   Presidential Authority Under the Trade Expansion Act to
       Adjust Shipments of Oil to and from Puerto Rico

N either the uniformity o f duties clause o f the C onstitution, A rt. I, § 8, cl. 1, nor the port
  preference clause, A rt. I, § 9, cl. 6, require uniform ity o f import quotas betw een the
  mainland and Puerto Rico.

T he President has authority under § 232(b) o f the T rade Expansion A ct o f 1962 to impose
   separate quantitative restrictions on oil im ports into the U.S. mainland and Puerto Rico,
   respectively.

A ny system o f separate quotas imposed under the T rade Expansion A ct must be justified
  by national security concerns.

By implication, § 232(b) authorizes the President to impose quotas on shipm ents o f oil
  from Puerto Rico to the U.S. mainland in order to make the separate import quotas
  effective.

                                                                           February 6, 1980

              M EM ORANDUM OPINION FOR TH E
  G EN ER A L COUNSEL, D EPA R TM EN T O F TH E TREASURY,
                         AN D TH E
      G EN ER A L COUNSEL, D EPA R TM EN T O F ENERGY

   This responds to your request for our opinion on several questions
relating to the importation of oil through Puerto Rico. Section 232(b)
of the Trade Expansion Act of 1962, 19 U.S.C. § 1862(b), authorizes the
President to “take such action . . . as he deems necessary to adjust the
imports of [an] article . . . so that such imports will not threaten to
impair the national security. . .    The President may do so after the
Secretary of the Treasury has completed an investigation and has con­
cluded that the article “is being imported into the United States in such
quantities or under such circumstances as to threaten to impair the
national security. . .   On March 14, 1979, the Secretary of the Treas­
ury completed such a report and concluded that imports of oil and
certain oil products threatened to impair the national security. See 44
Fed. Reg. 18818 (1979). On July 15, 1979, the President announced that
he would impose an oil import quota. See 15 Weekly Comp. Pres. Doc.
1235 (July 23, 1979). You asked for our analysis of three questions
concerning the form of that quota:


                                              375
          (1) May the President adjust shipments of oil, which are de­
              rived from Puerto Rican oil imports, from Puerto Rico to
              the U.S. mainland pursuant to his authority under § 232(b)
              of the Trade Expansion Act?
          (2) Does the answer to the first question depend on whether oil
              imported into Puerto Rico is itself adjusted under the
              § 232(b) authority?
          (3) If the answer to the second question is affirmative, what
              kind of adjustment of Puerto Rican oil imports will suffice?
              Specifically, may the adjustment involve an unrestricted
              quota for imports into Puerto Rico intended for Puerto
              Rican consumption with an accompanying limitation on
              shipments from Puerto Rico to the U.S. mainland?
  For the reasons that follow, we believe that the President may
impose a quantitative restriction on shipments of oil from Puerto Rico
to the U.S. mainland if that restriction is reasonably ancillary to a
system of import adjustments, imposed under § 232(b), that applies to
both the mainland and Puerto Rico. That system of adjustments need
not be a single quota for the entire combined territory of the mainland
and Puerto Rico; the President may impose separate quotas on Puerto
Rico and the mainland respectively. The separate quota for Puerto
Rico may be unlimited even if imports into the mainland are limited.
We believe that this is the most defensible basis for restricting ship­
ments from Puerto Rico to the mainland.1
I. The President May Impose Separate Quotas on Imports into the
   Mainland and Puerto Rico, Respectively.

   As this Office has previously concluded, the Constitution does not
prevent Congress from authorizing the President to impose separate
quotas on different regions. Section 232(b) is an exercise of Congress’
power to regulate foreign commerce. See U.S. Const., Art. I, § 8, cl. 3.
It is well established that regulations of commerce need not be uniform,
see, e.g., Currin v. Wallace, 306 U.S. 1, 13-14 (1939); see also Mulford v.
Smith, 307 U.S. 38, 48-49 (1939), unless some other constitutional
provision—such as the uniformity of duties clause, Art. I, § 8, cl. I,2 or
the port preference clause, Art. I, § 9, cl. 6 3—requires uniformity. The

    1 If the President uses this approach, he will not have to interpret “ im ports" in § 232(b) to include
shipm ents from P uerto Rico to the mainland. This interpretation is questionable. T here appear to be
no o th er statutes that explicitly define shipm ents from P uerto R ico to the mainland as “ im ports.” See,
e.g.. 15 U.S.C. §§ 2001(10), 2052; 16 U.S.C. § 1159(0; 42 U.S.C. § 6291(a)(l 1). P uerto Rico is included
in the "custom s te rrito ry o f the U nited States" for tariff purposes. 19 U.S.C. § 1202 headnote 2. It is
unclear w h e th er shipm ents from P u erto R ico to the mainland are “ im ports" for constitutional pur­
poses. Compare Hooven & Allison Co. v. Evatt, 324 U.S. 652, 668-79 (1945), with id. at 670 n.5 and
Dooley v. United States, 183 U.S. 151, 154-55 (1901).
   2 "[A]ll D uties, Im posts and Excises shall be uniform th ro u g hout the U nited States."
   3 “ N o Preference shall be given by any Regulation o f C om m erce o r R evenue to the Ports o f one
State o v er those o f a n o th er."


