Commerce Launches 'National Security' Investigation on Steel That Could Result in Tariffs, Other Import Restraints

The Commerce Department on April 19 launched an investigation that could result in the imposition of tariffs, quotas or other import restraints on steel. Commerce will examine whether steel imports threaten national security and a finding in the affirmative would allow President Donald Trump to take action to “adjust imports.” Trump signed a memorandum (here) the following day, April 20, instructing Commerce to carry out the inquiry “expeditiously." The Section 232 investigation is legally required to be completed within 270 days, though Trump said at the memorandum’s signing ceremony that he expects the agency’s report in the “next 30 to 50 days, I would say, and maybe sooner.”

At the signing ceremony, the President called for a “very good, strong" study (here). The signing of the memorandum is a “historic day for American steel,” he said, vowing to “fight for American workers and American-made steel, and that’s beginning immediately.” Maintaining U.S. production of steel “is extremely important to our national security and our defense industrial base,” he said. "Steel is critical to both our economy and our military. This is not an area where we can afford to become dependent on foreign countries.” The ceremony was attended by representatives of several domestic steel producers, including AK Steel, ArcelorMittal, Evraz Steel, Nucor, SSAB Americas, Timken Steel and U.S. Steel, as well as the heads of the United Steelworkers labor union and the American Iron & Steel Institute.

Trump's memorandum directs Commerce to "recognize the close relation of the Nation's economic welfare to our national security." Commerce should also "consider the status and likely effectiveness of efforts of the United States to negotiate a reduction in the levels of excess steel capacity worldwide," it said. A litany of antidumping and countervailing duty orders have not "substantially alleviated the negative effects" of unfairly traded imports, the April 20 memorandum said. "If the present situation continues, it may place the American steel industry at risk by undermining the ability of American steel producers to continue investment and research and development, and by reducing or eliminating the jobs needed to maintain a pool of skilled workers essential for the continued development of advanced steel manufacturing."

Commerce Secretary Wilbur Ross discussed the investigation during an April 20 interview on CNBC (here). Asked about the possibility of eventual steel shortage issues, Ross said that “we can’t prejudge because we haven’t completed the study yet, but if the conclusion were to do something on a very broad basis that would help the overall finances of the steel companies and would help them to move quickly to resolve whatever shortages there may be.” Also, “we don’t contemplate absolutely prohibiting the import of steel,” Ross said. “I can’t imagine that would be a conclusion. What we’re trying to do is to change the arithmetic so that the dumping practices are not as effective as they have been.”

Commerce may, but is not required to, request public comments and hold a hearing in connection with the investigation. Working with the Department of Defense, and potentially other agencies such as the departments of State and Labor, the agency will consider the ability of domestic industry to meet the requirements of the defense sector, the quantity of imports and their impact on domestic industry, including on unemployment and the loss of capacity, according to a 2007 Bureau of Industry and Security report on Section 232 (here). The inquiry will conclude with a report to Trump, who will then make a final decision on whether steel imports threaten national security and, if so, whether to impose import restraints.

Though the Section 232 investigation is the 27th since the authority was created by Congress in 1962, only a few have resulted in import restraints. An investigation on metal-cutting and metal-forming machine tools culminated in agreements with Japan and Taiwan in 1986 to put in place voluntary export restraints. Several investigations in the 1970s on oil resulted in import surcharges and embargoes on Libya and Iran. President Richard Nixon cited Section 232 as an authority for his across-the-board 10 percent oil tariff in 1972. More recently, a 2001 investigation on imports of iron ore and semi-finished steel requested by two members of Congress led to no import restraints. Another Section 232 investigation on oil was initiated in 1999 at the request of the commerce secretary. Though President Bill Clinton found a threat to national security, he declined to take action to adjust imports.

The administration could take a more aggressive tack in this Section 232 investigation, said trade lawyer Terence Stewart, whose firm Stewart and Stewart often represents domestic producers in antidumping and countervailing duty cases. “Look for the Trump Administration to view national security needs more broadly than has been done in the past and to construe the statutory considerations in a manner that will support ensuring a viable industry in many sectors going forward,” he said in a blog post (here).

United Steelworkers International union President Leo Gerard called for the investigation to lead to concrete action to address imports. “This investigation, initiated by the Administration, should form the basis for taking comprehensive action to ensure that America has the steel it needs,” he said (here). So did Sen. Sherrod Brown, D-Ohio, and Rep. Rosa DeLauro, D-Conn. “This investigation won’t mean much to Ohio steel companies and steelworkers unless it is followed by tough action that addresses China’s overcapacity and stops the flood of unfairly traded steel imports from coming into our market,” Brown said (here). “A new investigation is a start, but the proof is in the enforcement,” DeLauro said.

House Ways and Means Committee Chairman Kevin Brady, R-Texas, said Commerce should remain objective in its analysis. “I welcome President Trump’s leadership in seeking to address the significant problem of global overcapacity in the steel sector,” Brady said. “Congress created the Section 232 process to give the President a set of objective tools to evaluate the impact that imports have on our national security and to respond in an effective and appropriate way. I look forward to reviewing the results of the Commerce Department’s fair and impartial assessment and working with the Administration on this vital issue.”