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  February 20th, 2018 | Written by

Section 232: Importers Have Limited Opportunities to Challenge Tariffs and Quotas

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  • Earlier tariff cases gave US importers an opportunity to argue whether added duties are justified.
  • Expect lawsuits from US importers of steel and aluminum if Trump adopts tariffs and/or quotas.
  • Proposed trade restrictions on steel and aluminum could spawn multiple international disputes.

The Commerce Department last week reported publicly the findings of two investigations undertaken last year about steel and aluminum imports under Section 232 of the Trade Expansion Act of 1962. Section 232 authorizes the US government to examine any harmful effects of imports on strategic industries that are deemed essential to national security.

The Commerce Department’s report focuses on the supposed minimum production levels that US steel and aluminum producers need to stay in business and thus to support the defense industrial base within the US economy. It proposes harsh new tariffs and import quotas on all foreign-made steel and aluminum, regardless of country of origin, that will then theoretically compel American steel and aluminum users to purchase those products from domestic steel and aluminum producers to match such minimum output levels and prevent US producers from going out of business. President Trump will have until April 2018 to decide whether he agrees with the recommendations and to issue his decision, which will then have the force of law.

If adopted, these measures would be in addition to the recently announced punitive tariffs on imports of certain solar products and household washing machines, which were also regardless of the country of origin. These Section 232 across-the-board tariffs and quotas would also be in addition to the existing trade remedies that the United States already imposes on certain imports of steel and aluminum products from China and other countries to address alleged trade abuses. Unlike Section 232, a different part of the Commerce Department issued those earlier tariffs after conducting case-by-case investigations that were prompted by specific complaints regarding specific products from specific countries. Those earlier tariff cases gave US importers and other interested persons an opportunity to argue whether such added duties are justified and an opportunity to seek judicial review of agency decisions. However, because Section 232 arises out of national security concerns and uses a different process, adversely affected importing companies may not have those same opportunities to oppose or challenge the new tariffs and quotas if adopted by the president.

Besides domestic lawsuits that might be expected from adversely affected US importers of steel and aluminum, these new proposed trade restrictions could also spawn multiple international disputes. Numerical quotas are generally inconsistent with the requirements of Article XI of the General Agreement on Tariffs and Trade of 1947 (GATT), and so the United States may need to defend such measures under the national security exception under Article XXI of GATT. Moreover, because these new proposed measures target imports from all countries that supply steel or aluminum to the US market, several or perhaps even all those countries may seek to initiate proceedings against the United States at the World Trade Organization (WTO), which enforces the GATT. If President Trump adopts the new Commerce Department proposals, there could be serious trade disputes with several US trading partners and potential disruptions to global trade for years to come.

T. Augustine Lo is an attorney at the international law firm Dorsey & Whitney who specializes in commercial litigation, government enforcement actions, and customs compliance matters.