Federal Circuit Says Trump Legally Expanded Section 232 Duties Onto Steel 'Derivatives'
President Donald Trump legally expanded the Section 232 national security tariffs to include steel and aluminum "derivative" products despite implementing the expansion beyond procedural deadlines laid out in the statute, the U.S. Court of Appeals for the Federal Circuit ruled in a Feb. 7 opinion. Relying on the appellate court's opinion in Transpacific Steel v. U.S., in which the court said that the president can adjust the tariffs beyond these time limits if it relates to the original plan of action laid out in the initial Section 232 tariff action, the Federal Circuit said that the expansion of the tariffs was related to the original plan.
Judges Richard Taranto, Raymond Chen and Kara Stoll found that the president can take action against the derivative products despite the commerce secretary not having individually investigated the goods. The statute's "evident purpose" of letting the president act under an announced plan to adjust initial measures over time to achieve a stated goal applies not only to increases in tariff rates, as was the case in Transpacific, but also to an extension to derivatives of goods that were initially hit with the duties, the opinion said.
Plaintiff-appellee PrimeSource Building Products initiated its challenge following Trump's decision to expand the Section 232 tariffs to cover steel derivatives in January 2020. At the Court of International Trade, the importer successfully argued that the tariffs were expanded illegally since they were announced well after the 105-day deadline for tariff action following the Commerce Department's report that led to the initial imposition of Section 232 steel tariffs in 2018 (see 2101280034).
The CIT ruling was thrown into question by the Federal Circuit's decision in Transpacific. In that decision, the court held that Trump was allowed to raise the duties on Turkish steel beyond the same 105-day deadline (see 2107130059). So long as a Section 232 rate hike taken beyond these time limits relates to the president's original plan of action, such a tariff action is legal, the Transpacific court held.
PrimeSource argued, among other things, that a rate hike on already covered products is different than expanding the tariffs to cover products that were not already covered by the initial tariff action or the Commerce secretary's initial report.
The appellate court ultimately found this attempt to differentiate the tariff actions "unpersuasive," ruling that the statute allows the president to expand the national security duties onto derivative products. The court said that the fact that the initial tariff action and secretary's 2018 report didn't address the effect of the derivative imports is "immaterial," since the president can take action against derivatives regardless of whether the secretary has reported on them.
"There is no textual basis for reading § 232 as empowering the President to do so only at the initial plan-adoption stage, not at later, modification stages," the opinion said. "And what we recognized in Transpacific as serving the 'evident purpose' of § 232 -- permitting the President to act under an announced plan to adjust initial measures over time to reach the initially adopted objective -- applies not only to an increase in tariff rates on the same entries but equally to an extension to derivatives of measures initially imposed only on the underlying articles." The greater length of time between the secretary's report and the derivative action also does not affect the legality of the move, the judges held.
The court did clarify, however, that presidential action under Section 232 could be called into question where the underlying objective has become "substantively stale," though in this case there is no challenge to the staleness of the objective.
The judges also addressed PrimeSource's claim that permitting the president to modify an initial plan of action to include derivatives renders the move an unconstitutional delegation of Congress' authority. The Supreme Court already rejected a similar challenge in the 1976 case Federal Energy Administration v. Algonquin, and "[t]he same is true today" since the necessary preconditions to presidential action -- the secretary's report -- still exist.
"In acting to close a loophole exploited by steel-derivatives importers, the President was making a 'contingency-dependent choice that [is] a commonplace feature of plans of action,' ... adding use of a tool that he could have used in the initial set of measures and later found important to address a specific form of circumvention Congress recognized when it authorized coverage of derivatives of the articles whose imports the Secretary found to threaten national security," the opinion said.
(PrimeSource Building Products v. United States, Fed. Cir. # 21-2066, dated 02/07/23, Judges Richard Taranto, Raymond Chen, Kara Stoll. Attorneys: Jeffrey Grimson of Mowry & Grimson for plaintiff-appellee PrimeSource Building Products; Andrew Caridas of Perkins Coie for plaintiffs-appellees Oman Fasteners and Huttig Building Products; Meen Geu Oh for defendant-appellant U.S. government; Adam Gordon of The Bristol Group for amicus curiae The American Steel Nail Coalition)