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Automobiles, Auto Parts Could Face Increased Tariffs, Quotas from New 232 Investigation

Friday, May 25, 2018
Sandler, Travis & Rosenberg Trade Report

The Department of Commerce announced May 23 its self-initiation of an investigation under section 232 of the Trade Expansion Act of 1962 to determine whether imports of automobiles (including SUVs, vans, and light trucks) and auto parts are harming U.S. national security. A DOC press release explains that auto manufacturing has long been a significant source of U.S. technological innovation and that this 232 investigation will therefore consider whether the decline of domestic automobile and auto parts production threatens to weaken the internal economy of the U.S., including by potentially reducing research, development, and jobs for skilled workers in connected vehicle systems, autonomous vehicles, fuel cells, electric motors and storage, advanced manufacturing processes, and other cutting-edge technologies. The DOC notes that U.S.-owned vehicle manufacturers in the U.S. account for only 20 percent of global research and development in the automobile sector and U.S. auto part manufacturers account for only seven percent in that industry.

If the DOC finds that excessive automobile and auto parts imports are a threat to U.S. national security, and the president concurs, the president has the authority to adjust imports, including through the use of tariffs and quotas. The DOC has up to 270 days to conclude its investigation and any resultant actions would be imposed within 15 days of the president’s determination to act. A hearing date and public comment period are expected to be announced shortly.

There is some speculation that the new investigation is a negotiating tactic by the White House. Press sources note that the Trump administration is pressing major trading partners to limit exports of steel and aluminum to the U.S. and attempting to persuade Canada and Mexico to incorporate tougher auto rules of origin in NAFTA and that many of the countries involved in these initiatives are significant exporters of automobiles and auto parts to the U.S. President Trump has often used the threat of adverse trade actions to secure desired outcomes, though with mixed results.

The new investigation came in for criticism from a number of observers. “Tariffs are taxes,” said Cody Lusk, president and CEO of the American International Automobile Dealers Association. “To treat auto imports like a national security threat would be a self-inflicted economic disaster.” John Bozzella, head of a trade association that represents foreign auto companies in the U.S., noted that to his knowledge “no one is asking for this protection.” Senate Foreign Relations Committee Chairman Bob Corker, R-Tenn., accused Trump of “abusing” the Section 232 law and said the new investigation “should be abandoned immediately.” European Commission Vice-President Jyrki Katainen said any tariffs that may result from the investigation “obviously would be against” World Trade Organization rules.

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