CIT Finds Fault With Additional Section 232 Tariffs on Steel From Turkey, Denies Move to Dismiss Case
Increased Section 232 duties on steel products from Turkey may be invalid or even unconstitutional, the Court of International Trade said in a Nov. 15 decision. Denying the government’s motion to dismiss an importer's challenge of the 50 percent duty, which was dropped back to 25 percent in May (see 1905170004), the court said Transpacific Steel raises arguments that may lead to a refund of the additional duties in the CIT’s final decision.
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Transpacific filed the lawsuit in January (see 1901220010). It says that an August 2018 increase in Section 232 tariffs to 50 percent only for Turkey unfairly singled out importers of steel from the country, violating their constitutional due process rights. The importer also says the increase ran afoul of congressionally mandated procedures for Section 232 tariffs.
CIT found both arguments have some merit. Courts generally set a low bar for the government to clear in cases involving the equal protection clause; if no fundamental rights are at stake, the government must only show it had a “rational basis” for taking an action. In this case, the government was unable to raise one valid argument as to why it increased duties on Turkish steel but not steel from other countries, CIT said.
For example, the government said that Turkey had high import volumes, but five countries had higher volumes than Turkey, CIT said. It also said Turkey has many antidumping and countervailing duty orders against its steel products, but China and India have more, and Japan has just as many. “Whatever the President’s real motivation may be, it is not this court’s concern,” CIT said. “But we also cannot sustain a classification for which there is no offered -- or even possible -- rational justification tethered to the statute,” it said.
CIT also agreed that President Donald Trump did not follow the procedures laid out for Section 232 tariffs in the relevant statute. The law requires that the Commerce Department submit a report to the president, after which the president has 90 days to decide whether to act and 15 days to implement the action. Commerce’s Section 232 report was sent to the president in January, so the initial implementation of the tariffs in March followed that timeline. But by the time the duties on Turkey were increased in August, both deadlines had long been exceeded, CIT said.
CIT took issue with the government’s argument that the initial Section 232 proclamation allowed the president to make ongoing adjustments at will. “The President’s expansive view of his power under Section 232 is mistaken, and at odds with the language of the statute, its legislative history, and its purpose,” the trade court said.
In a concurring opinion, Judge Gary Katzmann was careful to note that the issue in this case is not whether the Section 232 tariffs as a whole are constitutional. That issue has already been decided by CIT (see 1903250032), and is currently on appeal at the Federal Circuit (see 1906240035). Instead, the question is narrower: whether there has been a violation of Section 232 procedures, and whether there is a rationale to justify different treatment for Turkish imports. Katzmann is the judge that filed a separate opinion in the broader constitutional challenge that concurred with the result based on Supreme Court precedent, but voiced misgivings about the Section 232 tariffs.
Though the additional tariffs were removed in May, that does not make the case moot, seeing that the government collected the additional duties and Transpacific is seeking a refund, customs lawyer Larry Friedman said on his blog. Similarly situated importers of steel and aluminum from Turkey that paid the additional duties may want to consider filing protests on liquidated entries and asking CBP to withhold action on the protest until the case is finally decided, “which may be a while,” Friedman said. “This is a risky proposition because the constitutionality of an action by the President and the Commerce Department is not something that is subject to review by CBP on a simple protest. That means other importers might need to file cases similar to Transpacific and decide whether to stay their cases pending a final decision in this case,” Friedman said, cautioning that he is not giving legal advice.
(Transpacific Steel LLC v. U.S., Slip Op. 19-142, CIT # 19-00009, dated 11/15/19, Judges Kelly and Restani, Judge Katzmann concurring.)
(Attorneys: Matthew Nolan of Arent Fox for plaintiff Transpacific Steel; Tara Hogan for defendant U.S. government)