy, prompting reactions from several Members of Congress, some in support and others voicing concern. Congress has also held a number of hearings to examine the issue.²¹⁹ 276 Press reports, company earnings statements, government data, and academic studies to date have suggested the U.S. steel and aluminum tariffs raised the tariff inclusive cost of imports leading to declining demand for U.S. imports of the products subject to the tariffs, and allowingwhich allowed domestic steel and aluminum producers to increase domestic prices and expand output.²²⁰ In turn, for a time.277 In turn, 271 For more information, see CRS Report R45903, Retaliatory Tariffs and U.S. Agriculture, by Anita Regmi. 272 U.S. Bureau of Economic Analysis, “U.S. International Transactions,” Table 1.3, June 19, 2020 release, https://apps.bea.gov/iTable/iTable.cfm?ReqID=62&step=1. 273 “Threat of Auto Import Tariffs Remains Despite Lapsed Deadline,” Wall Street Journal, November 21, 2019. 274 For example, see China, “United States – Certain Measures on Steel and Aluminum Products Request for Consultations by China,” WTO WT/DS544/1, April 9, 2018; and United States, “Certain Measures on Steel and Aluminum Products,” WTO WT/DS544/2, April 17, 2018. 275 For example, see European Union, “United States – Certain Measures on Steel and Aluminum Products Request for the Establishment of a Panel by the European Union,” WTO WT/DS548/14, October 19, 2018. 276 See, for example, 115th Congress, the House Ways and Means Committee held hearings examining the potential economic implications of the tariffs and the product exclusion process, and its Trade Subcommittee held a hearing on the effects on U.S. agricultural producers. The Senate Finance Committee also held a hearing during the 115th Congress with Commerce Secretary Ross to discuss the Administration’s Section 232 investigations and the potential impacts of Section 232 auto tariffs. In the 116th Congress, the House Committee on Financial Services held a hearing on the impact of recent trade policies on the U.S. economy. 277 Sources cited throughout this section. For an overview of the estimated effects of the tariffs on the U.S. economy, see Congressional Budget Office, The Budget and Economic Outlook: 2020 to 2030, January 28, 2020, p. 33, Congressional Research Service 44 link to page 48 link to page 55 link to page 55 Section 232 Investigations: Overview and Issues for Congress downstream domestic industries (e.g., manufacturers using steel and aluminum as inputs) and consumers have faced higher costs. Preliminary data also appears to Trade data suggest other countries'’ retaliatory tariffs have had negative effects on U.S. industry by reducing demand for certain U.S. exports (see "Retaliation").

“Retaliation”). Most studies attempting to measure the overall economic effects of the tariffs estimate a negative impact on U.S. gross domestic product (GDP) as a result of the tariffs. Some groups supporting the tariff actions, however, argue that potential negative effects on the broader economy are exaggerated and that such effects are outweighed by the benefits to the domestic steel and aluminum industries in any case.²²¹278 President Trump'’s May 2019 decision to exempt Canada and Mexico, which accounted for more than 30% of affected steel and aluminum imports, have likely lessened the effects of the Section 232 tariffs. On the other handHowever, on August 16, 2020, President Trump reinstated tariffs on a significant share of aluminum imports from Canada (covering $2.5 billion of U.S. imports in 2019). In addition, academic studies suggest that the Administration'’s broader tariff actions—including Section 301 tariffs on imports from China and China'’s subsequent retaliation—and increased uncertainty from the Administration'’s various tariff actions may further depress U.S. and global economic growth, which would have negative implications for U.S. steel and aluminum producers as well as downstream industries.

(see “Aggregate Effects on the U.S. Economy”). In the near term, however, the supply and demand shocks resulting from the COVID-19 pandemic and associated economic downturn may outweigh tariff-related economic effects in steel, aluminum, and downstream industries. Industry-Level Dynamics of the Tariff Increase

Changes in tariffs affect economic activity directly by influencing the price of imported goods and indirectly through changes in exchange rates and real incomes. The extent of the price change and its impact on trade flows, employment, and production in the United States and abroad depend on resource constraints and how various economic actors (foreign producers of the goods subject to the tariffs, producers of domestic substitutes, producers in downstream industries, and consumers) respond as the effects of the increased tariffs reverberate throughout the economy. Several industry-level dynamics that occurred after the increase in steel and aluminum tariffs are described below. Tariffs, however, are only one of many variables influencing market conditions.

•  Tariffs raise the costs of imports relative to domestic goods, which may have given domestic steel and aluminum producers the ability to raise prices relative to foreign competitors. Both foreign and domestic producers may respond to increased tariffs. Domestic firms are likely to increase their prices in response to the new tariff protection, while foreign producers may lower their prices and absorb a portion of the tariff increase in order to remain competitive in the U.S. market.²²²279 Foreign producers'’ response determines the tariff "pass-through"“pass-through” rate, and most early economic studies of the tariff actions found that the https://www.cbo.gov/system/files/2020-01/56020-CBO-Outlook.pdf. 278 See for example: Jeff Ferry, Steel & Aluminum Tariffs Produce Minimal Impact on Jobs, GDP, Coalition for a Prosperous America, March 2018, https://www.prosperousamerica.org/steel_aluminum_tariffs_produce_minimal_impact_on_jobs_gdp; and Robert E. Scott, Aluminum Tariffs Have Led to a Strong Recovery in Employment, Production, and Investment in Primary Aluminum and Downstream Industries, Economic Policy Institute, December 11, 2018, https://www.epi.org/publication/aluminum-tariffs-have-led-to-a-strong-recovery-in-employment-production-and-investment-in-primary-aluminum-and-downstream-industries/. 279 Mary Amiti, Sebastian Heise, and Noah Kwicklis, “Will New Steel Tariffs Protect U.S. Jobs?,” Federal Reserve Bank of New York, Liberty Street Economics (blog), April 19, 2018, http://libertystreeteconomics.newyorkfed.org/2018/04/will-new-steel-tariffs-protect-us-jobs.html. Congressional Research Service 45 link to page 51 link to page 51 link to page 53 link to page 53 Section 232 Investigations: Overview and Issues for Congress rate, and most early economic studies of the tariff actions found that the U.S. Section 232 tariffs had largely been passed through to downstream industries and consumers with little effect on foreign export prices.²²³280 A more recent study, however, found that foreign steel producers absorbed some share of the tariff increases, potentially lowering their export prices by as much as 50%.²²⁴
  
