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STEEL IMPORTS

STEEL IMPORT STABILIZATION ACT AND STEEL TRADE LIBERALIZATION PROGRAM IMPLEMENTATION ACT

Title VII of the Trade and Tariff Act of 1984, sets forth the provisions of the Steel Import Stabilization Act, 36 which grants the President authority to enforce the terms of bilateral arrangements limiting the export of steel products to the United States. Congress provided this authority in October 1984 in response to President Reagan's decision the previous month to reject a petition for import relief to the domestic steel industry under section 201 of the Trade Act of 1974, and instead to enter into a series of bilateral restraint agreements with steel-exporting nations to reduce their exports of steel to the United States.37 This program is commonly referred to as the steel VRA program. The initial program, as established in 1984, provided for restraints on foreign steel for 5 years-until September 30, 1989. In 1989, however, the program was extended for an additional 21⁄2 years, to expire March 31, 1992.38

Background

In January 1984, Bethlehem Steel Corporation and the United Steelworkers of America jointly filed a petition under section 201 of the Trade Act of 1974 for import relief in the form of global quotas on imports of carbon and alloy steel products. In July 1984, in response to this petition, the U.S. International Trade Commission (ITC) submitted a report to the President setting forth its findings of serious injury and recommendations of quotas for five out of nine steel product categories.39 On September 18, 1984 President Reagan announced his decision to deny import relief under section 203 of the Trade Act of 1974, and, instead, to negotiate bilateral restraints with steel-exporting countries to limit U.S. imports of steel, and to pursue a more vigorous policy of enforcement of the laws against unfair trade practices.40 Based on the series of actions to be taken as part of the new steel trade policy, it was the expectation of the President that steel imports would be reduced to approximately 18.5 percent of the U.S. market, excluding semi-finished steel.41

In response to the President's decision, the following week legislation was introduced in the House of Representatives (H.R. 6301) to provide the President with express authority to enforce such bilateral restraint agreements, conditioned on adequate performance by the domestic steel industry in modernizing its plants and providing retraining to its former workers.42 The Steel Import Stabilization Act, H.R. 6301, was reported favorably by the Committee on Ways and Means on September 27,43 and passed by the House of

36 Public Law 98-573, title VIII, approved October 30, 1984, amended by section 1322 of the Omnibus Trade and Competitiveness Act of 1988, (Public Law 100-418, approved August 23, 1988) and by the Steel Trade Liberalization Program Implementation Act (Public Law 101-221, approved December 12, 1989).

37 Exec. Comm. 4046, September 18, 1984 (H. Doc. 98-263).

38 Public Law 101-221, approved December 12, 1989.

39 Report to the President on Investigation No. TA-201-51, USITC Pub. No. 1553, July 1984. 40 Exec. Comm. 4046, September 18, 1984 (H. Doc. 98-263).

41 After expected imports of semi-finished steel are factored in, the import market share that was expected by the President's policy equalled 20.2 percent of the U.S. market.

42 H.R. 6301 was introduced on September 25, 1984 by Congressman Dan Rostenkowski (D-Ill). 43 House Report 98-1089.

Representatives on October 2, 1984. The House then passed H.R. 6301 as an amendment to an omnibus trade bill, H.R. 3398, and it was considered in the House-Senate conference on H.R. 3398. Title VIII of the Trade and Tariff Act of 1984 contains the provisions of the Steel Import Stabilization Act as agreed to by the conference. The provisions of title VIII took effect as of October 1, 1984.

In 1989, several bills were introduced in the Congress to extend the steel VRA program for an additional 5 years. On July 25, 1989, however, President Bush proposed a 22-year extension. In September, the Steel Trade Liberalization Program Implementation Act was introduced to provide authority for the implementation_of President Bush's steel program. This legislation became law on December 12, 1989, with a retroactive effective date of October 1, 1989.

Basic provisions

The Steel Import Stabilization Act provides the President with authority to enforce the quantitative limitations, restrictions, and other terms agreed to in bilateral restraint arrangements between the United States and steel-exporting nations. The enforcement authority is broad in scope, authorizing the President "to carry out such actions as may be necessary or appropriate," including, but not limited to, requiring presentation of valid export licenses or other documentation as a condition of entry, into the United States. The definition of "bilateral arrangements" provided in the Act is also intentionally broad, and refers to any arrangement, agreement, or understanding (including, but not limited to, any surge control understanding or suspension agreement) between the United States and any foreign country containing quantitative limitations, restrictions, or other terms relating to the importation into, or exportation to, the United States of steel products.

