UPDATE: A Steely Look at Steel: Commerce Directed to Prioritize Investigation of the Effects of Steel Imports on National Security
Legal Sidebari
UPDATE: A Steely Look at Steel: Commerce
Directed to Prioritize Investigation of the
Effects of Steel Imports on National Security
Updated May 1, 2017
UPDATE: On April 27, 2017, President Trump issued a nearly-identical Presidential Memorandum
directing the Secretary to also prioritize investigating the effects of aluminum imports on national security
pursuant to Section 232(b).
The original post from April 24, 2017, is below.
On April 20, 2017, President Trump issued a Presidential Memorandum (“Memorandum”) directing the
Secretary of Commerce (“Secretary”) to prioritize investigating the effects of steel imports on national
security pursuant to Section 232(b) of the Trade Expansion Act of 1962. Under the Act, if the Secretary
determines that steel “is being imported into the United States in such quantities or under such
circumstances as to threaten to impair the national security,” the President is authorized to take actions “to
adjust the imports of the article and its derivatives so that such imports will not threaten to impair the
national security.” While not explicitly specified by the statute, such actions might include imposing
import quotas, imposing license fees on imported goods, or negotiating trade agreements that otherwise
restrict the importation into or exportation to the United States of the imported article.
Why Steel?
The steel industry figures prominently in U.S. trade policy and has been the subject of many domestic
legal challenges related to unfair trade practices, as well as disputes before the World Trade Organization.
From 2009 to 2016, for example, the U.S. Trade Representative filed twenty enforcement actions at the
World Trade Organization, six of which related to the steel industry. The U.S. Department of Commerce
also operates a Steel Import Monitoring and Analysis (SIMA) System to collect and publish data about
steel product imports.
As noted in Section 1 of the Memorandum, the United States already has many antidumping and
countervailing duty orders in place on imported steel products. Such orders impose duties on goods that
are sold in the United States at less-than-fair value (i.e., “dumped”), or have benefited from
countervailable subsidies, and are injuring or threaten to injure the domestic steel industry. According to a
fact sheet published by the U.S. Trade Representative in April 2016, of the 332 duty orders then in place,
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almost half (149) covered foreign steel products. Antidumping and/or countervailing duty orders cover a
large and diverse group of steel products with a broad geographical reach, ranging from hot-rolled carbon
steel flat products from Australia, Brazil, China, India, Indonesia, Japan, Korea, Netherlands, Russia,
Taiwan, Thailand, Turkey, Ukraine, and the United Kingdom; to steel nails from China, Korea, Malaysia,
Oman, Taiwan, United Arab Emirates, and Vietnam; to steel wire garment hangers from China, Taiwan,
and Vietnam. The fact sheet also reports that in fiscal year 2015, two-thirds of the 62 investigations
Commerce initiated to investigate allegations of unfair trade practices involved steel products, and
$900,000 worth of steel products were seized and $45.5 million in penalties were assessed for violations
of antidumping and/or countervailing duty laws.
According to Section 1 of the Memorandum, however, the President believes these measures “have not
substantially alleviated the negative effects that unfairly traded imports have had on the United States
steel industry.” One particular area of concern is the issue of excess capacity. The Memorandum states
that “both the United States and global markets for steel products are distorted by large volumes of excess
capacity—much of which results from foreign government subsidies and other unfair practices.”
According to the April 2016 fact sheet, “global crude steelmaking capacity more than doubled from 2000
to 2014, with global capacity growth led by an unprecedented expansion in capacity by China,” while
“global demand for steel is weakening.”
Why National Security?
With respect to national security, Section 1 of the Memorandum notes that industries such as the steel
industry “are critical elements of our manufacturing and defense industrial bases, which we must defend
against unfair trade practices and other abuses.” In Federal Energy Administration v. Algonquin SNG,
Inc., 426 U.S. 548 (1976), a case involving a challenge to President Ford’s imposition of quotas and
license fees on imports of petroleum and petroleum products under Section 232(b), the Supreme Court
noted that during congressional hearings on the precursor statute to the Trade Expansion Act of 1962,
“there was substantial testimony that increased imports were threatening to damage various domestic
industries whose viability was perceived to be critical to the national security.” Thus, one purpose of the
Trade Expansion Act of 1962 and its precursor was to counter such effects. One provision of the
statutedirects the Secretary and the President to “recognize the close relation of the economic welfare of
the Nation to our national security.”