  281 BLS data on domestic producer and import price indices for broad categories of steel and aluminum suggest that price differences between domestic and imported steel and aluminum increased after the Section 232 tariffs took effect in March 2018. For steel, the domestic producer price index increased by 20.5% from January to December 2018, while the price index for imports (excluding tariffs) increased by 8.5% (see Figure 9) Figure 10). By the end of 2019, after Canada and Mexico were exempted from the additional duties, domestic and imported prices became more closely aligned, at 3.5% and 4.7steel prices had become more closely aligned, but by June 2020 had widened again, at 5.7% and 9.3% below their January 2018 valueslevels, respectively. For aluminum, both domestic and import prices have drifted lower in 2019 and 2020 after peaking in mid-2018. Import prices fell at a faster rate throughout the period, but as of June 2020, domestic and imported aluminum prices had largely converged at 14.1% and 13.3% below their January 2018 levels (see Figure 11). Figure 10. Steel Price Indices Figure 11. Aluminumpeaking in mid-2018, but import prices have fallen at a faster rate, declining by 7.9% to December 2019, compared with 2.8% for domestic prices (see Figure 10).

Figure 9. Steel Price Indices Price Indices (monthly % change from January 2018) (monthly % change from January 2018) Source: U.S. Bureau of Labor Statistics. Source: U.S. Bureau of Labor Statistics. Notes: Based period set to January 2018. Notes: Base period set to January 2018. Production series ID = PCU3311 and import Production series ID = PCU3313 and import series ID = EIUIZ3311. Import price index (monthly % change from January 2018) Source: U.S. Bureau of Labor Statistics. Notes: Based period set to January 2018. Production series ID = PCU3311 and import series ID = EIUIZ3311. Import price index excludes tariffs.

Figure 10. Aluminum Price Indices (monthly % change from January 2018) Source: U.S. Bureau of Labor Statistics. Notes: Base period set to January 2018. Production series ID = PCU3313 and import series ID = EIUIZ3313. Import price index series ID = EIUIZ3313. Import price index excludes tariffs. excludes tariffs.  excludes tariffs.

• U.S. steel and aluminum production initially expanded and U.S. imports declined as demand for goods produced domestically increased relative to demand for imported goods (see Figure 11 and Figure 12). Figure 12 and Figure 13). Although U.S. steel and aluminum producers increased prices relative to foreign producers in 2018 and 2019, the additional tariff costs on imports, which were largely passed through to downstream firms (as discussed above), put downward pressure on demand for imports. Downstream firms' demand sensitivity to higher import prices (their price elasticity of demand) depends on the degree to which the steel and aluminum products produced domestically are sufficient substitutes for the products facing the tariffs, and the availability of domestic supplies.
  
  By the fourth quarter of 2019, U.S. 280 For example, see Alberto Cavallo, et al., Tariff Passthrough at the Border and at the Store: Evidence from U.S. Trade Policy, Becker Friedman Institute, Working Paper No. 2019-124, October 2019, https://bfi.uchicago.edu/wp-content/uploads/BFI_WP_2019124-1.pdf. 281 Mary Amiti, Stephen J. Redding, and David E. Weinstein, Who’s Paying for the U.S. Tariffs? A Longer-Term Perspective, National Bureau of Economic Research, Working Paper 26610, January 2020, https://www.nber.org/papers/w26610. Congressional Research Service 46 Section 232 Investigations: Overview and Issues for Congress demand for imports.282 By the first quarter of 2020, U.S. real imports of steel and aluminum (adjusted for price fluctuations) aluminum had decreased by more than 30% and 1516%, respectively, compared to their average quarterly values in 2017, the year before the tariffs went into effect.²²⁵ Annual domestic U.S. steel and aluminum production meanwhile increased from 2017 levels throughout 2018 and 2019. Steel283 By contrast, U.S. production increased over much of the period since the tariffs took effect. Anticipating higher domestic demand and less foreign competition, U.S. producers announced investment and production increases, including a new electric arc furnace (which uses scrap metal to make steel), near Birmingham, AL,284 and increased capacity at an aluminum facility in Hawesville, KY, resulting from a multiyear project underway to restart previously curtained capacity, among others.285 The increase in domestic steel and aluminum production both peaked in the fourth quarter of 2018 at 13.5% and 9.0%, respectively, above 2017 levels.²²⁶ In an anticipation of higher domestic demand and the ability to charge higher prices on U.S. steel and aluminum, some U.S. producers announced investment and production increases, including a new electric arc furnace (which uses scrap metal to make steel), near Birmingham, AL,²²⁷ and increased capacity at an aluminum facility in Hawesville, Kentucky.²²⁸ As U.S. market conditions weakened in late 2019, U.S. Steel announced plans to scale back operations at a labor-intensive blast furnace in Michigan, and moved forward with investment in a less labor-intensive electric arc furnace facility in Arkansas.²²⁹

Figure 11. Domestic Production and Imports: Steel (quarterly % change from 2017 average) Source: Production data from Federal Reserve Economic Data (FRED) and imports from U.S. Census Bureau. Notes: Base period set to 2017 average. Production series seasonally adjusted, ID = IPN3311A2RSQ. Import classification = NAICS 3311.

