January/February 2021 | Vol. 26 No. 1

by Stacy Tatman, Senior Manager, Government Affairs, NEMA

Last May, the U.S. Department of Commerce initiated a Section 232 investigation to determine whether imports of electrical transformers and certain components could represent a threat to national security. Section 232 investigations are conducted under the authority of the Trade Expansion Act of 1962 and are used to determine the effect of imports on national security.

Section 232 investigations had been a seldom-used procedural tool, but the Trump Administration used these inquiries frequently to scrutinize imports of steel, aluminum, automobiles (and parts), titanium sponge, and uranium, resulting in tariffs on steel and aluminum.

From the initial announcement of the investigation, NEMA was active in its advocacy, strenuously asserting that the investigation should not lead to tariffs or other policies that disrupt the supply chain for these important products. NEMA Members are part of the U.S. transformer manufacturing sector composed of over two dozen companies directly employing over 15,000 workers in seven states. We consistently asserted that continued importation of products within the scope of this investigation would not threaten national security and was in fact necessary to maintain it and protect the existing U.S. transformer manufacturing base.

Throughout the summer, NEMA submitted  several sets of comments to Commerce and met directly with Mr. Cordell A. Hull, Commerce Acting Undersecretary for Industry and Security. During that meeting NEMA Members provided additional commentary on product manufacturing and voiced concerns about the investigation and potential resulting regulatory actions.

On October 22, 2020, rumors of the investigation’s conclusion began circulating. Several reputable sources reported that Commerce had delivered its report to the White House ahead of the December 2021 deadline. As of mid-November, NEMA has not obtained confirmation that the report was delivered nor whether the White House had made any decisions. If the report has been delivered to the White House, the administration has 90 days to take action.

Interestingly, on Nov. 5, the Office of the United States Trade Representative (USTR) released a statement reporting the successful conclusion of steel negotiations with Mexico. These consultations were held pursuant to a 2019 Joint Statement to address “the transshipment of grain-oriented electrical steel (GOES) from outside the North American region into the United States through GOES-containing downstream products.” Starting later this year, Mexico will be tasked with monitoring exports of electrical transformer laminations and cores made of non-North American GOES.

This agreement sets up a potential policy conflict within two major offices within the Administration—USTR and the Commerce Department. Should the White House impose tariffs on GOES imports because of the Commerce Section 232 investigation report, it would call into question the commitment of the U.S. to the newly-reached agreement with Mexico negotiated by USTR. ei