The President's Power to Impose a Fee on Imported Oil Pursuant to the Trade Expansion Act of 1962

• Court: Department of Justice Office of Legal Counsel
• Decided: January 14, 1982
• Status: Published

Opinion

The President’s Power to Impose a Fee on Imported Oil Pursuant to the Trade Expansion Act of 1962

T h e P resident has authority under § 232(b) of the Trade Expansion Act of 1962 to impose a license fee d irectly on foreign oil in order to restrict its im portation in the interest of national security. However, the case law casts doubt on the P resident’s authority to act under § 232(b) when the im pact o f his action falls only rem otely and indirectly on im ported articles, as was the case when President C arter sought in 1980 to im plem ent a program designed prim arily to restrict dom estic con su m p tio n o f gasoline.

Prior to im posing a license fee on oil im ports under § 232(b), the President is required to make certain findings, based on an investigation by the Secretary o f C om m erce, relating to the effects on the national security o f oil imports, a n d to issue a proclam ation.

January 14, 1982

M EM O R A N D U M OPINION FOR TH E DEPUTY ATTORNEY GENERAL

You have asked this Office to provide you with a preliminary and summary review concerning the President’s authority under § 232(b) of the Trade Expan­ sion A ct o f 1962, as amended, 1 9 U .S .C .§ 1862 (1976ed. & Supp. IV 1980), to im pose a fee on imported o il. Specifically, you have asked whether such authority can be exercised under that section of the Act and, if so, the proper procedures by w hich it can be invoked. Based upon our preliminary analysis, we are o f the view that the President has such authority and may exercise it by presidential proclamation based upon certain findings.

A. The Statute

Section 232(b) of the Act provides that if the Secretary of Com m erce1finds that an “ article is being imported into the U nited States in such quantities or under such circum stances as to threaten to im pair the national security,” the President is authorized to

take such action, and fo r such tim e, as he deems necessary to adjust the im ports of [the] article and its derivatives so that . . . im ports [of the article] w ill not so threaten to impair the national security.

1 T h is re sp o n sib ility was transferred to the S ecretary o f C om m erce from the S ecretary o f the Treasury pursuant to § 5(a)(1 )(B ) o f R eorganization Plan No 3 o f 1979, 3 C .F .R . 513 (1979 C o m p ).

74 The Secretary, upon his own motion or at the request of the head of any departm ent or agency, is directed by this section to make an “ appropriate investigation” in the course of which he must consult with the Secretary of Defense and “ other appropriate officers of the United States” to determ ine the effects on the national security of imports of the subject article. The Secretary is further instructed that “ if it is appropriate,” he shall give reasonable notice, hold public hearings, and otherwise give interested parties an opportunity to present information and advice relevant to his investigation. Section 232(c) of the Act provides the President and the Secretary with guidance as to some of the factors to be considered in implementing § 232(b). “ [W ]ithout excluding other relevant factors,” this section directs the Secretary and the President to consider such factors as domestic production of the article necessary for national defense needs, the capacity of domestic industries to meet such requirem ents, and, generally, the availability o f materials and services necessary to meet national security requirements. This section further provides: In the administration of this section, the Secretary and the Presi­ dent shall further recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from displace­ ment of any domestic products by excessive imports shall be co nsidered, w ithout excluding other factors, in determ ining whether such weakening of our internal economy may impair the national security.

Power under § 232(b) and its predecessors2 has frequently been exercised in the context of presidential proclamations designed to restrict the importation of petroleum and petroleum products. Thus in 1959 President Eisenhower, having been advised that crude oil products were being imported in such quantities and under such circum stances as to threaten the national security, imposed a system of quotas on the importation of petroleum and petroleum products. Presidential Proclamation No. 3279, 3 C.F.R. 11 (1959-1963 Comp.). Thereafter, Presidents Kennedy, Johnson, and Nixon each am ended the quota program by raising the permissible quota levels. See proclamations cited at 19 U .S.C . § 1862 note.

B. Authority to Impose Import Fees

The authority of the President to impose a fee on imported oil pursuant to the Act was upheld by the Supreme Court in Federal Energy A dm inistration v. Algonquin S N G , Inc., 426 U.S. 548 (1976). In that case, the Secretary of the

2 S ection 232(b) w as originally enacted by C ongress as § 7 o f the Trade A greem ents Extension A ct o f 195 5 , ch 1 6 9 .6 9 Stat. 162, 166, and am ended by § 8 of the Trade A greem ent Extension A ct o f 1958. Pub. L. N o. 8 5 -6 8 6 ,7 2 Slat 6 7 3 , 678.