Although investigations under Section 232(b) have not been initiated in recent years, they were
occasionally initiated in prior decades to examine the effects on national security of imports of a range of
products, such as iron ore and semi-finished steel (2001); crude oil and petroleum products (1999); gears
and gearing products (1991) (56 Fed. Reg. 56,626); uranium (1989) (54 Fed. Reg. 8225); anti-friction
bearings (1987) (52 Fed. Reg. 28,857); metal-cutting and metal-forming machine tools (1983) (48 Fed.
Reg. 15,174); and bolts, nuts and large screws of iron or steel (1982) (47 Fed. Reg. 13,546). Perhaps one
reason these investigations are infrequently conducted may be that such investigations rarely result in a
finding that certain imports threaten to impair national security. As one commentator has noted, of the
twenty-six investigations that have been initiated over the last fifty-five years, only two found a threat to
national security leading to the imposition of import restrictions; both of these investigations, one from
1979 and the other from 1982, involved crude oil.
How Do Such Investigations Proceed?
Section 232(b) provides that after the Secretary initiates an investigation, he must consult with the
Secretary of Defense as to the “methodological and policy questions” the investigation will raise, and may
request that the Defense Secretary provide “an assessment of the defense requirements” of the articles
under investigation. According to the statute, the Secretary may also consult with other officers of the
United States.
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Sections 705.1 through 705.12 of Title 15 of the Code of Federal Regulations detail the procedures for
how Commerce shall conduct such investigations. In addition to consultations with the Defense Secretary
and other U.S. officers, these procedures specify that the Secretary may solicit information and advice
relevant to the investigation by publishing a request in the Federal Register for “written comments,
opinions, data, information or advice relative to the investigation” from “any interested party,” and may
hold public hearings to elicit further information if he deems such action appropriate.
What Factors Will Be Examined?
Section 232(d) delineates the factors the Secretary and the President shall consider in such investigations,
including:
“Domestic production needed for projected national defense requirements, [and] the
capacity of domestic industries to meet such requirements”;
“existing and anticipated availabilities of the human resources, products, raw materials,
and other supplies and services essential to the national defense”;
“requirements of growth of such industries and such supplies and services including the
investment, exploration, and development necessary to assure such growth”;
“the importation of goods in terms of their quantities, availabilities, character, and use as
those affect such industries and the capacity of the United States to meet national security
requirements”;
“the impact of foreign competition on the economic welfare of individual domestic
industries; and”
“any substantial unemployment, decrease in revenues of government, loss of skills or
investment, or other serious effects resulting from the displacement of any domestic
products by excessive imports.”
Section 2 of the Memorandum draws upon these criteria and specifically directs the Secretary to consider
them in the context of the steel industry. It also directs the Secretary to “consider the status and likely
effectiveness of efforts of the United States to negotiate a reduction in the levels of excess steel capacity
worldwide.”
What Happens Next?
Under Section 232(b)(3)(A), the Secretary has 270 days after the date the investigation is initiated to
submit a report to the President on the effects of steel imports on national security. The report must
include the Secretary’s recommended course of action or inaction based on the findings of the
investigation. Pursuant to the statute, if the Secretary finds that steel “is being imported into the United
States in such quantities or under such circumstances as to threaten to impair the national security, the
Secretary shall so advise the President in such report.” The portions of the report that do not contain
classified or proprietary information will be published in the Federal Register pursuant to Section
232(b)(3)(B).
Next, under Section 232(c)(1), within 90 days of receipt of a report by the Secretary finding that steel
imports threaten to impair national security, the President shall determine: (1) whether he concurs with the
Secretary’s findings; and (2) what actions should be taken to adjust the imports of steel and its derivatives
so they no longer threaten to impair national security. Section 232(c)(2) then directs the President to
submit to Congress a written statement of “the reasons why the President has decided to take action, or
refused to take action” within 30 days of the date such determinations are made.
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Author Information
Brandon J. Murrill
Legislative Attorney
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