                                                   376
uniformity of duties clause probably does not apply to Puerto Rico. See
Rasmussen v. United States, 197 U.S. 516, 520 (1905); Downes v. Bidwell,
 182 U.S. 244 (1901).4 The port preference clause may or may not apply
to Puerto Rico. See, e.g., Secretary o f Agriculture v. Central Roig Refin­
ing Co., 338 U.S. 604, 616 (1950) (a “vexing problem”); Alaska v. Troy,
258 U.S. 101, 111-12 (1922). But even if it does apply, it would not
proscribe separate quotas for the mainland and Puerto Rico respec­
tively. The net effect of separate quotas may be to benefit mainland
ports at the expense of Puerto Rican ports, or vice versa, but legislation
does not violate the port preference clause merely because it “greatly
benefit[s] particular ports and . . . incidentally result[s] to the disadvan­
tage of other ports. . . ." Louisiana Public Service Commission v. Texas
& New Orleans Railroad Co., 284 U.S. 125, 131 (1931). See also Alabama
Great Southern Railroad Co. v. United States, 340 U.S. 216, 229 (1951).
        [T]he clause, in terms, seems to import a prohibition
        against some positive legislation by congress [looking to a
        direct privilege or preference of the ports of any particu­
        lar State over those of another] . . . , and not against any
        incidental advantages that might possibly result from the
        legislation of congress upon other subjects connected with
        commerce, and confessedly within its power.
Pennsylvania v. Wheeling & Belmont Bridge Co., 59 U.S. (18 How.) 421,
435 (1856). This distinction is not easy to draw, but the Supreme Court
seems never to have invalidated legislation under the clause simply
because it affects the prosperity of different States’ ports differently.
See, e.g., Louisiana Public Service Commission v. Texas <£ New Orleans
Railroad Co., 284 U.S. 125, 131-32 (1931). Moreover, in Secretary o f
Agriculture v. Central Roig Refining Co., 338 U.S. 604, 616 (1950), the
Court brushed aside the suggestion that a system of regional quotas
might violate the port preference clause. Central Roig involved produc­
tion and marketing quotas, not import quotas, but their effect was
similar to the effect that might be expected from a system combining a
restrictive quota on oil imports into the mainland with an unlimited
quota on shipments into Puerto Rico.5 For these reasons, this Office

   4 In Downes v. Bidwell ihe Suprem e C ourt held that the uniform ity clause applied only to the states
and to those territories that have been incorporated into the U nited States. 182 U.S. at 251, 287. T he
C ourt has also decided that statutes that g o verned the status o f P uerto R ico betw een 1900 and 1950
did not incorporate it into the U nited States w ithin the meaning o f Downes. See, e.g., id.: Balzac v.
Puerto Rico, 258 U.S. 298, 305-13 (1922). This O ffice has expressed the view that statutes c u rre n tly in
force do not change P uerto R ico's status in this respect. But § 2 o f the F o rak er A ct, 48 U.S.C. § 739,
has an effect similar to that o f the uniform ity o f duties clause and does limit the President's pow er
under § 232(b).
   5 M ore recently, the C ourt has held that an o th er clause that appears to require geographical
uniform ity— the bankruptcy clause, A rt. I, § 8 , cl. 4— perm its explicit distinctions betw een or am ong
regions. “T he uniform ity provision does not deny C ongress p o w er to take into account differences
that exist betw een different parts o f the co u n try , and to fashion legislation to resolve geographically
isolated problem s.” Blanchette v. Connecticut General Insurance Corps. (Regional R a il Reorganization
Act Cases), 419 U.S. 102, 159 (1974); see id. at 160-61 (com paring uniform ity requirem ent o f bank­
ruptcy clause w ith A rt. I, § 8, cl. I, the uniform ity o f duties clause).