75 Treasury, acting pursuant to § 232(b), had initiated an investigation “ to deter­ mine the effects on the national security of imports of petroleum and petroleum products.” Id. at 553. Although § 232(b) directs the Secretary “ if it is appropri­ ate [to] hold public hearings or otherw ise afford interested parties an opportunity to present information and advice” as part of such an investigation, the Secretary found that such procedures would interfere with “ national security interests” and were “ inappropriate” in this case. Id. at 554. The investigation therefore proceeded w ithout any public hearings or submissions from interested non­ governm ental parties. I d ? On January 14, 1975, ten days after the Secretary initiated his investigation, he reported to President Ford that prior measures under § 232(b) had not solved the problem of the N ation’s dependence on foreign oil and concluded

crude oil . . . and related products . . . are being imported into the U nited States in such quantities . . . [and] under such circum ­ stances as to threaten to im pair the national security.

426 U .S . at 554. On the basis of these findings, the President issued a proclamation on January 23, 1975, w hich, in ter a lia , imposed a “ supplemental fee” on all imported oil. Presidential Proclam ation No. 4341, 3 C.F.R. 431 (1971-1975 Comp.). The fee was initially $1 per barrel for oil entering the United States on or after February 1, 1975, but was scheduled to be raised to $2 per barrel for oil entering after M arch 1, 1975, and to $3 per barrel fo r oil entering after April 1, 1975. Four days after Proclamation N o. 4341 was issued it was challenged by eight states, 10 utility com panies, and a Congressm an in the United States District C ourt for the D istrict of Columbia, who alleged that the imposition of the fees was beyond the President’s constitutional and statutory authority, and that the fees were im posed w ithout the necessary procedural steps having been taken. The district court ruled that § 232(b) was a valid delegation to the President of the pow er to im pose license fees on oil im ports, and that the procedures followed by the Secretary in im posing the fees had fully conformed to the requirements of the statute. The C ourt of Appeals for the District of Columbia Circuit reversed, holding that § 232(b) did not authorize the President to impose a license fee schem e as a m ethod for adjusting im ports because, in its view, the Act authorized only the use of “ d irect” controls, such as quotas, and did not encompass license fees. T he Suprem e C ourt, in turn, reversed the court of appeals, holding that § 232(b) authorized the implementation of im port fees and stating:

3 T h e S ecretary had solicited the views of th e A ttorney G eneral o n this subject. In an opinion dated January 14, 1975, the A ttorney G eneral determ ined that, u n d er the statute and Treasury Regulations, the public notice and co m m en t pro v isio n s could be “ varied or d isp en sed with in em ergen cy situations o r w hen, in [the S ecretary ’s] ju d g m e n t, national secu rity interests require. . . O pinion o f A ttorney G eneral W illiam B S a x b e ,4 3 0 p A tt’y G en N o. 3 (Jan. 14, 1975) at 4. T h is opinion w as also based in p art on the fact that the S ecretary proposed to follow the pattern o f regulating oil im ports by am ending Proclam ation N o 3 2 7 9 ,3 C F R . 11 (1 9 5 9 -1 9 6 3 C o m p ). T he findings o f that orig in al proclam ation had, by that tim e, “ been sanctio n ed by C ongress’ failure to o b ject to the P resid en t’s p ro cee d in g on that basis repeatedly d u rin g the past 15 y ea rs” to co u n ter the threat of oil im ports. Because P roclam ation N o 3279 already had “ been am ended at least 26 tim es since its issuance in 1 9 5 9 ,” id. at 3, citin g 19 U S C § 1862 n o te , th e A ttorney General co n c lu d ed that no new findings w ere necessary.

76 Taken as a whole then, the legislative history of § 232(b) belies any suggestion that Congress, despite its use of broad language in the statute itself, intended to limit the President’s authority to the imposition of quotas and to bar the President from imposing a license fee system like the one challenged here. To the contrary, the provision’s original enactment, and its subsequent reenact­ ment in 1958, 1962, and 1974 in the face of repeated expressions from M embers of Congress and the Executive Branch as to their broad understanding of its language, all lead to the conclusion that § 232(b) does in fact authorize the actions of the President challenged here. Accordingly, the judgm ent of the Court of Appeals to the contrary cannot stand.