Figure 12. Domestic Production and Imports: Aluminum (quarterly % change from 2017 average) peaked in the fourth quarter of 2018 at 13.5% and 9.0%, respectively, above average 2017 values.286 More recently, however, domestic production has fallen sharply in line with broader declines in U.S. economic activity associated with the COVID-19 pandemic—from January to May 2020, U.S. steel and aluminum production declined by 36% and 25%, respectively.287 In April 2020, citing declining market conditions including the global oversupply of aluminum, falling prices, and the economic fallout from the pandemic, Alcoa announced plans to cut production at its aluminum smelter in Ferndale, WA, and began layoffs at the facility in June.288 Various U.S. steel facilities have announced similar plant closures, or reductions in capacity, in recent months.289 282 Downstream firms’ demand sensitivity to higher import prices (their price elasticity of demand) depends on the degree to which the steel and aluminum products produced domestically are sufficient substitutes for the products facing the tariffs, and the availability of domestic supplies. 283 Import statistics sourced from U.S. Census Bureau. 284 Bob Tita, “U.S. Steel to Expand Under Tariffs,” Wall Street Journal, February 11, 2019. 285 Alan Rappeport, “Trump’s Tariffs are Paying Off for Century Aluminum,” New York Times, August 20, 2018. 286 Production data are from Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis. 287 Monthly production data from Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis (series IPN3311A2RS and IPG3313S). 288 Geoff Baker, "Alcoa Begins Laying Off Workers at its Ferndale Aluminum Plant Ahead of Schedule," Seattle Times, June 4, 2020. 289 For example, see Letter from Michael P. Madar, Vice President and General Manager, ArcelorMittal Cleveland, to Ohio Office of Workforce Development, Rapid Response Program Manager, July 24, 2020, https://jfs.ohio.gov/warn/pdf/ArcelorMittalClevelandIncArcelorMittalUSALLC.stm. Congressional Research Service 47 Section 232 Investigations: Overview and Issues for Congress Figure 12. Domestic Production and Figure 13. Domestic Production and Imports: Steel Imports: Aluminum (quarterly % change from 2017, real values) (quarterly % change from 2017, real values) Source: Production data from Federal Reserve Source: Production data from Federal Reserve Source: Production data from Federal Reserve Economic Data (FRED) and imports from U.S. Census Bureau. Economic Data (FRED) and imports from U.S. Census Bureau. Census Bureau. Notes: Base period set to 2017 average. Notes: Base period set to 2017 average. Production series seasonally adjusted, ID = IPG3313S. Import classification = NAICS 3313.

• Production series seasonally adjusted, ID = IPN3311A2RSQ. Import classification = NAICS IPG3313S. Import classification = NAICS 3313. 3311. Data are in real terms (adjusted for price Data are in real terms (adjusted for price fluctuations). fluctuations).  The combination of higher domestic prices and the added duties on imports led to higher input costs for some downstream industries. Domestic industries that use steel and aluminum in their products ("downstream"“downstream” industries, including auto manufacturers and oil producers) faced higher input costs relative to producers in other markets. Higher input costs led to some combination of lower profits for producers and higher prices for importers and consumers, which in turn may have dampened demand for downstream products, leading to some contraction in these sectors. A study by researchers at the Federal Reserve Board, which examined effects on the manufacturing sector from all U.S. tariff actions in 2018, found that higher input costs from the tariffs were associated with higher prices, employment declines, and reductions in output for affected firms.²³⁰ 290 Another study found that the higher input costs associated with the tariffs may have led to a decrease in U.S. exports for firms reliant on imported intermediate inputs. TheThis study suggests export growth was approximately 2% lower for products made with steel and aluminum or other goods subject to higher U.S. tariffs, relative to unaffected products.²³¹291
  
  Some have also pointed to higher costs for several industries relying on both domestic and imported steel and aluminum. For example, Ford CEO James 290 Aaron Flaaen and Justin Pierce, Disentangling the Effects of the 2018-2019 Tariffs on a Globally Connected U.S. Manufacturing Sector, Washington: Board of Governors of the Federal Reserve System, Finance and Economics Discussion Series 2019-086, December 23, 2019, https://www.federalreserve.gov/econres/feds/files/2019086pap.pdf. 291 The authors suggest that the U.S. import increases had the equivalent effect of U.S. trading partners applying a 2% tariff on U.S. exports. Kyle Handley, Fariha Kamal, and Ryan Monarch, Rising Import Tariffs, Falling Export Growth: When Modern Supply Chains Meet Old-Style Protectionism, National Bureau of Economic Research, NBER Working Paper No. 26611, January 2020, https://www.nber.org/papers/w26611. Congressional Research Service 48 link to page 12 link to page 54 Section 232 Investigations: Overview and Issues for Congress Hackett suggested the metal tariffs cost the auto manufacturer roughly $1 billion in profits in 2018.292 The higher input costs for U.S. downstream firms potentially gives their foreign competitors an advantage in the U.S. market and abroad. Allegheny Technologies, which uses imported steel slabs in its production of stainless steel sheet, cited the Administration’s tariffs in its April 2020 decision to close a facility in western Pennsylvania.293 In January 2020, the Trump Administration expanded the Section 232 tariff actions to certain steel and aluminum derivative products (see “Presidential Actions”), arguing that higher input costs had disadvantaged these downstream domestic manufacturers relative to their foreign counterparts, in turn leading to more imports of the downstream products.  U.S. exports subject to retaliatory tariffs declineddomestic and imported steel and aluminum. For example, Ford CEO James Hackett suggested the metal tariffs cost the auto manufacturer roughly $1 billion in profits in 2018.²³² The higher input costs for U.S. downstream firms potentially gives their foreign competitors an advantage in the U.S. market and abroad. In January 2020, the Trump Administration expanded the Section 232 tariff actions to certain steel and aluminum derivative products (see "Presidential Actions"), arguing that higher input costs had disadvantaged these downstream domestic manufacturers relative to their foreign counterparts, leading to more imports of the downstream products.

