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Section 232 Tariff Authority Limited, Court Says

Thursday, November 21, 2019
Sandler, Travis & Rosenberg Trade Report

The president’s authority to impose national security-related tariffs has limits, the Court of International Trade ruled Nov. 15, a decision that could yield refunds of some Section 232 tariffs on steel products and have an impact on potential tariffs on automobiles and auto parts. This decision does not address the constitutionality of Section 232’s delegation of tariff authority from Congress to the president, which was upheld in a CIT ruling earlier this year that has been appealed.

Under the law, the president has 90 days after receiving a report from the Department of Commerce that imports of a particular product are threatening national security to determine if he/she concurs. If so, the president must act within 15 days to adjust those imports so they will no longer pose such a threat. This can include measures such as imposing import tariffs or negotiating an agreement to limit imports. If the latter option is chosen but no agreement is reached within 180 days, the law requires the president to take such other actions necessary to adjust imports so they will not threaten national security.

In March 2018 President Trump issued (within 90 days of receiving a DOC report) proclamation 9705 imposing an additional 25 percent tariff on imports of steel articles from all countries, including Turkey. However, the president then issued in August 2018 (outside the statutory time limit) proclamation 9772 increasing this tariff to 50 percent for steel articles imported from Turkey. An importer of such goods filed suit, alleging that the latter action was illegal and seeking a refund of the additional duties paid.

In Transpacific Steel LLC v. U.S., the CIT concluded that the importer has alleged sufficient facts “to demonstrate that, at the very least, the President issued Proclamation 9772 in violation of the equal protection component of the Fifth Amendment and without observing the statutorily required procedure under section 232.” The court thus denied the federal government’s motion to dismiss the case and set a Dec. 9 deadline for the two sides to submit a proposed schedule to continue proceedings.

The CIT explained that the U.S. submitted no set of facts that justify singling out importers of steel from Turkey. The U.S. argued that “the relatively high import volumes” of steel from Turkey and the 14 existing antidumping and countervailing duty orders against its steel exports demonstrated the threat posed by such goods. However, the CIT pointed out that the DOC report identified five countries with higher volumes of steel exports to the U.S. than Turkey and that the U.S. maintained as many or more AD/CV duty orders against steel products from China, India, and Japan.

The CIT also said President Trump’s “expansive view” of the president’s power under Section 232 is “mistaken.” While the law grants the president great discretion in deciding what action to take following a threat determination, the CIT stated, it requires any such action to eliminate (and not merely address) the applicable national security threat and sets a time limit in which the president must act. These safeguards “do not merely roadmap action,” the court said, but are “constraints on power” that President Trump “appears to have ignored. The CIT therefore rejected the government’s argument that the president retains power to modify a Section 232 action without conducting a new investigation or following the procedures set forth in the statute.

There is some speculation that this ruling could be used to preclude or overturn the Section 232 additional tariffs on imports of automobiles and auto parts that President Trump has been threatening for some time. Earlier this year the DOC reportedly found that such imports are threatening U.S. national security, but a May 17 presidential proclamation said the Trump administration would take advantage of the 180 days allowed by the law to negotiate agreements with exporting countries. That period expired Nov. 14, prompting some observers to say the president has missed his opportunity to impose the threatened tariffs.

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