426 U.S. at 570-71. Although the Court upheld the President’s power under § 232(b) to affect the price of imports, as well as their quantity, its opinion ended on a note of caution, stating as follows:

A final word is in order. Our holding today is a limited one. As respondents themselves acknowledge, a license fee as much as a quota has its initial an d direct im pact on im ports, albeit on their price as opposed to their quantity. Brief for Respondents 26. As a consequence, our conclusion here, fully supported by the relevant legislative history, that the imposition of a license fee is autho­ rized by § 232(b) in no way compels the further conclusion that any action the President might take, as long as it has even a remote impact on imports, is also so authorized.

426 U .S. at 571 (emphasis added).

C . “ Indirect” Import Restrictions

In 1980, President Carter sought to use his authority under the Act in conjunc­ tion with authority derived from the Emergency Petroleum Allocation Act of 1973, 15 U .S .C . §§ 751-760a (1976 ed. & Supp. IV 1980), to im plement a program designed to decrease domestic consumption of gasoline. Presidential Proclamation No. 4744, 3 C .E R . 38 (1980 Comp.). Although styled as a “ petroleum import adjustment program ,” the program was intended and de­ signed “ to ensure that the burden of the crude oil fee [fell] on gasoline,” and not on such products as home heating oil. This was accomplished through imposition of a “ gasoline conservation fee” which applied irrespective of whether the gasoline was refined from domestic or imported crude oil. The decision to impose the fee on gasoline proceeded after the requisite investigation and finding by the Secretary of the Treasury that oil imports were entering the country “ in such quantities and under such circumstances as to threaten to impair the national security.” 44 Fed. Reg. 18818 (1979).

77 This Office was consulted about the proposed fee in January 1980. Memoranda m em orializing conversations w ith D epartm ent of Energy and Office of M anage­ m ent and Budget officials expressed concerns that the Act, by itself, could not authorize im position of a system for allocating to domestic producers of gasoline a tax on foreign crude. Although we recognized that the President clearly had power to adjust im ports under § 232(b) by establishing quotas or affecting import prices, we also noted that the Supreme C ourt’s language in the Algonquin decision had distinguished between import fees, which have an “ initial and direct im pact” on im ports, and actions with only “ a remote impact on imports.” Based on this decision and on the legislative history of the Act, we questioned that the President’s powers under § 232(b) encom passed measures that applied indirectly to the im ported article itself. These doubts notwithstanding, this Office even­ tually approved the final version of Proclamation No. 4744 as to form and legality. As noted, that version relied for the President’s authority not only on § 232(b) o f the Act but also on provisions of the Emergency Petroleum Alloca­ tion A ct of 1973. T he Petroleum Im port Adjustment Program (PIAP), set in place by Proclama­ tion No. 4744, was challenged in court on the ground that in imposing it the President had exceeded his authority under the Act. Independent G asoline M arketers C ou ncil, Inc. v. D uncan, 492 F. Supp. 614 (D .D .C . 1980). A fter an extended discussion o f the m echanics of PIAP, the intent behind it and its predictable im pact, the district court, focusing on the Supreme C ourt’s warning in A lgonquin held: In A lgonquin, the Suprem e C ourt indicated that TEA [Trade Expansion Act] does not authorize “ any action the President m ight take, as long as it has even a remote impact on imports.” Any possible benefits o f the PIAP on levels o f oil imports are far too rem ote and indirect for the TEA alone to support the program. The rem oteness of the program ’s effect on imports is apparent from three factors. First, the quantitative impact of the program on im port levels will adm ittedly be slight. Second, the program im poses broad controls on domestic goods to achieve that slight impact. T hird, Congress has thus far denied the President au­ thority to reduce gasoline consumption through a gasoline con­ servation levy. PIAP is an attempt to circumvent that stumbling block in the guise of an im port control measure. TEA alone does not sanction this attem pt to exercise authority that has been deliberately withheld from the President by the Congress. 492 F. Supp. at 618 (footnote om itted).4 Subsequent to the district c o u rt’s decision in Independent G asolin e M arketers C ou ncil, Inc. v. D uncan, supra, Congress terminated PIAP by legislation passed

4 T he g o vernm ent also arg u ed that the P re sid e n t’s authority could be deriv ed from the Em ergency Petroleum A llocation A ct, 15 U S C . §§ 751-760a T h e co u rt rejected th is argum ent on the ground that the President had not co m p lie d w ith procedu res required by that A ct Id at 619

78 over the President’s veto. Pub. L. No. 96-264, § 2, 94 Stat. 439. This foreclosed substantive appellate action in the case.