Figure 13. U.S. Exports Subject to Section 232 Retaliation (quarterly % change from 2017 average)

Source: CRS analysis with data from the U.S. Census Bureau and partner country customs agencies via Global Trade Atlas. Notes: Base period set to 2017 average. Includes U.S. exports to China, the EU, Russia, and Turkey subject to retaliation since Q2 2018. Exports estimated using partner country import data. India began imposing retaliatory tariffs in Q2 2019 and is in not included. Total U.S. exports includes all products exported to all countries globally.

• U.S. exports subject to retaliatory tariffs declined. Five U.S. trading . Five U.S. trading Figure 14. U.S. Exports Subject to Section partners (China, EU, India, Russia, 232 Retaliation and Turkey) are currently imposing (quarterly % change from 2017) retaliatory tariffs in response to U.S. Section 232 tariffs affecting approximately $96.5 billion of U.S. annual exports (20182019 value). 294 Products targeted include agricultural goods, particularly pork and nuts, as well as steel and aluminum.²³³295 The retaliatory tariffs have led to decreased demand for these U.S. exports as they lower the competitiveness of U.S. firms relative to other suppliers in foreign markets. Source: CRS analysis with data from the U.S. Census In each of the sevenIn each of the six quarters since the Bureau and partner country customs agencies via retaliatory tariffs took effect, U.S. Trade Data Monitor. exports to China, the EU, Russia, and Turkey subject to the additional duties were roughly 25% or more below their average quarterly value in 2017 (see Figure 13).²³⁴ Notes: Base period set to 2017 average. Includes Turkey subject to the additional U.S. exports to China, the EU, Russia, and Turkey subject to retaliation since Q2 2018. Exports duties were roughly 25% or more estimated using partner country import data. India below their average quarterly value in began imposing retaliatory tariffs in Q2 2019 and is 2017 (Figure 14).296 During the same not included. Total U.S. exports includes all products During the same period, overall U.S. exports were as exported to all countries globally. much as 10% higher in each quarter relative to 2017 levels, suggesting the tariffs played a large role in the product-specific export declines.
  
  Retaliatory tariffs also have given U.S. exporters an incentive to manufacture 292 “Trump Metal Tariffs will Cost Ford $1 Billion in Profits, CEO Says,” Reuters, September 26, 2018, Business News. 293 "Allegheny Technologies to Shutter Steel Plant, Cites Tariffs," U.S. News, April 1, 2020. 294 Canada has announced plans to reinstate retaliatory tariffs on approximately $2.5 billion of U.S. annual exports on September 16, 2020, in response to the Trump Administration’s recent decision to resume tariff increases on certain aluminum imports from Canada. 295 Canada and Mexico removed retaliatory tariffs affecting approximately $14.1 billion of U.S. annual exports (2019 value) after the Trump Administration exempted both countries from Section 232 tariffs in May 2019. 296 India’s retaliatory tariffs were delayed until June 2019. Congressional Research Service 49 Section 232 Investigations: Overview and Issues for Congress Retaliatory tariffs also have given U.S. exporters an incentive to manufacture abroad to avoid the retaliation. Facing retaliatory tariffs on U.S. motorcycle exports to the EUEuropean Union, Harley-Davidson announced its intent to shift some of its production out of the United States to remain competitive in the EU market.²³⁵297 In July 2019, the company received approval from the EUEuropean Union to begin importing motorcycles from Thailand, which is to facefacing a 6% tariff, as compared to the 31% tariff applied to motorcycles exported to the EUEuropean Union from the United States.²³⁶

298 Aggregate Effects on the U.S. Economy

In addition to industry-level effects, tariffs also have the potential to affect the broader U.S. economy. For example, several academic studies and preliminary accounts of other industry observers appear to suggest the ad hoc nature of the tariffs has increased uncertainty in the business environment placing a drag on investment activity. One study found that uncertainty resulting from U.S. trade policy reduced investment by roughly 1.5% in 2018.²³⁷299 U.S. tariffs may also reduce national consumption patterns, as the higher costs of imported goods potentially reduces consumers'’ discretionary income and therefore aggregate demand. Similarly, retaliatory tariffs may dent U.S. consumption to the extent they cause export declines and lower incomes in affected industries. For example, some research suggests U.S. counties most exposed to China's ’s retaliatory tariffs on U.S. agricultural exports saw auto sales decline by 4%-5% relative to unaffected counties after the retaliatory tariffs were imposed.²³⁸300 Some groups that support the tariffs, however, argue that estimates of their impact may exaggerate potential negative effects.²³⁹

301 Assessing the tariffs overall impact on the U.S. economy is in part a distributional question, given the tariffs varied effects on producers in protected industries, downstream industries, consumers, and exporters subject to retaliation. From a policy perspective some analysts see the Administration'Administration’s trade actions as addressing long-standing issues of fairness that are intended to provide U.S. steel and aluminum producers with a more level playing field. Research by academic economists, however, generally argues the negative impact of higher prices on consumers and industries using the imported goods outweighs the benefit of higher profits and expanded production in the import-competing industries and the additional government revenue generated by the tariffs, especially if the negative effects of retaliatory tariffs are taken into consideration.²⁴⁰302 Quantitative estimates of the effects vary based on modeling assumptions and techniques, but most suggest a negative overall effect on U.S. gross domestic product (GDP) as a result of the tariffs.

