CIT Tells Commerce to Consider All Slab in Importer's Section 232 Exclusion Requests

The court remanded 31 of California Steel's exclusion requests, though since the entries had already been liquidated, Baker granted injunctive relief instead of simply remanding the agency's decision. The judge said that if Commerce grants any of the 31 exclusions on remand, the agency must tell CBP to "honor them by reliquidating entries and restoring" the importer to the position it would have been in had the requests been granted.

In the decision, Baker additionally sustained Commerce's rejection of 14 other exclusion requests filed in 2020, holding that the agency reasonably relied on U.S. Steel's evidence that it could timely make the requested slab in sufficient quantity.

California Steel initially took to the trade court in 2021 to contest 193 exclusion denials -- 170 of which were filed in 2018 and 23 of which came in 2020. After court-led mediation fell through (see 2402050019), Commerce reassessed the exclusion denials but continued to deny them all. After the remand, California Steel only continued to challenge 31 of the 2018 requests, which covered a total of 1.373 million metric tons of slab.

In assessing the importer's claims, Baker first addressed whether, under Commerce's regulations, California Steel had to first exhaust its administrative remedies by not filing a second exclusion requests after the first ones were denied. Under the agency's regulations at the time, Commerce said second exclusion requests were allowed if the first ones were denied based on representations from objectors that turned out to be false. The agency's revised regulations say that if a request isn't approved due to an objection, the requester can file a second request after failing to attempt to obtain the covered merchandise from an objector.

While the parties said this scheme doesn't allow an importer to renew a denied submission by filing a new application with evidence showing the objector "failed to deliver," Baker said he disagreed. The judge found it irrelevant, however, ultimately ruling that any requirement of exhaustion through this process is preempted by the Administrative Procedure Act.

Baker noted the APA's "categorical preclusion of requiring exhaustion of optional administrative remedies," holding that it can "hardly be 'appropriate'" for the trade court to circumvent that bar here. "To read the latter otherwise would invest authority in this tribunal that no district court possesses, and thereby render the CIT an island unto itself in the sea of APA law -- to say nothing of creating an unnecessary conflict between the two statutes," the decision said.

The court said that, in determining whether requiring exhaustion is appropriate, the court must assess the "legal regime governing the asserted cause of action, insofar as it speaks to the question." Where that framework provides otherwise, "as here," CIT can't compel exhaustion. Baker said Section 2637 of the Tariff Act of 1930, which requires the exhaustion of administrative remedies, doesn't add to or subtract from the APA or other judge-made law regarding exhaustion.

Turning to the merits of California Steel's claims, Baker held that Commerce failed to consider whether U.S. Steel could supply the entire amount of steel for which the importer requested exclusions. The judge said Commerce's regulations support this finding, since they require the agency to see if the objector can provide the product in a "sufficient and reasonably available amount." Central to California Steel's claim is evidence showing U.S. Steel couldn't supply the total amount since it needed the slab to meet its own needs.

"Highly relevant to whether" the objector could meet the demand is the extent to which the company overcommitted its "current or future capacity" to other users of the article, including itself, the judge said. Commerce failed to address this point, and on remand, it must "consider not just the individual trees (each submission in isolation) but also the forest (the aggregate of those applications)," the judge said.

Regarding whether U.S. Steel could timely supply the slab, California Steel noted U.S. Steel's admission that it couldn't supply any more than the contract amount between the two parties until the fourth quarter of 2018. Baker said Commerce failed to address this concession.

The court sided with U.S. Steel regarding California Steel's 2020 requests, ultimately denying all of the importer's exclusion requests. Baker took issue with California Steel's failure to rebut or address U.S. Steel's claim that it was the importer that decided not to extend its contract with U.S. Steel into 2020 or to purchase slab through spot sales in late 2019, undergirding California Steel's claim that U.S. Steel couldn't fill orders as requested.

California Steel's decision not to purchase the full amount offered by U.S. Steel also stood as the court's basis for rejecting the importer's claim that U.S. Steel would only sell limited quantities of slab in 2020, the court held. And while historical data seemingly showed that U.S. Steel sold California Steel only a limited amount of slab in the past, Baker said that, as Commerce explained, the data would show "considerably higher" numbers if the importer "had not declined to renew the contract in August 2019 and had not declined spot offers in the fourth quarter."

(California Steel Industries v. United States, Slip Op. 24-127, CIT # 21-00015, dated 11/13/24; Judge: M. Miller Baker; Attorneys: Sanford Litvack of Chaffetz Lindsey for plaintiff California Steel Industries; Stephen Tosini for defendant U.S. government; Lydia Pardini of Polsinelli PC for amicus curiae U.S. Steel Corp.)