Car Wars: Trump Administration Opens Section 232 Investigation into Imports of Autos and Auto Parts

On May 23, 2018, as directed by President Trump, the Secretary of Commerce initiated a Section 232 investigation into whether imports of automobiles, including SUVs, vans, light trucks and automotive parts, threaten to impair national security. President Trump reportedly is contemplating tariffs as high as 25% on automobile imports, similar to the tariff imposed a result of its recent 232 action on steel imports.

The statute authorizes the President to “adjust imports” so that “such imports will not threaten to impair the national security.” The Trump Administration has interpreted “national security” very broadly to include effects on the general economy. For example, in the steel and aluminum investigations, the Administration found that U.S. producers must be commercially viable (i.e. attract sufficient commercial business) in order to supply defense needs.

Although the main target of the investigation appears to be automobiles, imports of parts are also covered. The Federal Register Notice published on May 30 does not define “automotive parts” and the term could be interpreted to cover any part incorporated into an automobile. For example, the Commerce Department’s press release referred to threats of imports “to weaken the internal economy of the United States, including by potentially reducing research, development, and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, [and] electric motors and storage.” Thus, the Section 232 investigation and any subsequent trade action potentially could extend beyond traditional car parts.

Per the Federal Register Notice, companies have an opportunity to submit comments and participate in a hearing.

In particular, the Commerce Department has asked for comments on the following factors:

• The quantity and nature of imports of automobiles, including cars, SUVs, vans and light trucks, and automotive parts and other circumstances related to the importation of automobiles and automotive parts;
• Domestic production needed for projected national defense requirements;
• Domestic production and productive capacity needed for automobiles and automotive parts to meet projected national defense requirements;
• The existing and anticipated availability of human resources, products, raw materials, production equipment, and facilities to produce automobiles and automotive parts;
• The growth requirements of the automobiles and automotive parts industry to meet national defense requirements and/or requirements to assure such growth, particularly with respect to investment and research and development;
• The impact of foreign competition on the economic welfare of the U.S. automobiles and automotive parts industry;
• The displacement of any domestic automobiles and automotive parts causing substantial unemployment, decrease in the revenues of government, loss of investment or specialized skills and productive capacity, or other serious effects;
• Relevant factors that are causing or will cause a weakening of the national economy;
• The extent to which innovation in new automotive technologies is necessary to meet projected national defense requirements;
• Whether and, if so, how the analysis of the above factors changes when U.S. production by majority U.S.-owned firms is considered separately from U.S. production by majority foreign-owned firms; and
• Any other relevant factors.

The due date for filing comments, for requests to appear at the public hearing, and for submissions of a summary of expected testimony at the public hearing is June 22, 2018. Rebuttal comments are due July 6, 2018. There are also public hearings scheduled for July 19 and 20, 2018.

The Commerce Department is required to submit a report to the President with findings and recommendations within 270 days of initiating the investigation, which means the due date for the report is in February 2019. However, it is possible that the Commerce Department could act sooner. The President is required to determine whether to concur with the recommendation, and determine whether and how to respond, within 90 days of receiving the report.

The Section 232 investigation potentially will establish a basis for the imposition of new tariffs on automobiles and automobile parts from all countries, including the EU, Canada, China, Mexico, Japan, and South Korea. The EU, China, and the UK have expressed concerns about the newly initiated investigation and questioned the national security justification for tariffs. As demonstrated by the prior Section 232 actions on aluminum and steel, imports from allied countries will not necessarily be exempt.