The Congressional Budget Office, for example, estimates that the increased tariffs in effect as of December 2019 would reduce U.S. GDP by 0.5% in 2020, below a baseline without the tariffs, 297 “U.S. Trade War with Europe Revs Up as Harley-Davidson Shifts Production,” Financial Times, June 25, 2018. 298 “Harley-Davidson Gets EU Approval for Plan to Dodge $100-million Tariff Hit,” Los Angeles Times, July 23, 2019. 299 Dario Caldara, et al., “The Economic Effects of Trade Policy Uncertainty,” Journal of Monetary Economics, vol. 109 (January 2020), pp. 38-59. 300 Michael E. Waugh, The Consumption Response to Trade Shocks: Evidence from the U.S.-China Trade War, National Bureau of Economic Research, NBER Working Paper 26353, December 2019, https://www.nber.org/papers/w26353. 301 Robert E. Scott, Estimates of Jobs Lost and Economic Harm Done by Steel and Aluminum Tariffs Are Wildly Exaggerated, Economic Policy Institute, March 21, 2018, https://www.epi.org/publication/estimates-of-jobs-lost-and-economic-harm-done-by-steel-and-aluminum-tariffs-are-wildly-exaggerated/. 302 For example, see Pablo D. Fajgelbaum, et al., “The Return to Protectionism,” The Quarterly Journal of Economics, vol. 135, no. 1 (January 2020), pp. 1-55. Congressional Research Service 50 Section 232 Investigations: Overview and Issues for Congress December 2019 would reduce U.S. GDP by 0.5% in 2020, below a baseline without the tariffs, while raising consumer prices by 0.5%, thereby reducing average real household income by $1,277.²⁴¹303 From a global perspective, the International Monetary Fund (IMF) estimated that the tariffs would reduce global GDP in 2020 by 0.8%.²⁴²304 As these studies examine the effects of all recent U.S. tariffs actions, the impact directly attributable to the Section 232 tariffs on steel and aluminum is likely smaller, although this could grow if the Section 232 tariffs were expanded to U.S. motor vehicle imports.²⁴³305 U.S. steel and aluminum imports subject to Section 232 tariffs accounted for less than 10% of imports affected by the Administration'’s tariff actions—imports from China subject to Section 301 tariffs accounted for more than 90%.²⁴⁴

Issues for Congress

As Congress debates the Administration'306 In early 2020, the United States entered a recession as a result of the economic fallout from the global COVID-19 pandemic with the scale of economic disruption far outweighing estimated negative effects of the Administration’s tariff actions, cited above.307 In the second quarter of 2020, U.S. GDP declined at annualized rate of 32.9%, highlighting further deterioration in U.S. economic conditions following a 5% decline (annualized rate) in the first quarter of 2020.308 Various stakeholders, including some Members of Congress, have called for suspending the tariff increases, including actions under Section 232, in an effort to enhance U.S. economic growth during the downturn.309 Some beneficiaries of the increased tariffs, however, argue they are necessary to maintain domestic production and employment during the pandemic.310 Issues for Congress As Congress debates the Administration’s Section 232 actions it may consider the following issues, many of which include potential legislative responses.

Possible Long-Term Effects

Section 232 tariffs on steel and aluminum imports have now been in place for over two years and have no statutory expiration. Congress may explore the long-term economic consequences of the tariffs on U.S. domestic industry, including steel and aluminum producers, downstream manufacturers, and those sectors targeted by retaliatory tariffs. Impacts may include increased prices and costs for steel and aluminum producers and users, respectively; changes in workforce 303 Congressional Budget Office, The Budget and Economic Outlook: 2020 to 2030, January 28, 2020, p. 33, https://www.cbo.gov/system/files/2020-01/56020-CBO-Outlook.pdf. 304 International Monetary Fund, World Economic Outlook: Global Manufacturing Downturn, Rising Trade Barriers, October 2019, pp. 31-33, https://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019. 305 Motor vehicle and parts imports from Japan and the EU (the two trading partners targeted in the Administration’s Section 232 proclamation on motor vehicles) totaled $119 billion in 2018 according to BEA data. 306 CRS Insight IN10971, Escalating U.S. Tariffs: Affected Trade, coordinated by Brock R. Williams. 307 For more, see CRS Report R46270, Global Economic Effects of COVID-19, coordinated by James K. Jackson. 308 Bureau of Economic Analysis, "Gross Domestic Product, 2nd Quarter 2020 and Annual Update," press release, July 30, 2020, https://www.bea.gov/news/2020/gross-domestic-product-2nd-quarter-2020-advance-estimate-and-annual-update. 309 Ana Swanson, "U.S. Weighs Tariff Relief but Some Fear China Will Take Advantage," New York Times, March 15, 2020. Representative Stephany Murphy, "Murphy, Cunningham Urge Congressional Leadership to Suspend Tariffs in Upcoming Coronavirus Response Bill," press release, March 18, 2020, https://murphy.house.gov/news/documentsingle.aspx?DocumentID=1254. 310 United Steelworkers, "USW Calls on Congress to Continue Strict Enforcement of Trade Rules," press release, March 26, 2020, https://m.usw.org/news/media-center/releases/2020/usw-calls-on-congress-to-continue-strict-enforcement-of-trade-rules. Congressional Research Service 51 Section 232 Investigations: Overview and Issues for Congress prices and costs for steel and aluminum producers and users, respectively; changes in workforce levels; shifts in global supply chains as firms seek to avoid tariffs; and potential loss of foreign markets for domestic producers facing retaliatory tariffs.

In a 2018 Ways and Means Committee hearing on the Section 232 tariff exclusion process, Commerce stated the "“Secretary has directed Commerce Department economists to conduct semi-annual reviews of the impacts of the steel and aluminum tariffs, including on downstream sectors."²⁴⁵”311 As part of its own assessment, Congress may request the Administration'’s analyses.

