Recent Presidential Trade Actions Affecting the U.S. Power Grid

Recent Presidential Trade Actions Affecting the U.S. Power Grid

INSIGHTi
Recent Presidential Trade Actions Affecting
the U.S. Power Grid
May 21, 2020
Introduction
Over the past several weeks, the Trump Administration has taken actions to limit the use of foreign
manufactured products in the U.S. power grid. On May 1, 2020, the President declared a national
emergency (E.O. 13920) invoking the International Emergency Economic Powers Act (IEEPA) to prohibit
certain international transactions for bulk-power system electric equipment used to operate the national
grid. On May 4, Secretary of Commerce Wilbur Ross, announced a new investigation under Section 232
of the Trade Expansion Act of 1962 into whether imports of certain large electrical transformers and their
parts threaten national security. These actions may suggest a pattern, begun last year, of making use of
executive national security authorities to restrict imports of goods that may be used for critical
infrastructure (e.g., telecommunications and electrical equipment).
The U.S. Power Grid and National Security Issues
The federal government recognizes the U.S. bulk-power system as critical infrastructure, whose
“disruption, corruption, or dysfunction” would have severe impacts across critical infrastructure sectors.
The Department of Energy (DOE) administers voluntary public-private partnerships in the electricity
subsector to promote information sharing on best practices and common threats affecting bulk-power
systems. These systems enable long-distance transmission and distribution of electricity from generation
facilities to end users. In addition, the Federal Energy Regulatory Commission (FERC), an independent
federal agency, oversees mandatory and enforceable reliability standards for industry stakeholders.
Risk assessments by subsector stakeholders have general y focused on threats and hazards that may
disable or permanently damage large numbers of high-voltage electric-power transformers (LPTs)
simultaneously. LPTs are critical to the movement of electricity across the bulk-power system. Because
LPTs require long lead times for manufacture, transport, and instal ation, 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.
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Widely recognized cyber supply chain vulnerabilities may increase cybersecurity risks to the electricity
subsector.
In 2016, FERC initiated development of a new reliability standard to address supply chain risk
management issues affecting cybersecurity of bulk-power systems. The rule would require industry
stakeholders to formalize cybersecurity risk management and implement more rigorous vetting of vendors
and software, among other measures. In April 2020, FERC delayed implementation of the rule due to
COVID-19 contingencies. Policies developed under the recent emergency declaration or because of an
affirmative Section 232 investigation (see below) might block procurement of bulk-power systems from
certain foreign-owned vendors and subcontractors on national security grounds, rather than al owing
industry stakeholders to purchase these systems and then assume corporate responsibility for carrying out
risk mitigation measures mandated by applicable FERC reliability standards.
International Emergency Economic Powers Act Action
On May 1, 2020, President Trump declared a national emergency, finding that “foreign adversaries are
increasingly creating and exploiting vulnerabilities in the United States bulk-power system.” The finding
determined that “the unrestricted foreign supply of bulk-power system electric equipment constitutes an
unusual and extraordinary threat to the national security, foreign policy, and economy of the United
States.”
In declaring the emergency, President Trump invoked IEEPA, which provides the President broad
authority to regulate international economic transactions during a declared national emergency. While the
statute has been most commonly used as part of U.S. sanctions measures, the Trump Administration has
used it in new ways, including in actions to protect national infrastructure, like telecommunications. In
this case, the President banned “any acquisition, importation, transfer, or instal ation of any bulk-power
system electric equipment … by any person, or with respect to any property, subject to the jurisdiction of
the United States” when (1) that transaction involves property in which a foreign country or a foreign
national has an interest and (2) the Secretary of Energy, in consultation with other interested officials,
finds that such a transaction would impair national security. He also ordered the establishment of a Task
Force on Federal Energy Infrastructure Procurement Policies Related to National Security to recommend
policies and assess their effectiveness.
Section 232 Investigation
On May 4, 2020, Commerce Secretary Ross announced the self-initiation of an investigation under
Section 232 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. GOES
products are incorporated into transformers used in critical energy infrastructure. Commerce has 270 days
to conduct the investigation in consultation with the Secretary of Defense and other U.S. officials, and
submit a report to the President advising whether the imports of GOES derivatives threaten to impair
national security and provide recommendations. This marks the Trump Administration’s sixth Section 232
investigation.
After a 2018 investigation, President Trump applied 25% tariffs on imports of certain steel products and,
in January 2020, expanded the tariffs to cover certain derivative steel products. While some Members of
Congress raised various concerns at the time about the increased tariffs, other Members have since argued
that the tariffs were insufficient because they did not cover GOES derivative products like laminations
and cores. 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. AK Steel, with
manufacturing operations in Pennsylvania and Ohio, is currently the sole domestic GOES producer.

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Potential Impact of Actions and Issues for Congress
Article I, Section 8 of the U.S. Constitution grants to Congress the power to regulate commerce with
foreign nations. As one scholar has argued, over the 20th century, Congress has delegated different levels
of authority to the President. Congress has general y tightly controlled trade-liberalizing measures, like
Trade Promotion Authority but it has also more fully delegated trade-restricting measures related to time-
sensitive and national security matters through mechanisms like IEEPA and Section 232. Over the past
several years, the Trump Administration has increasingly made use of trade-restricting national security
measures to pursue various long-term trade-related strategies.
Previously, such actions have sparked concern among some Members, leading to debate over
whether such actions reflect Congress’s purpose in delegating national security authorities over
trade. The question is particularly acute for time-sensitive situations when some argue that the
legislative branch may be, as John Locke described it, “too numerous, and so too slow, for the
dispatch requisite to execution.”

Author Information

Christopher A. Casey
Brian E. Humphreys
Analyst in International Trade and Finance
Analyst in Science and Technology Policy

Rachel F. Fefer

Analyst in International Trade and Finance

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