Since 2018, President Trump has repeatedly threatened to tax foreign autos and auto parts—particularly those from Japan, the European Union and Mexico—under the tenuous pretense of “national security.” However, on Nov. 13, 2019, the White House quietly missed a critical deadline to take formal action, under Section 232 of the Trade Expansion Act of 1962, at the conclusion of a statutory 180-day negotiating period. As a result, there is a strong argument that the administration has entirely forfeited its legal authority to tariff autos and auto parts under Section 232.

This is an important and welcome development that should not be overlooked in the recent onslaught of trade activity. In 2018, the Peterson Institute estimated that global 25 percent tariffs on foreign autos and auto parts would raise the cost of a new car by as much as $6,971 and result in 195,000 U.S. auto workers losing their jobs over a one- to three-year period. If all U.S. trading partners retaliated, American job losses could impact as many as 624,000 workers. So much for President Trump’s promises to re-shore auto jobs.

American and foreign-owned automakers and suppliers alike have opposed the president’s proposed tariffs, which would undoubtedly increase production costs, decrease sales, hurt workers and damage the global competitiveness of American manufacturing. Even the United Automobile Workers—the only group to even partially support the tariffs—warned the administration in public comments that “the automotive industry is a global industry with long, complicated supply chains. We caution that any rash actions could have unforeseen consequences, including mass lay-offs for American workers.”

The quiet passage of the Nov. 13 deadline without formal action from the White House should give the trade-beleaguered auto industry and prospective car buyers reason to cheer.

Section 232 is a Cold War-era law that delegates conditional authority to impose trade restrictions (such as tariffs or quotas) from Congress to the Executive if the U.S. Department of Commerce concludes that certain goods “threaten to impair” the national security of the United States. Historically, the statute has been used narrowly by U.S. presidents to target a handful of product lines or imports from hostile countries. Prior to President Trump, it was last used to restrict imports in 1986. Contrary to historical wisdom and the national security mandate of the statute, the Trump administration has resurrected Section 232 as a catchall tariff power to protect favored industries and coerce trading partners into suboptimal trade deals—an approach most clearly exemplified by the ongoing Section 232 tariffs on steel and aluminum imports.

Importantly, although Section 232’s language is quite generous in the authorities it delegates to the Executive, it is not a carte blanche for a president to unilaterally tax any import he wishes in perpetuity. As with all legitimate delegations of Congress’ constitutional responsibilities, there are conditions that must be satisfied before the Executive Branch may legally exercise the delegated authority.

First, the Commerce Department has 270 days to investigate whether certain imports threaten U.S. national security and deliver those findings to the president. Next, if Commerce affirms that there is a threat—which it has in the case of autos—the president has 90 days to decide if he agrees with Commerce’s conclusion. If he does, he must “determine the nature and duration of the action” that should be taken to “eliminate” the threat. The president then has 15 days to implement that action.

On May 17, 2019—exactly 90 days after receiving Commerce’s still-classified report—President Trump issued a proclamation asserting, among other things, that “domestic conditions of competition must be improved by reducing imports” of autos and auto parts and that “American-owned producers must be able to increase R&D expenditures to ensure technological leadership that can meet national defense requirements.” According to the proclamation, “technologies” so critical to the national defense that they might require boosted private sector investment include advanced innovations like “electrification”—which is another way of saying “electric charging.” Never mind that the auto industry already invests $19 billion in R&D in the U.S. each year, an amount roughly equivalent to the annual budget of NASA.

Setting aside the tortured logic used to justify tariffs, the May proclamation also fulfilled two key procedural requirements under Section 232: First, the president officially concurred with Commerce’s finding that auto imports threaten U.S. national security. Second, pursuant to that concurrence, the president determined the “action” to be taken to address the threat. Instead of imposing tariffs immediately, he invoked a provision of Section 232 that permits him to pursue negotiations with foreign governments for a period of 180 days in order to reach “an agreement which limits or restricts the importation into, or the exportation to, the United States of the article that threatens to impair national security.” Specifically, the president directed the U.S. Trade Representative to negotiate with Japan and the European Union—with whom the U.S. was already formally negotiating trade agreements. Of course, an additional benefit of invoking the 180-day negotiating period was to punt by six months a wildly controversial decision on tariffs at the same time that talks with China were publicly imploding.