Some Members, including Senate Finance Chair Grassley, have suggested that the Administration consider immediate tariff relief to help U.S. importers in the wake of the economic downturn of the Covid-19 pandemic.312 Representative Ron Kind noted that the re-imposition of tariffs on Canadian aluminum will “disproportionately harm Wisconsin’s storied beer industry, which is already facing weakened demand due to a national shortage of aluminum cans and a stagnant economy.”313 the Covid-19 pandemic.²⁴⁶ One steel industry group voiced opposition to removal of the Section 232 tariffs noting that "the coronavirus epidemic is exacerbating the global glut in steel production and threatens to unleash a new surge in imports."²⁴⁷

Appropriate Delegation of Constitutional Authority

In enacting Section 232 of the Trade Expansion Act, Congress delegated aspects of its authority to regulate international commerce to the executive branch. Use of the statute to restrict imports does not require any formal approval by Congress or an affirmative finding by an independent agency, such as the USITC, granting the President broad discretion in applying this authority. Should Congress disapprove of the President'’s use of the statute, its current recourse is limited to passing new legislation or using informal tools to pressure the Administration (e.g., putting holds on presidential nominee confirmations in the Senate). Some Members and observers have suggested that Congress should require additional steps in the Section 232 process. In the 116^th 116th Congress, a variety of proposals have been introduced to amend Section 232, in various ways, such as by

• :  requiring an economic impact study by the USITC, congressional consultation, or approval of any new tariffs,
•  allowing for a resolution of disapproval of trade actions, or
•  mandating a transparent exclusion process to limit potential negative domestic effects.

effects. In addition, the 2020 expansion of the steel and aluminum tariffs, initially imposed in 2018, has raised questions about Section 232 authority expiration. Some stakeholders have suggested that Section 232 reform should include new or clarified timelines, deadlines, or expiration dates for any tariffs or quotas imposed or on the authority to impose new or expanded trade actions.

Some Members, including Senate Finance Chair Senator Grassley seek, have sought to draft a consensus bill to restore certain congressional authority that would gain sufficient bipartisan support to withstand a possible presidential veto. Issues under debate includeContentious issues have included whether any changes would be retroactive, potentially affecting the steel and aluminum tariffs, or whether they would only apply to future actions, and whether Congress'’s role should be consultative or 311 U.S. Congress, House Committee on Ways and Means, Subcommittee on Trade, Hearing on Product Exclusion Process for, 115th Cong., 2nd sess., July 24, 2018, Serial No. 115-TR06, https://docs.house.gov/meetings/WM/WM04/20180724/108591/HHRG-115-WM04-Transcript-20180724.pdf. 312 Adam Beshudi, “Grassley: White House, Congress should consider tariff easing measures,” PoliticoPro, March 16, 2020. 313 Representative Ron Kind, Twitter, August 6, 2020. Congressional Research Service 52 link to page 67 link to page 67 Section 232 Investigations: Overview and Issues for Congress s role should be consultative or decisive (e.g., requiring congressional approval). The Chairman noted that, "“the president'’s use of tariffs has brought to our attention the shortcomings of the 1962 and 1974 legislation on trade that delegated too much authority from Congress'’ constitutional power [over trade] to the executive branch."²⁴⁸

”314 After multiple meetings, the Chairman admitted that the efforts had stalled as it was “difficult to get bipartisan agreement on what to do and, secondly, there’s some Republicans who don’t want to advance [the bill] because they might be seen as doing it in an anti-Trump fashion.”315 Others have proposed revisiting the delegation of congressional constitutional authority more broadly, such as by requiring congressional approval of executive branch trade actions more generally. The Tariff Reform Coalition, a cross-sectoral coalition of industry associations, have advocated for "“greater Congressional oversight with respect to Presidential use of tariff authority."²⁴⁹

”316 For a list of proposals in the 116^th116th Congress, see Appendix C.

Legislative Responses to Retaliatory Tariffs

Several major U.S. trading partners are currently imposing retaliatory tariffs in response to the U.S. actions. In the 116^th116th Congress, some Members of Congress proposed legislation to respond to the potential economic impact of these foreign retaliatory tariffs. Some proposals expand programs like trade adjustment assistance to include assistance for workers, firms, and farmers harmed by foreign retaliation.²⁵⁰317 The Administration announced an assistance program for farmers harmed by foreign retaliation to Section 232 and other tariffs through the U.S. Department of Agriculture.²⁵¹318 Others have suggested broader trade adjustment assistance reform to help U.S. workers and firms harmed by globalization, supply chain shifts, and global over-capacity in certain sectors, and depressed demand due to the COVID-19 pandemic. For a list of proposals from the 116^th116th Congress, seesee Appendix C.

Establishing Threshold

It is relatively easy for a stakeholder to prompt the Section 232 investigation process. The statute states that "“Upon request of the head of any department or agency, upon application of an interested party, or upon his own motion, the Secretary of Commerce ... shall immediately initiate an appropriate investigation."” To limit the volume of Section 232 petitions and ensure that any requests are sufficiently justified, Congress may consider establishing criteria or a threshold that a request must meet before Commerce and Defense agencies invest resources in conducting a Section 232 investigation. Similarly, Congress may consider limiting the types of imported articles that may be considered under Section 232 (e.g., S. 287, , H.R. 940).

