Over the past several months, softening demand and declining prices have wreaked havoc on domestic crude oil producers. Members of Congress and industry participants have pleaded with the Trump administration for relief, including from import competition.
Recent reports indicate that the Trump administration may decide to utilize Section 232 of the Trade Expansion Act of 1962 to investigate whether crude oil imports threaten to impair the national security. Although it has invoked Section 232 far more than its predecessors, a decision by the Trump administration to investigate crude oil imports under Section 232 would align with steps taken by previous administrations.
I. Section 232
Section 232 authorizes the President to take action to address imports of articles that threaten to impair the national security. Prior to any presidential action, the U.S. Department of Commerce will investigate the effects of such imports on the national security. In so doing, Commerce will consult with the U.S. Department of Defense (DOD) and appropriate officers of the United States, as well as hold a hearing. The DOD will also provide Commerce with an assessment of the defense requirements of the article subject to investigation. Within 270 days of initiating the investigation, Commerce must submit a report to the President disclosing whether such imports threaten to impair the national security and recommending action.
Within 90 days of receiving the report, the President must decide whether he concurs with Commerce’s finding and “determine the nature and duration” of any action to eliminate any threat to the national security. Upon making a decision, the President has “no later than” 15 days to implement the action. The President may take a broad range of actions to address the imports, including the negotiation of a trade agreement that limits or restricts imports of the article at issue.
II. Previous Investigations
Since its enactment in 1962, the current administration and its predecessors have initiated a total of 33 investigations pursuant to Section 232, two of which remain ongoing. These investigations have addressed a broad range of products, from watches to antifriction bearings, from automobiles to mobile cranes. Previous administrations have investigated petroleum and crude oil imports on eight separate occasions, most recently in 1999. Each of these investigations resulted in a finding that such imports threaten to impair the national security, though not every affirmative finding has resulted in the imposition of a trade restriction. For example, in the 1970s and 1980s, Presidents Nixon, Carter and Reagan imposed various embargos and fees on the imports. But in the late 1980s and 1990s, Presidents Reagan and Clinton declined to impose any remedy.
III. What’s Next?
Since assuming office in 2017, the Trump administration has initiated seven investigations pursuant to Section 232, more than 20 percent of all such investigations initiated to date. Moreover, each of these investigations has concluded that imports of the articles at issue threaten to impair the national security. Bolstered by past practice, it stands to reason that an investigation of crude oil imports pursuant to Section 232 may pique the Trump administration’s interest, particularly as the COVID-19 outbreak and industry woes have resulted in double economic blows to domestic crude oil producers, their employees, and the communities across the United States that rely on them.
