Environment and Energy

Leibowitz: China 301 and S232 Measures Sustained—What’s Next?

Written by Lewis Leibowitz

We’ve reached a milestone on the trade litigation front. Nearly all the cases (save two) have been decided regarding the legality of Section 301 tariffs on China and of Section 232 tariffs (and other measures) on steel and aluminum. The US government has prevailed.

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The Supreme Court last week declined to review one of the last Section 232 cases dealing with the initial imposition of those measures. The case, USP Holdings Inc. v. United States, challenged the determination by the US Commerce Department secretary that imports of steel “threaten to impair” the national security.

The Court of International Trade held that the Commerce determination was not reviewable by the court because it did not amount to “final agency action” under applicable law. The appellate court, the Court of Appeals for the Federal Circuit, reversed on that point, finding that the Commerce determination was final agency action. But the Federal Circuit declined to review the report on the generally applicable standard of whether the decision was “arbitrary, capricious … or otherwise not in accordance with law.” The case was appealed to the Supreme Court, which denied a writ of certiorari.

Thus, the last case challenging the Section 232 tariffs from their inception has been finally decided. I was the counsel of record on that case. Naturally, I was disappointed for my clients. But when a case is over, it is over. Now we must look to the future.

Three other cases challenging the Section 232 tariffs bear mentioning.

The American Institute for International Steel (now the American Metals Supply Chain Institute, or AMSCI), an association representing steel traders and supply chain participants, sued the government in 2018. That case asserted that Section 232 was unconstitutional because it delegated unlimited legislative authority to the president. AMSCI lost that argument in the Court of International Trade in 2019 and in the Federal Circuit in 2020. The Supreme Court denied review in 2021.

In August 2018, the Trump administration modified the Section 232 measures on steel to double the tariffs on steel imports from Turkey. Three steel trading companies sued the government for illegally modifying the measures without obtaining a new report from the secretary of Commerce. The Court of International Trade ruled in favor of the plaintiffs, ordering refunds of the extra tariffs. On appeal, the Federal Circuit reversed that decision, holding that the Section statute permits the president to modify relief without the benefit of an additional Commerce determination. Again, the government won the case. The Supreme Court denied review in 2022.

Finally, a group of companies challenged the expansion of the steel and aluminum tariffs to steel and aluminum “derivative products” in 2020. The Court of International Trade ruled in plaintiffs’ favor in 2021 but stayed the effect of the ruling in light of the Turkish Federal Circuit decision. The government appealed to the Federal Circuit. Early in 2023, the Federal Circuit reversed the CIT, following the Turkish case’s holding, and ruled in the government’s favor.

On the China Section 301 front, the cases are not quite as far along. One “lead” case has been decided by the Court of International Trade. Last month, the court ruled that the Office of the US Trade Representative had done enough to explain and respond to public comments opposing new Section 301 tariffs on China in “List 3” and “List 4”. The earlier List 1 and List 2 tariffs were not challenged. The decision of the CIT will probably be appealed because it will affect about 4,000 cases that challenge the List 3 and List 4 tariffs and the legality of billions of dollars in tariffs. The China cases probably have a ways to go.

Section 232 is a different story. The Section 232 measures on steel and aluminum, based on the court decisions discussed here, are with us for as long as the administration decides to keep them. Because of the court decisions, the Section 232 tariffs are now permanent and infinitely changeable at the discretion of the president. He or she could increase them, reduce them (or replace them with quotas), add to them, or keep them as they are.

Whether the tariffs and other measures are modified will be firmly in the realm of politics. Congress could conceivably change the statutes to put firmer time limits in place, or to prevent increases in measures. Perhaps Congress could require them to be evaluated periodically, but the courts have said that the statute does not require that.

There could be activity within the import regimes, such as modification of the exclusions process, changing tariffs to quotas, etc. The exclusions process is not functioning as it should in many respects, according to many observers. More timely decisions would be nice, for example.

We’re in for a long ride on this one.

Lewis Leibowitz 

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Lewis Leibowitz, SMU Contributor

Lewis Leibowitz

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