                                                   377
has previously expressed the view that the port preference clause does
not prohibit a system of regional quotas as opposed to a single overall
national quota; therefore it would not proscribe separate quotas for the
mainland and Puerto Rico. Thus, separate quotas seem to pose no
constitutional problem.
   Whether Congress has authorized the President to impose separate
quotas is a more difficult question. Section 232(b) does not expressly
confer such power on the President, but it does grant power in broad
terms without expressly withholding the authority to impose separate
quotas. As the Supreme Court has said:
          Section 232(b) authorizes the President to act after a find­
          ing by the Secretary of the Treasury that a given article is
          being imported “in such quantities or under such circum­
          stances as to threaten to impair the national security.”
          [Emphasis added.] The emphasized language reflects Con­
          gress’ judgment that “not only the quantity of
          imports . . . but also the circumstances under which they
          are coming in: their use, their availability, their character”
          could endanger the national security and hence should be
          a potential basis for Presidential action.
Federal Energy Administration v. Algonquin SNG, Inc., 426 U.S. 548, 561
(1976), quoting 104 Cong. Rec. 10542-43 (1958) (remarks of Representa­
tive Mills).
   The legislative history of § 232(b) and its predecessors, moreover,
makes it plain that the President was to consider the domestic effects of
imports. In this respect, § 232(b) contrasts sharply with several statutes
which delegate power to the President but instruct him to focus on
international concerns. See, e.g., 19 U.S.C. §2132 (correcting balance of
payments disequilibria); 50 U.S.C. §§ 1701-1706 (international emer­
gency economic powers). Specifically, when Congress enacted § 232(b)
it wanted the President to address himself to the effects of imports on
various domestic industries that it thought were important to national
security.6 See § 232(c), 19 U.S.C. § 1862(c). The needs of “national
security” industries may, of course, differ from region to region. A
single, overall national quota might be a very crude and ineffective way
of serving those needs; since Congress wanted the President to serve
them, it is reasonable to suppose that Congress authorized him to use

   6    F o r exam ple, the hearings leading up to (he predecessor o f § 232(b) dealt extensively w ith the
effects im ports had on industries that w itnesses believed vital to the nation's security. See Hearings on
H .R. 1 ("Trade Agreements Extension") before the House Comm, on Ways and Means, 84th Cong., 1st
Sess. 178-79, 194-95, 883-85, 1000, 1006-13, 1051-54, 1266, 1308-09, 1327-28, 2118-24 (1955); Hear-
ings on H .R. I ("Trade Agreements Extension") before the Senate Comm, on Finance, 84th Cong., 1st
Sess. 113-15, 331-55, 602, 721, 878-88 (1955). T h e Senate R eport on this provision said that “ [t]he
C om m ittee believes that this am endm ent will provide a means for assistance to . . . various national
defense industries.'* S. Rep. No. 232, 84th C ong., 1st Sess. 4 (1955). T h e Senate floor debate focused
on w h eth er § 232(b) w ould protect the leading industries o f various Senators’ states. See, e.g., 101
C ong. Rec. 5297-99 (1955).


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 more refined methods. See Federal Energy Administration v. Algonquin
 SNG, Inc., 426 U.S. 548, 561-62 (1976). Different regional quotas are
 one of the obvious refinements that Congress might have envisioned.
    Indeed, Presidents have imposed regional quotas since they began
 using their § 232(b) power. In general, separate quotas were set for the
 area west of the Rockies, the area east of the Rockies, and Puerto Rico.
 See, e.g., § 2 Proclamation No. 3279, 24 Fed. Reg. 1781, 1783 (1959). So
 far as we have been able to determine, no court has ever decided
 whether imposing these regional quotas exceeded the President’s au­
 thority under § 232(b).7 But Congress reenacted the provisions of
 § 232(b) while regional quotas were in force without specifying that the
 President had no power to impose them. See, e.g., Trade Expansion Act
 of 1962, Pub. L. No. 87-794, § 232(b), 76 Stat. 872, 877 (1962),
 reenacting Trade Agreements Extension Act of 1958, Pub. L. No. 85-
 686, § 8, 72 Stat. 673, 678 (1958). The Supreme Court has said that such
 reenactments can indicate that Congress accepted the President’s in­
 terpretation of the statute. Federal Energy Administration v. Algonquin
SNG, Inc., 426 U.S. 548, 570 (1976); see, e.g., Norwegian Nitrogen Co. v.
 United States, 288 U.S. 294, 313-15 (1933). For these reasons, we
 believe that § 232(b) permits the President to impose separate quotas on
the mainland and Puerto Rico.
    To say that § 232(b) permits separate quotas, however, is not to say
 that they may be imposed for any reason. Section 232(b) authorizes the
 President only to “take such action, and for such time, as he deems
necessary to adjust the imports of [an] article . . . so that such im­
ports will not threaten to impair the national security. . . .” Any
system of separate quotas, then, must be justified by national security
concerns. The March 14, 1979, findings of the Secretary of the Treas­
ury endorse import adjustment as a way “to reduce domestic oil con­
sumption and increase domestic production of oil and other sources of
energy.” 44 Fed. Reg. 18818, 18819, 18823 (1979). The legislative his­
tory of § 232(b) firmly establishes that increasing the domestic produc­
tion of oil is a legitimate national security aim; recent practice, acqui­
esced in by the Supreme Court, suggests that reducing the consumption
of oil is similarly comprised by “national security.” See Federal Energy
Administration v. Algonquin SNG, Inc., 426 U.S. 548, 553-55 (1976). We
understand that the reason for imposing a separate quota on Puerto
Rico is that, since the island has no indigenous oil, any gains from
limiting its imports will be outweighed by the risk of severe economic
dislocation. We believe that this too is a suitable national security
justification. Section 232(c), 19 U.S.C. § 1862(c), makes it plain that
economic dislocation which results from excessive imports is the sort of