). 314 Megan Cassella, “Grassley Still Hopes to Craft 232 Reform Bill with Wyden,” PoliticoPro, March 4, 2020. 315 Hannah Monicken, “Grassley: Section 232 reform efforts have stalled, could be over,” Inside U.S. Trade, May 28, 2020. 316 Tariff Reform Coalition, letter to Chair and Ranking Members of Senate Finance and House Ways and Means Committee, September 19, 2020, http://www.nftc.org/default/trade/Tariff%20Reform%20Coalition%20Letter.pdf. 317 For more information on trade adjustment assistance, see CRS In Focus IF10570, Trade Adjustment Assistance for Workers (TAA), by Benjamin Collins, CRS Report RS20210, Trade Adjustment Assistance for Firms, by Rachel F. Fefer, and CRS Report R40206, Trade Adjustment Assistance for Farmers, by Mark A. McMinimy. 318 For more information see CRS Report R45310, Farm Policy: USDA’s 2018 Trade Aid Package, by Randy Schnepf et al. Congressional Research Service 53 Section 232 Investigations: Overview and Issues for Congress Interpreting National Security Interpreting National Security

Congress created the Section 232 process to try to ensure that U.S. imports do not cause undue harm to U.S. national security. Some observers have raised concerns that restrictions on U.S. imports under Section 232, however, may harm U.S. allies, which could also have negative implications for U.S. national security. For example, Canada is considered part of the U.S. defense industrial base according to U.S. law and is also a top source of U.S. imports of steel and aluminum.²⁵²

319 National security is not clearly defined in the statute, allowing for ambiguity and alternative interpretations by an Administration. International trade commitments both at the multilateral and FTA level generally include broad exceptions on the basis of national security. The Trump Administration argues its Section 232 actions are permissible under these exceptions, while many U.S. trading partners claim the actions are unrelated to national security. If the United States invokes the national security exemption in what may be perceived to be an arbitrary way, it could similarly encourage other countries to use national security as a rationale to enact protectionist measures and limit the scope of potential U.S. responses to such actions.

Congress may consider amending Section 232 to address these concerns. For example, some Members have proposed to narrowly define "national security" to narrowly define “national security” under Section 232 and the factors to be considered in a Section 232 investigation. One bill limits it to protection against foreign aggression (S. 287, , H.R. 940). Congress could also consider changing the investigative authority from Commerce to Defense to provide more weight to the military perspective or interpretation as to what constitutes a national security threat.

Establishing New International Rules

Addressing the specific market-distorting practices that are the root causes of steel and aluminum overcapacity (e.g., government intervention, subsidization) may require updating or amending existing trade agreements. In addition to the international efforts discussed, recent U.S. FTA negotiations, including the recently-concludedimplemented USMCA, include related disciplines (e.g., by establishing rules on state-owned enterprises or anticorruption), and the United States is engaged in negotiations with China on overcapacity and other trade barriers. To address these issues, Congress could consider establishing specific or enhanced new negotiating objectives for trade agreement negotiations, potentially through new or modified Trade Promotion Authority (TPA) legislation. Congress could also consider directing the executive branch to prioritize engagement in such negotiations, by, for example, endorsing the continuation of the OECD discussions or the trilateral proposals by USTR with the EU and Japan to address nonmarket practices, including subsidies, state-owned enterprises, and technology transfer requirements, mostly aimed at China.

Congressional oversight on ongoing reform efforts at the WTO may examine efforts to establish new international trade rules on these issues (see below). Impact on the Multilateral Trading System

Some analysts argue that the United States risks undermining the international system it helped create when it invokes unilateral trade actions that may violate core commitments and with regard to broad useuses of national security exemptions. These observers fear that disagreements at the WTO on these issues may be difficult to resolve through the existing dispute settlement procedures given the concerns over national sovereignty that would likely be raised if a WTO dispute settlement panel issued a ruling relating to the U.S. use of national security. Furthermore, actions by the United States that do not make use of the multilateral system'’s dispute settlement 319 10 U.S.C. §148. Congressional Research Service 54 Section 232 Investigations: Overview and Issues for Congress s dispute settlement process may open the United States to criticism and could impede U.S. efforts to use the multilateral system for its own enforcement purposes. For example, China called on other parties such as the EU to join it in opposition to the U.S. actions on Section 232, while simultaneously promoting domestic policies often seen as undermining WTO rules.²⁵³320 Congress could potentially address these concerns by conducting increased oversight of the Administration'’s actions by inviting testimony from multiple parties, considering legislation to establish more stringent criteria for Section 232 investigations, or requiring congressional approval of any use of Section 232, among other possible actions.

The WTO overall is at a critical point and many observers believe the WTO needs to adopt reforms to retain its credibility and continue its role as the foundation of the world trading system. Potential areas of reform could include addressing the issues underlying the Section 232 actions including: the proposal on subsidies and nonmarket practices, reforming certain aspects of the WTO dispute settlement mechanism, or clarifying the national security exception and the WTO’s role. The growing debate over the role and future direction of the WTO may be of interest to Congress as it conducts oversight over the U.S. position and role in reform efforts as some Members have expressed support to address long-standing concerns of the United States. 321 Impact on Broader International Relationships Impact on Broader International Relationships

The U.S. unilateral actions under Section 232 have raised the level of tension with U.S. trading partners and could pose risks to broader international economic cooperation. The strain on international trading relationships also could have broader policy implications, including for cooperation between the United States and allies on foreign policy issues and U.S. credibility in future trade negotiations.

