September 21, 2020

Volume X, Number 265

September 21, 2020

Subscribe to Latest Legal News and Analysis

September 18, 2020

Subscribe to Latest Legal News and Analysis

Trump Administration To Consider Whether Imports Pose A Threat To The U.S. Energy Infrastructure

On May 4, 2020, Commerce Secretary Wilbur Ross announced an investigation into whether imports of certain power distribution transformers and parts threaten to impair U.S. national security. A few days earlier, on May 1, 2020, President Trump issued an Executive Order declaring a national emergency over potential foreign threats to the security of the U.S. bulk power system.  Both actions, which are in response to perceived foreign threats to the U.S. electrical power grid, will likely result in the imposition of significant restrictions on the importation of covered equipment.  As discussed below, each action will proceed along separate paths.

Commerce Section 232 National Security Investigation

On May 4, 2020, Commerce Secretary Wilbur Ross announced that the agency intends to initiate an investigation under Section 232 of the Trade Expansion Act of 1962[1] into whether imports of certain power distribution transformers and parts threaten to impair U.S. national security. Secretary Ross indicated the investigation will focus on “laminations for stacked cores for incorporation into transformers, stacked and wound cores for incorporation into transformers, electrical transformers, and transformer regulators.” 

Once initiated, the investigation must be completed within 270 days. Commerce will then provide its report and recommendations to the President, at which point the President has 90 days to determine the nature and duration of action to “adjust” imports.

The law gives the President complete discretion (“in the judgment of the President”) to choose the nature or duration of any action to adjust imports “so that such imports will not threaten to impair the national security.” Previous Section 232 actions included imposition of import tariffs, fees, and quotas, as well as complete embargo of subject imports. For example, in March 2018 President Trump imposed tariffs on steel and aluminum imports as a result of similar Section 232 investigations launched in April 2017. The President also has the option of negotiating agreements with trading partners to limit subject imports, the option embraced by President Trump in the context of the Section 232 investigation launched in May 2018 with respect to imports of automobiles.

Executive Order to Secure U.S. Bulk-Power System from Foreign Adversary Threats

On May 1, 2020, President Trump issued an Executive Order[2] declaring a national emergency over potential foreign threats to the U.S. bulk-power system from foreign adversaries that may seek to commit malicious acts against the United States and its population including malicious cyber activities.  The Order empowers the U.S. government to block imports of certain equipment that could endanger the security of U.S. power plants.

As a practical matter, the new Order does not ban anything, but rather instructs the Department of Energy to issue regulations within 150 days.  These regulations are expected to set forth procedures whereby specifically identified bulk power equipment may be prohibited from importation, acquisition, transfer, or installation.  (This process will likely be similar to that laid out in Commerce Department regulations implementing a 2019 Executive Order declaring a national emergency with respect to the information and communications technology and services supply chain concerns.[3]  Please see our prior alert for an explanation of those Commerce regulations.[4])

The May 1st Order provides authorization to target any acquisition, importation, transfer, or installation (transaction) of to-be-identified bulk-power system electric equipment designed, developed, manufactured, or supplied by persons owned/controlled by/subject to the jurisdiction or direction of a foreign adversary, where the transaction—

  • poses an undue risk of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of the bulk-power system in the United States;

  • poses an undue risk of catastrophic effects on the security or resiliency of United States critical infrastructure or the economy of the United States; or

  • otherwise poses an unacceptable risk to the national security of the United States or the security and safety of United States persons.

The Order provides a somewhat generic definition of the term “foreign adversary” as “any foreign government or foreign non-government person engaged in a long-term pattern or serious instances of conduct significantly adverse to the national security of the United States or its allies or the security and safety of United States persons.”  The Commerce regulations (referenced above) include this same definition which gives the agency discretion to identify foreign adversaries as needed.

Implications

Trump Administration actions in response to perceived foreign threats to the U.S. electrical power grid could include sweeping import restrictions with a significant impact on both the renewable and conventional power industries. Until the Department of Energy issues regulations to implement the Executive Order, the order will not directly impact any power plant project or transaction.   


[1] 19 U.S.C. 1862 (2018); https://www.govinfo.gov/content/pkg/USCODE-2018-title19/html/USCODE-2018-title19-chap7-subchapII-partIV-sec1862.htm.

[2] https://www.federalregister.gov/documents/2020/05/04/2020-09695/securing-the-united-states-bulk-power-system.

[3] https://www.federalregister.gov/documents/2019/05/17/2019-10538/securing-the-information-and-communications-technology-and-services-supply-chain.

[4] http://www.klgates.com/commerce-proposes-process-to-evaluate-transactions-involving-information-and-communications-technology-and-services-for-national-security-concerns-12-03-2019/

Copyright 2020 K & L GatesNational Law Review, Volume X, Number 127

TRENDING LEGAL ANALYSIS


About this Author

Stacy Ettinger, KL Gates Law Firm, Public Policy and Financial Matters Attorney
Partner

Stacy J. Ettinger is a partner in the firm’s Washington, D.C. office and focuses her practice on public policy. She has over 20 years of experience working in Congress and the executive branch. Her experience spans a variety of fields, including international trade, intellectual property, and regulatory issues, as well as food and product standards, motor vehicle safety, and consumer financial services.

Ms. Ettinger has substantial experience working closely with senior U.S. and foreign government officials and Fortune 500 executives, navigating...

202-778-9072
Steven F. Hill, KL Gates, enforcement matters lawyer, export controls attorney
Partner

Steven Hill is a partner in the firm’s Washington, D.C. office. He has nearly 20 years of experience in a broad array of international trade regulation compliance and enforcement matters, particularly export controls, including the Export Administration Regulations (EAR) and International Traffic in Arms Regulations (ITAR), sanctions laws enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), customs and other importation laws, anti-boycott laws, and anti-corruption laws, such as the Foreign Corrupt Practices Act (FCPA).

202-778-9384
Benson, KLGates, Seattle
Practice Area Leader - Energy, Infrastructure and Resources

David Benson is a partner in the firm’s Seattle office and is a member of the Energy, Infrastructure and Resources practice group. Prior to joining K&L Gates, Mr. Benson was a corporate partner at a Seattle law firm. He focused his practice in energy project development and financing, including debt and cash equity financings, tax equity financings, merger and acquisition transactions, joint ventures and other strategic alliances both in the U.S. and abroad. He represents investors and companies developing and financing wind, solar, biomass, thermal, transmission, energy storage and...

206-370-7830
William Keyser, KL Gates Law Firm, Energy Law Attorney
Partner

William Keyser, a partner in Washington, D.C., focuses his practice on regulatory litigation and transactions involving the nation’s electricity and capacity markets. Will represents clients before the Federal Energy Regulatory Commission (FERC), the Department of Energy, federal and state courts and state public utility commissions. His clients include electric utilities, transmission providers, independent power providers, hydro electric power producers, power marketers, public utility holding companies, and debt and equity investors. Will has represented and counseled...

202-661-3863