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CAFC Says President Can Make Trade-Restricting Modifications to Section 201 Safeguards

President Donald Trump didn't clearly misconstrue the statute when he revoked a Section 201 tariff exclusion on bifacial solar panels, the U.S. Court of Appeals for the Federal Circuit ruled on Nov. 13. Granting the president wider discretion to make modifications to Section 201 duties, Judges Alan Lourie, Richard Taranto and Leonard Stark said that the statute -- Section 2254(b)(1)(B) of the Trade Act of 1930 -- allows for trade-restricting modifications, as opposed to only trade-liberalizing ones.

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In addition, Stark, the opinion's author, said that the president didn't violate any of the statute's procedural requirements in revoking the tariff exclusion. Notably, the court said that the president is not required to reweigh the costs and benefits of a Section 201 modification, reversing the Court of International Trade's contrary view. The Federal Circuit found that the two provisions requiring a cost-benefit analysis for tariff moves make no reference to modifications.

While the trade court feared that not requiring this analysis could lead to "absurd results," Stark said the court does not share this fear since modifications will be clearly read to only mean small changes. For instance, a 1% duty expanded to 50% clearly wouldn't stand since it is not a minor change.

The case originally was brought by various importers, led by the Solar Energy Industries Association, to claim that Trump illegally revoked a tariff exclusion. The crux of their argument was that Section 2254(b)(1)(B) only allows trade-liberalizing modifications, given that the statute only says that existing safeguards can be "reduced, modified, or terminated." In revoking the prior exclusion, the president clearly didn't reduce or terminate the duty, leaving the question of whether the exclusion revocation qualifies as a modification.

The trade court said that it didn't qualify as a modification (see 2111160032). The U.S. appealed and found a sympathetic ear in the appellate court. The Federal Circuit said that nothing in the statute limits the president's authority to only make trade-liberalizing moves, noting that the court's review is "very limited," seeing as the measure was imposed in the context of foreign affairs.

Looking first to the statutory language, Stark noted the "statutory silence" on whether modification includes trade-restrictive changes. The court viewed this silence as "favoring the government's broader view, as the statute simply does not contain the narrowing limitation the trade court read into it." While both parties found support in the dictionary for their reading of "modify," the court said that in the context of its limited review, the government's dictionary support, other courts' precedents and SEIA's concession that the government's dictionary definition is not wrong, SEIA failed to show Trump's interpretation of "modification" is a clear miscontruction.

The importers argued that the statute's structure and purpose should be taken into account. The court agreed, though it only found these factors to further support the U.S.'s claim. For instance, Stark noted the statute's "broad remedial purpose," finding that this purpose supports the president's ultimate goal in revoking the tariff exclusion. SEIA also pointed to the Trade Act's own general definition of "modification," which includes the elimination of any duty or other import restriction. The appellate court said this definition is open-ended and doesn't exclude further restrictions.

SEIA also claimed that the lack of Section 2254(b)(1)(B)'s historical usage to restrict trade is evidence of the fact that it cannot be used to restrict trade. However, the Federal Circuit pointed to one instance in which President Bill Clinton used the statute to take "trade-restrictive action." Finding no clear misconstruction of the statute, the appellate court said it didn't need to rule on the government's claim that, even if the statute did bar increases to the duties, the exclusion revocation should be sustained since it's neutral in relation to the original safeguard measure.

SEIA's case also contained a trio of procedural claims, all of which were rejected by CIT and now the CAFC. The first hinged on the statute's requirement that tariff modification be made if the president "determines, after a majority of the representatives of the domestic industry submits to the President a petition requesting such reduction, modification, or termination on such basis, that the domestic industry has made a positive adjustment to import competition." SEIA said that "such" refers to the domestic industry petition, while the U.S. said it refers to a mid-point review from the International Trade Commission on the duties. Stark said that since both views are reasonable, the government's read was not a clear misconstruction of the statute.

Another procedural attack from the importers claimed that the president failed to determine that the industry has made a positive adjustment to the safeguard. While Trump said the industry had begun to make a positive adjustment, SEIA said this finding falls flat of the requirement to find that the industry had completed its adjustment. Stark cited the trade court in finding this distinction to be "too narrow to rise to the level of a clear misconstruction."

The third procedural claim was related to the supposed requirement to conduct a cost-benefit analysis for a modification of the tariff. Here, the appellate court differed from the trade court in finding that no such analysis was required at all for modifications.

(Solar Energy Industries Association v. United States, Fed. Cir. # 22-1392, dated 11/13/23, Judges Alan Lourie, Richard Taranto and Leonard Stark. Attorneys: Matt Nicely of Akin Gump for plaintiffs-appellees led by Solar Energy Industries Association; Amanda Berman of Crowell & Moring for plaintiff-appellee Invenergy Renewables; Christine Streatfeild of Baker & McKenzie for plaintiff-appellee EDF Renewables; Joshua Kurland for defendant-appellant U.S. government; Jonthan Stoel of Hogan Lovells for amice curiae led by Chamber of Commerce of the United States of America)