President Trump reached the end of this 180-day grace period on Nov. 13, 2019. At this juncture in the Section 232 process, if an agreement has not been reached to sufficiently address the threat of imports, the president has two options: He “shall take such other actions” as he deems necessary, or he may decide that Section 232 is no longer needed to address the threat (emphasis added). In either case, the President must also publish his decision—including any additional actions he will take—in the Federal Register.

On Nov. 13, no agreement that limited foreign auto exports to the U.S. had been announced with Japan, the EU, or any other country. Therefore, President Trump’s only options on that date were to take additional action or shut the book on Section 232 auto tariffs entirely.

Although Section 232 does not explicitly provide a deadline for the publication of the Federal Register notice, it’s clear that, by the end of the 180 days, the president must (“shall”) make some determination about how to proceed, including identifying specific “additional actions” to address the threat of imports. This is important: The statute should not be interpreted to permit the president to make a decision after 180 days have elapsed; otherwise, the 180-day limit on initial negotiations is entirely meaningless as a procedural benchmark and might as well have been left out of Section 232 altogether. Further, the statute should not be interpreted to permit the president to take “additional actions” after 180 days without issuing an appropriate proclamation to validate those actions—whether they be tariffs, quotas or further negotiations—under Section 232’s authorities.

Any alternative reading of these provisions would effectively endorse the idea that invoking Section 232’s 180-day negotiating period is a “loophole” that permits the president to reserve the right to impose tariffs indefinitely—i.e., well past 180 days—without any meaningful transparency to Congress or the public. This is probably not the scenario Congress envisioned when it baked a 180-day deadline into the statute.

In other words, procedure is of great importance here. Fortunately, a recent Court of International Trade (CIT) decision sheds additional light on the binding nature of Section 232’s “unambiguous” procedural steps.

In the case of Transpacific Steel LLC v. U.S., an Austin-based steel importer challenged an August 2018 proclamation that doubled the Section 232 tariff rates on steel and aluminum from Turkey, purportedly to account for devaluation of the Turkish Lira. The Trump administration’s lawyers argued that the president could daisy-chain new trade restrictions by amending his initial Section 232 steel and aluminum tariff proclamations from five months prior. The court rejected this argument, ruling that the administration had violated Section 232’s procedural timelines (as well as the equal protection clause of the Fifth Amendment):

“The procedural safeguards in section 232 do not merely roadmap action; they are constraints on power. […] The time limits, in particular, compel the President to do all that he can do immediately, and tie presidential action to the investigative and consultative safeguards. If the President could act beyond the prescribed time limits, the investigative and consultative provisions would become mere formalities detached from Presidential action.”

Although the CIT intentionally did not comment on the legitimacy of a president taking “continuing action” by invoking the 180-day negotiating period (instead of immediately proclaiming tariffs), the court’s logic would suggest that daisy-chaining negotiations into perpetuity, all the while reserving the right to impose tariffs if talks go south, also contravenes the purpose of including “prescribed time limits” in Section 232. If negotiations could continue indefinitely, in secret and without formal notification from the president by a certain point in time, why would Congress have bothered to specify 180 days as the deadline for the president to decide whether to take additional action?

The White House will in all likelihood cling to this small sliver of ambiguity in Section 232 to justify future tariffs on auto imports, should the president decide on a whim to tax foreign Volkswagens, Toyotas or cars assembled in Mexico. But the auto industry, Congress and American taxpayers should be willing to call the administration’s bluff: The President has missed his window to legally impose auto tariffs under Section 232.

Image credit:  FabrikaSimf