The enforcement authority provided by the Act expires on March 31, 1992 and is subject to annual renewal within the authorized period. In order for the enforcement authority to renew for an additional year, the President must submit in writing by October 1 of each year an affirmative determination to the House Committee on Ways and Means and Senate Committee on Finance that requirements set forth in the Act have been met. These requirements include the following:

(1) that the major steel companies, taken as a whole, have, during the relevant 12-month period, (a) committed substantially all of their net cash flow from steel operations for purposes of reinvestment in and modernization of their steel operations; and (b) taken sufficient action to maintain their international competitiveness;

(2) that each of the major steel companies committed, during the relevant 12-month period, not less than 1 percent of net cash flow to the retraining of workers, unless the President waives this requirement with respect to a particular company due to unusual economic circumstances; and

(3) that the enforcement authority remains necessary to maintain the effectiveness of bilateral arrangements undertaken to eliminate unfair trade practices in the steel sector.

If the President does not submit an affirmative determination that these conditions have been met, the enforcement authority permanently expires. If the President does submit such an affirmative determination, the enforcement authority renews for an additional year, at which time it would again be subject to the annual determination requirement. This process of annual renewal will continue until the authority is terminated, or until the authority expires on March 31, 1992, whichever is sooner.

The Act also required the Secretary of Labor to prepare, in consultation with the Steel Advisory Committee, and to submit to Congress by April 1, 1985, a proposed plan of action for assisting workers in communities that are adversely affected by imports of steel products. Such assistance must include retraining and relocation for former workers in the steel industry who are unlikely to return to work in the industry.

In 1988, two additional provisions were added to the enforcement authority.44 The first provision, commonly referred to as the "melted and poured" provision, provides discretionary authority to count against a particular VRA country's quota those steel products that were manufactured in a non-VRA country from steel that was melted and poured in such VRA country. The second provision authorizes the USTR to take such action as he deems necessary to ensure the effectiveness of any "third country equity provision" of a bilateral arrangement.

The 1989 Act, extending the steel program for an additional 21⁄2 years, also contained specific authority and criteria for the granting of exemptions pursuant to short supply requests. Under this authority, the Secretary of Commerce is required to respond to a petition within 30 days and determine whether a short supply situation exists in the United States with respect to a particular steel product that is subject to quantitative limitation under a bilateral arrangement. In making such determination, the Secretary is required to consider such factors as capacity utilization, quantity demanded, prevailing domestic market prices, reasonable specifications, and delivery times. If the Secretary finds short supply to exist, then the petitioner is authorized to import the additional quantity of steel, notwithstanding the provisions of the bilateral arrangement.

National Security Import Restrictions

SECTION 232 of the TRADE EXPANSION Act of 1962

Section 232 of the Trade Expansion Act of 1962, as amended,45 authorizes the President to impose restrictions on imports which threaten to impair the national security. This authority has been used by the President to impose quotas and fees on imports of petroleum and petroleum products from time to time. Public Law 96223 (imposing a windfall profit tax on domestic crude oil) amended

44 Section 1322 of the Omnibus Trade and Competitiveness Act of 1988, Public Law 100-418, approved August 23, 1988.

Public Law 87-794, approved October 11, 1962, 19 U.S.C. 1351, amended by section 127 of the Trade Act of 1974, Public Law 93-618, sec. 127, approved January 3, 1975, 19 U.S.C. 18621863, and further amended by section 1501 of the Omnibus Trade and Competitiveness Act of 1988, Public Law 100-418, approved August 23, 1988.

section 232 to authorize either House of Congress to disapprove an action of the President to adjust oil imports.