   7   In N ew England Governors' Conference v. Morton, Civ. No. 72-13-59 (D. Me. Sept. 7, 1973), the
system o f regional quotas was challenged, but the com plaint was voluntarily dismissed.


                                              379
 impairment of the national security that the President may act to
 prevent:
           In the administration of this section, the Secretary and the
           President 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 domes­
           tic industries; and any substantial unemployment, decrease
           in revenues of government, loss of skills or investment, or
           other serious effects resulting from the displacement of
           any domestic products by excessive imports shall be con­
           sidered, without excluding other factors, in determining
           whether such weakening of our internal economy may
           impair the national security.
 Section 232(c), 19 U.S.C. § 1862(c). W hatever exactly the national secu­
 rity is,8 there is no reason to believe that economic dislocations with
this origin threaten it more than similar dislocations caused by insuffi­
cient amounts of imported goods. Congress’ unrestrictive language—
“without excluding other factors”—suggests that it would not have
opposed this interpretation. Thus, if the President concludes that a
strict import quota would enhance national security on the mainland
but only impair it further in Puerto Rico by disrupting the island’s
economy, § 232(b) authorizes him to impose separate quotas. Moreover,
we see nothing in § 232(b) that prohibits the President from specifying
an unlimited quota for Puerto Rico, if that is what the national security
demands.9 In any event, the link between the national security and the
quota system which the President finally chooses should be stated in
the materials accompanying the proclamation of the quota.
    We emphasize that we are discussing only the legality of separate
quotas—that is, separate quantitative restrictions—for Puerto Rico and
the mainland. In 1970, this Office advised the Executive Director of the
Cabinet Task Force on Oil Import Control that, under § 232(b), the
President cannot impose tariffs or fees on products entering Puerto
Rico that differ from those he imposes on the same products entering
the continental United States. We reached this conclusion on the basis


    8 A pp aren tly the national security requirem ent o f § 232(c) has never been interpreted by a court.
    ®A letter to this O ffice from the D eputy G eneral Counsel o f the D epartm ent o f E nergy asks
w h e th er the President can regulate shipm ents o f cru d e oil and its derivatives from P uerto R ico to the
m ainland if im ports o f c ru d e oil into P u erto R ico are not adjusted under § 232(b) As we have said, the
most ap p ro p riate basis for regulating shipm ents o f oil from P uerto R ico to the mainland w ould be that
such regulation is necessary to enforce a system o f im port adjustm ents, imposed under § 232(b), that
em braces both the m ainland and P u erto Rico. See p. 2 and n.l supra. But since the national security
apparently w ould justify the P resident's allow ing unlim ited im ports into P uerto R ico as a part o f that
system o f adjustm ents, shipm ents from P uerto R ico to the mainland can be regulated even if im ports
o f oil into P u erto R ico are in fact com pletely unrestricted.


                                                     380
of § 2 of the Foraker Act, 48 U.S.C. § 739, which provides, in part:
       The same tariffs, customs, and duties shall be levied, col­
       lected, and paid upon all articles imported into Puerto
       Rico from ports other than those of the United States
       which are required by law to be collected upon articles
       imported into the United States from foreign countries.
We concluded that this specific prohibition limited the President’s
powers under § 232(b). Similar problems may arise if the President
imposes a license fee or “tariff quota” system in which imports can
enter free-of-charge up to a certain level but must pay a tariff or fee
beyond that level; if the level from which duties are charged is not the
same for both the mainland and Puerto Rico, we would have consider­
able doubt about the ability of the program to survive a challenge in
court.10
  II. The President May Impose Quotas on Shipments of Oil from Puerto
   Rico to the Mainland as a Necessary Incident of a System of Separate
                             Import Quotas.