D. Conclusion

On the basis of the Algonquin decision it is clear that the President has authority under § 232(b) to impose a direct fee on imported oil. Both the cautionary language in Algonquin, and the district court’s decision in the In de­ pen d en t G asoline M arketers Council case indicate, however, that his authority may be limited to the power to impose fees directly on imported articles. 426 U.S. 548, 571; 492 F. Supp. 614, 618-19. The President’s authority to act pursuant to that section becomes increasingly suspect as the impact of his action falls less directly on the imported articles and increasingly affects domestic products. This interpretation is also supported by the legislative history of § 232(b). Based on the Algonquin case, we are confident that a $2 per barrel import fee on imported oil could be imposed by the President pursuant to his authority under the A ct, provided it applied solely to imported petroleum or petroleum products. This fee could be imposed by a presidential proclamation similar to Proclamation No. 4341 of President Ford, supra. The proclamation could also specify which agency would be responsible for its implem entation.5

The 1975 Opinion of Attorney General Saxbe advising the Secretary of the Treasury with respect to the necessary procedures for imposing an import fee under § 232(b) stated alternatively (a) that the Secretary would be justified in following his own regulations in deciding that an emergency situation existed such that notice and hearings would be “ inappropriate” 6 were he to conduct an investigation, and (b) that an investigation and further finding with respect to the impact of oil imports on the national security were unnecessary, at least in the context of a proposed amendment to the series of programs that had been in existence since President Eisenhower issued Proclamation No. 3279 in 1959. Although we agree that the harmful impact o f oil imports on the national security is well established by prior findings under § 232(b), and further action under that section is not likely to be questioned on this basis, we note that the Act does specifically state that the Secretary shall make “ an appropriate investiga­ tion, in the course of which he shall seek information and advice from , and shall consult with, the Secretary of Defense and other appropriate officers of the United States. . . This procedure was followed prior to President Ford’s

5 T he departm ent assigned to im plem ent the proclam ation w ould be required to co n sid er the p o ssib le application of the N ational E nvironm ental Policy A ct, 4 2 U .S C . §§ 4321-4361 (Supp. IV 1980) (N E P A )to its actions tak en in connection w ith the im port fee program . Based upon o u r prelim inary review, we do not believe that the S ecretary, in connection w ith an investigation and recom m endation concerning the necessity for a § 232(b) p roclam ation, o r the President, in connection w ith his issuance of such a proclam ation, would be required by NEPA to file an environm ental im pact statem ent. 6 R egulations issued by the S ecretary o f C om m erce after § 232(b) functions w ere transferred to h im , see N o te 1, supra, contain sim ilar discretion for him to dispense w ith public participation in the conduct o f any § 232 investigation conducted 15 C F R . R irt 359 (1981 ed.).

79 im position of im port fees in Proclamation N o. 4341 in 1975 and was recounted in the Suprem e C o u rt’s opinion in Algonquin upholding the President’s power to im pose the fees. Because this approach has survived court challenge and because it would be perm issible and n o t unreasonably difficult or time-consuming to follow the current, applicable D epartm ent of Commerce regulations, 15 C .F.R ., Part 359 (1981), we recommend that that D epartm ent conduct a new, nonpublic investigation to support any proclam ation imposing new import fees. Such an investigation, like the one com pleted in only ten days in 1975, would, we believe, w ithstand a legal challenge. Based on the results of such an investigation and the report of the Secretary, the President could reasonably make the requisite findings7 set forth in §§ 232(b) and (c) of the Act and issue a proclamation im posing im port fees.

T heodore B. O lson

A ssistan t A ttorn ey G en eral Office c f L egal Counsel

1 B ecause o f the cautionary note in the Algonquin decision and the d istrict court s holding in Independent Gasoline M arketers Council, Inc. v Duncan, w e would counsel against the P resident’s prem isin g the issuance of a p roclam ation o n a finding that th e import fee w ould provide revenues w hich could be used for a national security p u rp o se, such as to defray th e expense of fillin g the S trategic Petroleum R eserve This m ight be m isconstrued as the prim ary pu rp o se for the proclam ation, thus su b jec tin g it to ch a llen g e on the g round that it w as not truly intended by the P resident “ to adjust th e imports of (petroleum ] . so that su ch import r w ill not threaten to im pair the national secu rity . as req u ired by § 232(b) (em p h asis added) N evertheless, w e recognize that the im port fee would g enerate rev en u es, and w e see no im pedim ent to C ongress' authorizing the Executive to apply these additional revenues for such a national security purpose.