CIT Curtails Presidential Authority to Adjust Tariffs Under Section 232 Steel Program

July 15, 2020

Yesterday a three-judge panel of the US Court of International Trade (CIT) issued Slip Opinion 20-98, which rejected President Donald Trump’s decision to increase tariffs from 25 to 50 percent on Turkish steel imposed pursuant to Section 232 of the Trade Expansion Act of 1962. After a string of court decisions affirming the President’s authority to place tariffs on steel products pursuant to Section 232 including the decision by the Supreme Court of the United States to deny certiorari, this is the first decision that finds that the President’s authority to restrict trade under Section 232 is not absolute.

In March 2018, the President issued a proclamation imposing 25% tariffs on steel imports, including those from Turkey. The President’s Proclamation followed an affirmative report from the U.S. Department of Commerce, which found that an increased volume of steel imports threatens the United States’ national security. In subsequent proclamations, the President adjusted the tariffs by replacing certain tariffs with quotas or removing the tariffs through State-to-State agreements. In August 2018, however, the President issued Proclamation 9772,  which increased the tariffs on steel imports from Turkey. According to press reports at the time, the tariff increase occurred amid a deteriorating political relationship between the United States and Turkey, as well as the reduction in value of the Turkish Lira.

Transpacific Steel LLC (“Transpacific”), an importer of Turkish steel, filed a lawsuit at the CIT claiming that Proclamation 9772 was unlawful and sought a refund of the over-paid tariffs. The CIT ruled in Transpacific’s favor, finding that Proclamation 9772 was issued outside of the mandatory statutory deadlines for the President to act in response to a Commerce Department national security report. Specifically, the CIT held that “the temporal restrictions on the President’s power to take action pursuant to a report and recommendation by the Secretary is not a mere directory guideline, but a restriction that requires strict adherence.”  The CIT also found that Proclamation 9772 violated the Equal Protection Clause of the Fifth Amendment because it was not a rational means of addressing the national security issues found in Commerce’s 232 report. Specifically, the Court explained that the Steel Report, which Proclamation 9772 cited for authority to act, “evaluated the collective impact of global steel imports on national security, and not the impact of imports from Turkey individually.”  Therefore, the Court concluded that singling out steel products from Turkey is not a rational means of addressing the concern.

Of note, the Court declined to address Transpacific’s substantive argument that the President’s chosen measure to increase tariffs lacked a nexus to national security, which the Government contended would have required the Court to second guess discretionary actions of the President. On that point, the Court evaluated the Steel Report and the Proclamation and found no procedurally proper finding of a national security threat from Turkey specifically meriting new duties. Thus, the Court’s decision rested almost entirely on Transpacific’s procedural arguments and leaves open the possibility for future modifications upon a more fulsome analysis and report from the Commerce Department.