Appendix A. After the United States re-imposed tariffs on Canada, the Ontario premier commented, “I just have to say how disappointed I am with President Trump right now.”322 The EU Trade Commissioner cited the U.S. Section 232 unilateral investigations and actions as part of the justification for establishing expanded retaliatory powers, potentially for use against the United States.323 On the other hand, WTO reform provides an opportunity for the United States to address issues of joint concern, such as rules for subsidies, with U.S. allies and trading partners, and strengthen those relationships. 320 Lyubov Pronina, “China Seeks EU’s Support in Standing Up to U.S. Trade Threat,” Bloomberg BNA, April 9, 2018. For more information on U.S.-China trade, see CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison. 321 For more information, see CRS Report R45417, World Trade Organization: Overview and Future Direction, coordinated by Cathleen D. Cimino-Isaacs. 322 “Canada to impose $3.6B in tariffs in response to Trump's move against Canadian aluminum,” CBC News, August 7, 2020. 323 “Hogan cites U.S. Section 232 probes in call for new retaliatory powers,” Inside U.S. Trade, July 7, 2020. Congressional Research Service 55 Section 232 Investigations: Overview and Issues for Congress Appendix A. Amendments to and Past Uses of Section 232 (19 U.S.C. §1862)

Concern over national security, trade, and domestic industry was first raised by the Trade Agreements Extension Act of 1954 (P.L. 83-464 §2). The 1954 act prohibited the President from decreasing duties on any article if the President determined that such a reduction might threaten domestic production needed for national defense.²⁵⁴324 In 1955, the provision was amended to also allow the President to increase trade restrictions, in cases where national security may be threatened.²⁵⁵

325 The Trade Agreements Extension Act of 1958 (P.L. 85-686 §8) expanded the 1955 provisions, by outlining specific factors to be considered during an investigation, allowing the private sector to petition for relief, and requiring the President to publish a report on each petition.²⁵⁶326 The factors to be considered during an investigation included (1) the domestic production capacity needed for U.S. national security requirements, (2) the effect of imports on domestic production needed for national security requirements, and (3) "“the impact of foreign competition on the economic welfare of individual domestic industries."

” Section 232 of the Trade Expansion Act of 1962 (P.L. 87-794) continued the provisions of the 1958 Act. Section 232 has been amended multiple times over the years, including (1) to change the time limits for investigations and actions; (2) to change the advisory responsibility from the Secretary of the Treasury to the Secretary of Commerce; and (3) to limit presidential authority to adjust petroleum imports.²⁵⁷

327 Section 232: Joint Disapproval Resolution Provision for Petroleum Products

In 1980, Congress amended Section 232 to create a joint disapproval resolution provision under which Congress could override presidential actions to adjust petroleum or petroleum product imports.²⁵⁸328 Congress included the joint disapproval resolution provision in the Crude Oil Windfall Profit Tax Act of 1980. The bill was signed into law on April 2, 1980, the same day that President 324 P.L. 83-464, §2. 325 The original inclusion of the 1955 provision appears to be due to considerations about specific minerals, namely petroleum, fluorspar, lead, and zinc. However, according to the committee report, the committee chose not to focus on specific commodities, but to create a more general provision requiring the President to adjust imports where national security may be threatened. (See S.Rpt. 84-232, p. 4.) 326 P.L. 85-686, §8. For a review of the committee’s rationale for these changes see, H.Rpt. 85-2502, H.Rpt. 85-1761, and S.Rpt. 85-1838. 327 Following the reorganization of trade functions in 1973, the Trade Act of 1974 (P.L. 93-618, §127(d)) changed the responsibility to advise the President from the Director of Office of Emergency Preparedness to the Secretary of the Treasury with requirements to consult with the Secretaries of Defense, Commerce, and other appropriate departments and agencies. The 1974 Act also placed a one-year time limit on the investigation. Following the reorganization of trade functions in the Reorganization Plan No. 3 of 1979, the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418, §402) changed the advisory responsibility from the Secretary of the Treasury to the Secretary of Commerce. The Omnibus Trade and Competitiveness Act of 1988 also reduced the investigation timeline from one year to 270 days and created the 15-day implementation period for the President to act. The Crude Oil Windfall Profit Tax Act of 1980 (P.L. 96-223, §402) created an option for Congress to override presidential actions to adjust petroleum imports through a joint disapproval resolution. 328 P.L. 96-223, §402, the Crude Oil Windfall Profit Tax Act of 1980. Congressional Research Service 56 Section 232 Investigations: Overview and Issues for Congress Profit Tax Act of 1980. The bill was signed into law on April 2, 1980, the same day that President Carter proclaimed a license fee on crude oil and gasoline pursuant to Section 232 in Proclamation 4744.329 4744.²⁵⁹

On April 15, 1980, two weeks after the President'’s proclamation on the crude oil and gasoline license fee, Representative James Shannon introduced House Joint Resolution 531 to disapprove and effectively nullify the presidential action. The House Ways and Means Subcommittee on Trade voted 14 to 4 to disapprove the presidential action; the resolution was favorably reported out of the full committee on a 27 to 7 vote. Dissenting views were voiced by Members who supported the fee program and were concerned about U.S. dependence on foreign oil. While the measure passed the House, it was indefinitely postponed in the Senate.²⁶⁰330 Multiple joint resolutions of disapproval were introduced in Congress in 1980, but none passed both chambers.

In addition to the disapproval mechanism created in the Crude Oil Windfall Profit Tax Act of 1980, President Carter'’s action in Proclamation 4744 was also challenged in court and through separate legislation in Congress. On May 13, 1980, a federal district court struck down the President'President’s action on petroleum imports as unlawful, thereby preventing the government from implementing the program. The court'’s decision, however, was appealable to the higher courts.²⁶¹ 331 Before a court could consider an appeal, Congress enacted an amendment to a bill to extend the public debt limit (P.L. 96-264, Section 2) on June 6, 1980, which terminated Proclamation 4744's ’s petroleum import program. Section 2 of P.L. 96-264 did not use the disapproval mechanism established in the Crude Oil Windfall Profit Tax Act of 1980; it was a separate piece of legislation that was attached as an amendment to an unrelated bill.²⁶²

332 On June 19, 1980, the President formally rescinded Proclamation 4744 "“in its entirety, effective March 15, 1980."²⁶³

Appendix B. Section 232 Investigations