Section 232 as amended requires the Secretary of Commerce to conduct immediately an investigation to determine the effects on national security of imports of an article, upon the request of any U.S. Government department or agency, application of an interested party, or upon his own motion. The Secretary must report the findings of his investigation and his recommendations for action or inaction to the President within 270 days after receiving the application or beginning the investigation. If the Secretary finds the article "is being imported in such quantities or under such circumstances as to threaten to impair the national security," he must so advise the President. The President must decide within 90 days after receiving the Secretary's report whether to take action. If the President decides to take action, he must proclaim such action within 15 days, and take such action for such time as he deems necessary to "adjust" the imports of the article and its derivatives so imports will not threaten to impair the national security. The President must submit a written statement to the Congress within 30 days explaining the action taken and the reasons therefor.

Upon initiation of an investigation, the Secretary of Commerce must immediately notify the Secretary of Defense, and consult with him on methodological and policy questions. Upon request of the Secretary of Commerce, the Secretary of Defense must provide an assessment of the defense requirements of the article subject to investigation.

The Secretary must hold public hearings or otherwise afford interested parties an opportunity to present information and advice relevant to the investigation if it is appropriate and after reasonable notice. The Secretary must also seek information and advice from, and consult with, other appropriate agencies. Among the factors which the Secretary and the President must consider are domestic production needs for projected national defense requirements; domestic industry capacity to meet these requirements; existing and anticipated availability of resources, supplies, and services essential to the national defense; the growth requirements of such industries, supplies, services; imports in terms of their quantities, availability, character, and use as they affect such industries and U.S. capacity to meet national security requirements; the impact of foreign competition on the economic welfare of domestic industries; and any substantial unemployment, revenue declines, loss of skills or investment, or other serious effects resulting from displacement of any domestic products by excessive imports.

SECTION 233 of the Trade EXPANSION Act of 1962

Section 233 of the Trade Expansion Act of 1962 was added by section 121 of the Export Administration Amendments of 1985 (Public Law 99-64) as a means of enforcing national security export controls imposed under that Act. The provision was amended by section 2447 of the Omnibus Trade and Competitiveness Act of 1988, to conform to sanctions authority added to the Export Administration Act.

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Under section 233 as amended, any person who violates any national security export control imposed under section 5 of the Export Administration Act of 1979, or any regulation, order, or license issued under that section, may be subject to controls imposed by the President on imports of goods or technology into the United States.

MACHINE TOOL VRA ENFORCEMENT AUTHORITY

Section 1501(c) of the Omnibus Trade and Competitiveness Act of 1988 provides specific statutory authority to enforce the restrictions on machine tool imports, as negotiated in bilateral arrangements pursuant to President Reagan's decision of May 20, 1986. The President's May 1986 decision was the result of a petition for import restrictions on machine tool imports filed under section 232 of the Trade Expansion Act by the domestic machine tool manufacturing industry.

Balance of Payments Authority

SECTION 122 OF THE TRADE ACT OF 1974

Section 122 of the Trade Act of 1974 46 provides the President with authority either to increase or reduce restrictions on imports into the United States to deal with balance of payments problems.

Tighter restrictions in the form of an import surcharge (not to exceed 15 percent ad valorem), temporary quota, or a combination of the two may be imposed for up to 150 days (unless extended by act of Congress) whenever fundamental international payments problems make such restrictions necessary to deal with large and serious U.S. balance of payments deficits, to prevent an imminent and significant depreciation of the dollar, or to cooperate with other countries in correcting an international balance of payments disequilibrium.

Existing imports restrictions may be eased for a period of up to 150 days (unless extended by act of Congress) through a temporary reduction in the rate of duty on any article (not to exceed 5 percent ad valorem), a temporary increase in the value or quantity of imports subject to any type of import restriction, or a temporary suspension of any import restriction. Such restrictions may be eased whenever fundamental international payments problems require special measures to deal with large and serious balance of payments surpluses or to prevent significant appreciation of the dollar. Trade liberalizing measures must be broad and uniform as to articles covered. The President may not, however, liberalize imports of those products for which increased imports will cause or contribute to material injury to domestic firms or workers, impairment of national security, or otherwise be contrary to the national interest. Certain conditions also are placed on the President's use of import restrictions for balance of payments purposes. Quotas may be imposed only if international agreements to which the United States is a party permit them as a balance of payments measure and only to the extent that the imbalance cannot be dealt with

46 Public Law sec. 122, approved January 3, 1975, 19 U.S.C. 2132.

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