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Lobbying on Aluminum and Steel Tariffs May Raise FARA Issues for Companies

President Trump’s decision to impose tariffs on imported steel and aluminum has set off a “stampede” of lobbying, according to the New York Times. Countries are lobbying for broad exemptions, and U.S. companies can petition the Commerce Department for specific exclusions for individual products and industries. Companies that are engaging with Congress and the executive branch on trade issues may be surprised to find that their advocacy could have FARA implications.

FARA is a notoriously tricky statute, with broadly worded triggers, complicated statutory and regulatory exemptions, and a complex history of Department of Justice legal interpretations that are not publicly available. It may seem strange to suggest that lobbying on commercial tariffs could have FARA implications, but Congress and the Department of Justice considered a very similar situation nearly thirty years ago and reached surprising conclusions.

In the last days of the Reagan administration, the U.S. Customs Service announced a revised tariff classification on sports utility vehicles. The new classification moved SUVs from the tariff for cars to the tariff for trucks, resulting in a higher import tariff. The move prompted fierce lobbying. Lawyers and lobbyists representing “[f]oreign vehicle manufacturers and their domestic subsidiaries . . . made formal and informal contacts with Federal officials at all levels of both Customs and Treasury, and Members of Congress were enlisted to make the importers’ case.”1

When Congress held hearings on federal lobbying disclosure laws a few years later, the lobbying associated with the import tariffs received significant attention. Congress noted that “virtually none of the lobbying activity in this case was disclosed under the Foreign Agents Registration Act,” and Congress wondered whether it should have been.2

The hearings resulted in several key observations that warrant reexamination today by lawyers assessing the FARA risks associated with lobbying on steel and aluminum tariffs, particularly lobbying on behalf of foreign corporations and their U.S. subsidiaries. Moreover, these observations from decades ago may take on greater significance in today’s FARA climate, in which the Justice Department has shifted to interpreting key exemptions to the statute more narrowly.

In testimony and written submissions before Congress examining the automobile tariff lobbying, Department of Justice officials stressed that lobbying directed at “enlarging the U.S. market for goods produced in [another] country” was predominantly advancing a foreign interest.3 In a letter to Congress, Assistant Attorney General W. Lee Rawls noted that Congress had specifically amended FARA in 1966 to capture lobbying related to sugar import quotas, and he analogized lobbying on sugar quotas to lobbying on automobile tariffs.4 In an exchange with Senator Carl Levin at the hearing, Deputy Assistant Attorney General Mark Richard stated that tariff lobbying that predominantly benefited foreign interests would require registration.5 Senator Levin added that tariffs are “not just a business issue,” and instead “it is a national economic issue which is involved here.”6

These observations take on new significance in light of the Justice Department’s recent interpretations of the Lobbying Disclosure Act exemption to FARA and the regulatory commercial exemption to FARA, particularly the limitations on the use of these key exemptions.7

First, if lobbying on broadly applicable market tariffs is considered to advance predominantly a foreign interest for the benefit of a country’s national interest, that could call into question the applicability of the Lobbying Disclosure Act exemption to FARA registration. The Lobbying Disclosure Act exemption is available to any foreign agent of a private sector entity that registers and discloses its lobbying activities under the Lobbying Disclosure Act, but the exemption is not available if the “principal beneficiary” of the lobbying is a foreign government.8

Second, a regulatory exemption for commercial activity could be foreclosed. FARA’s regulatory commercial exemption applies to activities in furtherance of “commercial, industrial, or financial operations of [a] foreign corporation,” but it is not available if the activities “directly promote” the interests of a foreign government.9 If trade lobbying is closely connected to a country’s national interest, this exemption may not apply.

These interpretations highlight the challenges of applying FARA’s broadly worded and lightly defined provisions. When companies engage in advocacy on issues that are intertwined with a foreign government’s interests—such as import tariffs and exemptions—the risks of inadvertently triggering FARA increase substantially.

The 1991 hearings focused primarily on a FARA exemption for domestic subsidiaries of foreign corporations engaged in substantial commercial operations in the United States. Congress repealed that exemption in 1995 when it adopted the Lobbying Disclosure Act exemption, which made the domestic subsidiary exemption largely superfluous. Notably, however, there are now serious proposals in Congress to repeal the Lobbying Disclosure Act exemption. If that were to occur, the Justice Department’s assessment of automobile tariff lobbying will take on even greater significance.


 

1 Federal Lobbying Disclosure Laws, Hearings Before the Subcommittee on Oversight of Government Management, Senate Committee on Governmental Affairs, 102d Cong. 10, S. Hrg. 102-377 (1991).

2 Id. at 11.

3 Id. at 488.

4 Id. at 487-88.

5 Id. at 41.

6 Id. at 26.

7 Other exemptions may also apply. For example, the lawyer’s exemption could apply to a legal representation before a court or agency, subject to certain limitations.

8 22 U.S.C. § 613(h); 28 C.F.R. § 5.307. 9 28 C.F.R. § 5.304(c).

© 2019 Covington & Burling LLP

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Robert Kelner, Covington, Government affairs attorney
Partner

Robert Kelner is the chair of Covington’s nationally recognized Election and Political Law Practice Group.  He counsels clients on the full range of political law compliance matters, and defends clients in civil and criminal law enforcement investigations concerning political activity. He also leads the firm’s prominent congressional investigations practice.

Mr. Kelner’s political law compliance practice covers federal and state campaign finance, lobbying disclosure, pay to play, and government ethics laws. His expertise includes the Federal Election Campaign Act...

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Brian Smith, Covington, Litigation attorney
Of Counsel

Brian Smith advises clients on challenging public policy matters that combine legal and political risks and opportunities.

Mr. Smith represents companies and individuals facing high-profile and high-risk investigations, congressional investigations, and criminal and civil investigations with political or public relations implications. He assists companies and executives responding to formal and informal inquiries from Congress and executive branch agencies for documents, information, and testimony, and he conducts internal investigations to assess legal risks. He has prepared numerous CEOs and other senior executives to appear before Congress in oversight hearings.

202.662.5090
Zachary Parks, Covington, Litigation attorney
Of Counsel

Zachary Parks advises corporations, trade associations, campaigns, and high-net worth individuals on their most important and challenging political law problems.

Chambers USA describes Mr. Parks as “highly regarded by his clients in the political law arena,” noting that clients praised him as their “go-to outside attorney for election law, campaign finance, pay-to-play and PAC issues.” Mr. Parks is also a leading expert in the emerging corporate political disclosure field, regularly advising corporations on these issues.

Mr. Parks' expertise...

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Derek Lawlor, Election and political law attorney, Covington
Special Counsel

Derek Lawlor is special counsel in the firm’s Washington office and a member of the firm’s Election & Political Law and White Collar practice groups.  He assists corporations, nonprofit organizations, and trade associations with federal and state lobbying, campaign finance, and government ethics issues.  Mr. Lawlor also represents clients in government investigations and inquiries conducted by the Federal Election Commission, Office of Congressional Ethics, and Congressional Committees and Commissions.

Prior to receiving his law degree, Mr. Lawlor worked in...

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