   Shipments of oil between regions can, of course, nullify any system
of regional quotas. Sometimes, market conditions and transportation
costs combine to prevent such transshipments. If they do not, however,
and if § 232(b) gives the President the power to establish separate
regional quotas, then by implication § 232(b) authorizes the President to
restrict transshipments directly in order to make the separate regional
quotas effective. The Supreme Court is, “in the absence of compelling
evidence that such was Congress’ intention, unwilling to prohibit
administrative action imperative for the achievement of an agency’s
ultimate purposes. . . . We cannot . . . conclude that Congress has
given authority inadequate to achieve with reasonable effectiveness the
purposes for which it has acted.” Permian Basin Area Rate Cases, 390
U.S. 747, 780, 777 (1968). Elsewhere the Court has indicated that unless
Congress says otherwise, an agency has power to do that which is
“reasonably ancillary to the effective performance of [its] various re­
sponsibilities. . . .” United States v. Southwestern Cable Co., 392 U.S.
157, 178 (1968). Neither the text nor the legislative history of § 232(b)
suggests that Congress intended to withhold from the President all
authority to regulate shipments between regions. The President may,
then, impose ‘quotas on shipments of oil from Puerto Rico to the
mainland if he decides that such quotas are reasonably necessary to
enforce the import adjustment scheme he has adopted under § 232(b).11

    10 T h e Suprem e C ourt recently declined 10 decide the analogous issue arising under the uniform ity
o f duties clause. See Federal Energy Administration v. Algonquin SN G . Inc.. 426 U.S. 548, 560 n .ll
(1976).
    11 In G u lf Oil Corp. v. Hickel, 435 F.2d 440 (D .C . Cir. 1970), the U nited States C ourt o f A ppeals
for the D istrict o f C olum bia C ircuit tacitly endorsed the President's p o w er to restrict shipm ents o f oil
from P uerto R ico to the m ainland. In 1968 a presidential proclam ation under § 232(b) imposed



                                                      381
    It is not difficult to see why restrictions on transshipments will be
 necessary if Puerto Rico’s quota is unlimited and the mainland’s has
 some significant effect on imports. Nonetheless, it would be advisable
 for the President to explain his reasoning if and when he adopts such
 restrictions. Moreover, we wish to emphasize that § 232(b) authorizes
 only those controls on interstate shipments which are reasonably ancil­
 lary to a system of import adjustments adopted under § 232(b). Section
 232(b) does not give the President a general power to adjust interstate
 shipments of oil.
    Again, our conclusions apply only to quotas or other quantitative
 restrictions on shipments from Puerto Rico to the mainland. A tariff or
 fee would violate § 3 of the Foraker Act, 48 U.S.C. § 738:
           All merchandise and articles coming into the United
           States from Puerto Rico and coming into Puerto Rico
           from the United States shall be entered at the several
           ports of entry free of duty and in no event shall any tariff
           duties be collected on said merchandise or articles.
See also Dooley v. United States, 182 U.S. 222, 233-36 (1901). As we
said in connection with § 2 of the Foraker Act, 48 U.S.C. § 739, this
specific prohibition limits the President’s general § 232(b) powers.

                                                             L arry A. H am m ond
                                                    Acting Assistant Attorney General
                                                         Office o f Legal Counsel




separate quotas on oil shipped into the mainland and P u erto Rico. See Proclam ation No. 3823, 33 Fed.
R eg. 1171 (1968), am ending Proclam ation No. 3279, 24 Fed. Reg. 1781 (1959). T h e P uerto Rican quota
was allocated am ong several producers. Section 3(b)(2) o f the proclam ation instructed the Secretary of
the In terio r that if a p ro d u cer shipped m ore oil from P u erto R ico to the mainland than that producer
had shipped d u rin g a certain base year, the p ro d u cer’s allocated share o f the P uerto Rican import
qu o ta for the next year w as to be reduced by an equal am ount. T he obvious purpose and effect o f this
provision w as to ensure that shipm ents o f oil from P uerto R ico to the mainland w ould not exceed the
base year levels. T h e D istrict o f C olum bia C ircuit noted that this provision w as “ in furtherance o f the
large design o f the overall reg u lato ry schem e, to restrict im portation o f foreign oil into the continental
U nited States.'* Id. at 443 (em phasis added). T h e co u rt proceeded to decide a dispute, arising under
this provision, about how to calculate the base year figure. T h e legality o f the restriction on shipm ents
from P u e rto R ico to the m ainland w as apparently not challenged, and the c ourt never questioned it.

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