Trade Cases

Leibowitz on Trade: Two Interesting Cases

Written by Lewis Leibowitz

Trade attorney and Steel Market Update contributor Lewis Leibowitz offers the following update on events in Washington:

As a participant of long standing in the saga of international trade cases, I can say that this week was particularly interesting. First, the U.S. International Trade Commission did something unusual—last Tuesday, it made a final negative determination (no duties) in the antidumping and countervailing duty investigations on “fabricated structural steel” from Canada, China and Mexico. And second, the U.S. Court of Appeals for the Federal Circuit held that Section 232 of the Trade Expansion Act of 1962, as amended, was not an unconstitutional delegation of legislative power to the President of the United States. This decision affirmed the result last year by the Court of International Trade, the U.S. court that handles international trade litigation.

The Fabricated Structural Steel Case

I was asked after the ITC vote on Tuesday whether a negative determination was an unusual occurrence. It is definitely unusual, but it is not the “unicorn” of a negative determination of the Department of Commerce in these cases. In 2018, for example, the ITC went negative on a high-profile case involving smaller civil aircraft, which pitted Boeing against the Canadian manufacturer Bombardier.

By contrast, Commerce finds “dumping” or subsidization in just about every investigation they initiate. In particular, there are very few cases where Commerce found no dumping and no subsidies in cases involving China, famously a “non-market economy” country.

I checked to see whether there were surveys of decisions of Commerce and the ITC regarding their affirmative (which means duties) or negative (no duties) final determinations. The closest to a survey of this sort that I found was dated 2012. It found that about 21 percent of ITC final determinations in antidumping cases were negative, meaning that 79 percent were affirmative. The countervailing duty negative determination rate was a bit higher, at 23 percent. I found no research later than 2012 on the issue. Perhaps relatively few people are curious about the propensity of the ITC and Commerce to NOT find “unfair” trade and injury.

The ITC is required under the antidumping and countervailing duty laws to determine whether an industry in the United States is materially injured or threatened with material injury by reason of imports that Commerce has found to be dumped or subsidized. The ITC is constrained by the statute, and interpretations by the Commission, to investigate injury with some fairly significant blinders. For example, the Commissioners have written that Congress does not want them to have cases be decided based on whether the imposition of duties would result in the loss of more industrial activity and jobs in the United States than would be gained by the imposition of duties (a “public interest” test, which most countries apply before imposing antidumping or countervailing duties). They argue that dumping and subsidies are bad, and that the cost of imposing antidumping and countervailing duties is “collateral damage” that must be accepted.

For now, I cannot tell you why the ITC voted the way it did. The reasons for the determination will be in a final report to be released in April. All we know now is that three Commissioners—Chairman David Johansen and Commissioners Jason Kearns (Obama appointees) and Randolph Stayin (Trump appointee)—voted in the negative (no duties) for all three countries. Commissioners Rhonda Schmidtlein (Obama appointee) and Amy Karpel (Trump appointee) voted in the affirmative. The sixth seat on the Commission has been vacant since June 30, 2017. A nomination to fill that seat was made in September 2017, but the 115th Congress adjourned without acting on it. This could have been significant, because the relevant statute requires that a 3-3 tie vote means an affirmative injury determination.

The most interesting facet of this decision is that the American Institute for Steel Construction, a “downstream” industry from steel producers, asked for antidumping and countervailing duties as a result of the Section 232 tariffs on basic steel products. At least a portion of any damage to the industry was likely due to the tariffs rather than low prices or government subsidies—by the way, China and Mexico were accused of subsidizing the industry, but Commerce did not detect any significant subsidies with respect to Mexico.

In April, we will know more about the reasons that the three-member majority voted against duties and the two-member minority did not. The domestic industry may appeal this result to the Court of International Trade.

Section 232 Again Survives Constitutional Challenge

On Friday, the Court of Appeals for the Federal Circuit (CAFC) released its decision in American Institute for International Steel v. United States, challenging the constitutionality of Section 232 as an excessive delegation of legislative power to the president. Like the Court of International Trade decision last year, the appellate court found that the issue was decided by the Supreme Court in 1976, and that only that court could overrule the decision. The AIIS quickly announced plans to take the case to the Supreme Court. The Supreme Court is not obligated to take the case; however, there are issues concerning excessive delegation of legislative power that may persuade them to hear it.

As we have seen before, there are a growing number of legal challenges to Section 232. Now that the AIIS case has been decided, the remaining challenges (some of a constitutional nature and some based on such issues as the availability of judicial review of presidential decisions and review of agency decisions under the Administrative Procedure Act) are pending in the Court of International Trade. Three more cases were filed last week against Section 232 tariffs on steel. Two contested the new proclamation on “derivative” products made from steel and one on denials of exclusion requests on semifinished steel. All this legal activity is aimed at reducing or eliminating the impact of Section 232 on steel purchasers, traders and importers.

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Lewis Leibowitz, SMU Contributor

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