Lately there has been a great deal of news on the legal front. Readers of this column have asked a lot of questions. Today I will try to get to at least some of them.
Most of the recent court decisions relate to the Section 232 tariffs, so that is a good place to start. To recap, Section 232 gives the president of the United States authority to impose tariffs, quotas or other import restrictions on articles of commerce, a power granted by the Constitution to Congress. Congress has given that authority to the president subject to certain procedural and substantive requirements.
In Cause of Action Institute v. United States (decided Jan. 14, 2021),the United States District Court for the District of Columbia heard a challenge to the refusalof the president and the Commerce Department to publish its determination on whether the import of autos and auto parts constituted a threat to impair the national security. The plaintiff asserted that a statute guaranteeing disclosure of documents (the Freedom of Information Act) did not permit the president to conceal the report. The District Judge, John Nichols, ruled that the constitutional protection from disclosure of communications with the president (“executive privilege”) overruled the statutory requirement to publish the Section 232 determination in the Federal Register. Neither the public nor any member of Congress has seen the autos and auto parts report. The deadline for completion of that investigation was completed in February 2019, finding that imports of autos and auto parts “threaten to impair” national security. Under the statute, the president has 90 days to announce the measures, if any, that the president believes necessary to address this threat.
The bottom line was that executive privilege takes precedence over the statutory requirement to disclose the report of the investigation. The report need not be disclosed to Congress or the public. The court, however, did not decide whether the failure to disclose the report would prevent the president from actually increasing tariffs. That issue will not be decided unless the president decides to act.
In Transpacific Steel v. United States, (decided July 14, 2020 and currently on appeal in the Court of Appeals for the Federal Circuit in Washington), the Court of International Trade ruled that the increase of tariffs on Turkish steel imports from 25 to 50 percent in August 2018 violated Section 232. The statute requires that the president act to restrict imports within 90 days after receiving the report from the Commerce Department finding a threat to impair national security. The increase to 50 percent was more than four months after that statutory deadline. The CIT ordered the government to refund the tariffs unlawfully collected. As noted, the case is currently on appeal. Full disclosure—I am an attorney in that case.
In Universal Steel Inc. v. United States, decided Feb. 4, 2021, the Court of International Trade decided several challenges to the Section 232 steel tariffs. A three-judge panel of the court ruled that (1) the Commerce investigation and report was not reviewable by a court; (2) did not require the president to find a “threat” within the ordinary meaning of the word; (3) did not require the president to set either a date for the tariffs to be ended or a set of conditions for them to end; and (4) that the imposition of tariffs on Canada, Mexico and the European Union after the 90-day limit were permissible because the president announced that he might impose those tariffs within the 90-day limit. Another full disclosure—I am counsel of record in this case.
In PrimeSource Building Products v. United States, decided Jan. 27, 2021, the Court of International Trade threw out four of five challenges to “derivative products” tariffs imposed in January 2020, nearly two years after the initial steel tariffs. The court ruled that (1) the Commerce advice to the president about imposing tariffs on downstream products made from steel (including nails, auto parts and other products) was not reviewable in court; (2)the plaintiffs were not denied due process despite the lack of an opportunity to comment before tariffs were imposed; (3) that Section 232 was not an unconstitutional delegation of legislative authority, a question already decided in American Institute for International Steel v. United States last year; and (4) that the non-statutory “assessments” by Commerce advising the president to take action against new products was not subject to court review.
The only claim that survived the government’s motion to dismiss the PrimeSourcecase was similar to the claim in Transpacific Steel, discussed above. The president imposed tariffs based on the Commerce report in the steel investigation of 2017-18, completed in January 2018. The “derivative products” tariffs were imposed in January 2020, nearly two years later.
Where Do We Go from Here?
These four cases have sharply changed the equation, if they stand. Note that all of them are decisions of the Court of International Trade and are subject to appellate review by the Court of Appeals for the Federal Circuit and ultimately by the Supreme Court.
The procedural requirements, including the time limits, are now considered mandatory; but the actual decisions and actions by the president, as long as those time limits are arguably met, leaves the statute a fairly comprehensive delegation by Congress to the president of the taxing power, leaving U.S. importers and the manufacturing customers at the mercy of changes in government policy that could cost them dearly.
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