Gallagher, Beyer Take Up Section 232 Reform

Rep. Mike Gallagher, a Wisconsin Republican and the chairman of the House Select Committee on China, co-sponsored the Congressional Trade Authority Act with Ways and Means Committee member Rep. Don Beyer, D-Va. The bill was introduced Aug. 11. The effort in the House to constrain the president's ability to set quotas and tariffs under Section 232 was previously led by former Rep. Ron Kind, a Democrat from Wisconsin and a free-trade advocate.

The bill narrows the definition of national security so that it does not cover economic security, saying it only means "the protection of the United States from foreign aggression," and specifying that the items that can be tariffed under the law must be connected to military equipment, energy resources or critical infrastructure. There was widespread opposition in Congress to former President Donald Trump's idea of using Section 232 to hike tariffs on imported automobiles.

If an investigation instigated by the Defense Department with participation from the Commerce Department recommends that import restrictions are needed, the president would have to submit a proposal to Congress "regarding the nature and duration of the action that ... should be taken to adjust the imports of the covered article and its derivatives so that such imports will not be a substantial cause of a threat to impair the national security." That proposal would have to be given within 15 days of the presidential announcement that action is warranted.

The action could only go forward if, within the first 60 days after receiving the report, each chamber approves of it through a privileged joint resolution that would not be subject to the 60 votes needed for cloture in the Senate.

The quotas or tariffs would sunset three years after the joint resolution passed.

The bill also says that current Section 232 tariffs and quotas on steel and aluminum would end after 75 days if Congress does not approve them continuing. If Congress did vote to keep them, they would also have a three-year sunset from the time of that vote, a spokesperson from Beyer's office said.

The bill also requires an exclusion process and moves that exclusion process to the International Trade Commission from the Commerce Department, and directs the ITC to grant exclusions to importers to avoid "severe economic harm," to avoid "an unreasonable impact on manufacturing output," to avoid an "unreasonable impact on the ability of an entity to fulfill contracts or to build critical infrastructure," if leaving the tariffs or quotas in place would be likely to allow a firm or several firms to "abuse a dominant market position," or if the imposition of the duty "would unreasonably increase consumer prices for day-to-day items consumed by low or middle-income families in the United States." The current criteria that exclusions are allowed if the item is not available in sufficient quality or quantity would continue.

Once an exclusion were granted, it would apply to all imports of that article, as in the Section 301 exclusion rules. The Section 232 exclusions only granted them to the requestor. The bill says exclusion denials would have to send "written reasoning" to the applicant. The ITC would have the authority to decide how long the exclusions were in effect.

For steel and aluminum, exclusions would remain with Commerce.

A year and a half after the action, the ITC would also have to produce a report on the effects on the domestic industry and the broader U.S. economy.

“Congress’ penchant for ceding its constitutional authorities to the Executive Branch has left the institution weak and the country increasingly governed by executive fiat. This bipartisan bill takes a step to reverse this trend by restoring our voice in the tariff process and what constitutes a national security threat under Section 232,” Gallagher said in an Aug. 11 press release announcing the bill's introduction.

Beyer said in the same release: “Section 232 national security tariffs were historically used sparingly and strategically, but that changed under the previous administration, showing the need for Congress to reassert its constitutional prerogatives to provide oversight of U.S. trade relations. This legislation will ensure that future administrations do not abuse national security authorities to impose tariffs without clear objectives and without Congressional approval. Tariffs are a powerful tool to combat unfair trade practices, but they impose significant costs on American consumers, and Congress must have the ability to weigh in on any future 232 trade actions."

National Foreign Trade Council Vice President for Global Trade Policy Tiffany Smith, on behalf of the Tariff Reform Coalition, hailed the bill's introduction.

"The last five years have demonstrated the need for fundamental reform of the authority granted to the President under Section 232,'" she wrote. She said the bill would offer "much needed predictability for U.S. businesses by ensuring that exclusions are available to all importers of a given product, setting a maximum three-year window for 232 duties to be in place, and transferring the process of reviewing and granting exclusion requests to the International Trade Commission in conjunction with new guidelines to provide greater transparency to those seeking exclusions."

The Senate has not yet introduced a similar bill; the Senate champions of reform have also retired, though bills introduced by former Sen. Pat Toomey, R-Pa., and former Sen. Rob Portman, R-Ohio, did have co-sponsors who are still in office. Portman's bill, which wouldn't have touched existing steel and aluminum tariffs and quotas, had more sponsors. A spokesman from Beyer's office said they hope to find a senator to introduce a companion bill.

If Congress were to end the Section 232 tariffs on steel and aluminum, importers would be allowed to liquidate or reliquidate those goods at the standard tariff rate as long as the request was filed with CBP within 255 days of the law's enactment, with sufficient information to allow CBP to either locate the entry or reconstruct the entry.