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UPDATE 2-Trump can no longer impose 'Section 232' auto tariffs after missing deadline -experts

By David Lawder

(Adds details on Turkish steel tariff decision, paragraph 6)

By David Lawder

WASHINGTON, Nov 19 (Reuters) - The clock has run out on President Donald Trump's "Section 232" tariffs on imports of foreign-made cars and auto parts, after he failed to announce a decision by a self-imposed deadline, trade law experts say.

The U.S. administration may have to find other means if Trump wants to tax European or Japanese car imports, a key part of the U.S. president's pledge to make America's trade relationships more fair, the experts say.

Their argument centers on the Trade Expansion Act of 1962, a U.S. law aimed at protecting America's Cold War-era defense industrial base. Section 232 of that act lays out how a U.S. president can tax specific imports if the Department of Commerce deems them a threat to national security.

The Trump administration launched its Section 232 probe of foreign autos in May 2018. Six months ago Trump agreed with an administration study that some imported vehicles and components are "weakening our internal economy" and could harm national security. He has threatened to tax them by as much as 25%.

But he took no action on Nov. 14, the deadline established by the act to take action, puzzling automakers.

Bolstering the contention by trade experts that the president's hands are now tied is a new U.S. trade court ruling, published on Monday, that Trump previously exceeded the time limit on his Section 232 authority when he tried to double the tariff on steel imports from Turkey last year.


UNUSED TOOL

Trump has hailed the threat of car tariffs as a strong negotiating tool to gain leverage over his opponents.

But an initial trade deal with Japan reached in September did not address auto trade, while trade talks with the EU have not formally started as the two sides remain at odds over the scope of the negotiations.

The 1962 act is clear about the time limits that a president has for invoking tariffs to protect U.S. national security.

"I don’t see the law as giving the president any options other than take action against imports or determine to take no action and the case is closed," said Jennifer Hillman, a Georgetown University law professor and a former World Trade Organization judge.

By not acting by the deadline, Trump has forfeited his authority to impose the Section 232 tariffs, added Clark Packard, trade policy counsel with libertarian advocacy group RStreet.org.

In a decision published on Monday, the Court of International Trade ruled that Trump ran out of time on a Section 232 investigation of steel imports, when he tried to double the tariffs on Turkish steel to 50% in August 2018.

The attempt to double tariffs was challenged by an importer of Turkish steel, which claimed that, among other things, the move came too late to follow proper procedures in the law.

The New York-based federal court, which handles appeals of U.S. duty determinations, ruled in Transpacific Steel LLC's favor and said Trump's "expansive view" of his Section 232 powers was "mistaken" and is confined.

"Although the statute grants the President great discretion in deciding what action to take, it cabins the President’s power both substantively, by requiring the action to eliminate threats to national security caused by imports, and procedurally, by setting the time in which to act," wrote judges Claire Kelly and Jane Restani in the decision dated Nov. 15.

Devin Sikes, a trade lawyer with Akin Gump in Washington, wrote in a note to clients that the case lays the groundwork for future challenges to Section 232 cases.

A White House official, asked to comment on whether time has run out for Trump's 232 decision, said only that U.S. Trade Representative Robert Lighthizer "has updated the President on the progress of trade negotiations to address concerns related to the threatened impairment of national security with respect to imported automobiles and certain automobile parts."


ESCAPE HATCHES

A clause in the 1962 law may offer an escape hatch for Trump. If an agreement is not reached within 180 days or proves ineffective, "the President shall take such other actions as the President deems necessary to adjust the imports of such article so that such imports will not threaten to impair the national security."

It adds that Trump would be required to publish these actions in the Federal Register, but does not specify a time frame.

Hillman, currently a senior fellow at the Council on Foreign Relations, said that even if courts ultimately deny Trump authority to impose auto tariffs for national security reasons, the president could use other statutes to impose them, including the International Emergency Economic Powers Act widely used to impose sanctions and fight terrorist financing.

Known as IEEPA, the statute "does not have much of an investigatory prerequisite to it, so it is something the president could do quickly," Hillman said. "Ditto for the Trading with the Enemy Act, and he seems predisposed to deem the EU as an 'enemy,' at least with respect to autos trade." (Reporting by David Lawder and Alex Alper in Washington Editing by Heather Timmons and Matthew Lewis)