Industry News

Federal Circuit Sides with Government in Turkey 232 Duty Case

Jul. 13, 2021
By: Lawrence M. Friedman

The Court of Appeals for the Federal Circuit today reversed the Court of International Trade’s decision in Transpacific Steel. The CIT had held that the President lacked authority to increase Section 232 duties on steel from Turkey to 50% while imposing a 25% on imports from other countries. The CIT’s decision was based on the fact that President Trump did not impose the additional duties on products from Turkey within the statutory 105-day time limit imposed by § 1862(c) or without relying on a new Section 232 report from the Secretary of Commerce. The CIT also found that singling out Turkish imports violated the equal protection guaranteed by the Fifth Amendment.

Regarding the statutory time limit, the Federal Circuit opinion by Circuit Judge Taranto (with Circuit Judge Chen in agreement) framed the question as whether the law “permits the President to announce a continuing course of action within the statutory time period and then modify the initial implementing steps in line with the announced plan of action by adding impositions on imports to achieve the stated implementation objective.” The Court reviewed the history of predecessors to Section 232 as well as amendments to the law and concluded that Congress granted the President the authority to “adopt and carry out a plan of action that allows adjustments of specific measures, including by increasing import restrictions, in carrying out the plan over time.” According to the decision, the time limit was intended to spur presidential action without limiting the scope of the authority to act.

Moreover, the “action” to be taken can, according to the CAFC, be understood to refer to “a process or launch of a series of steps over time.” This follows, in part, from the statute, which authorizes the President to determine the nature and duration of the action. That plan of action can include increasing the remedy, not simply terminating or reducing the remedy.

On the issue of equal protection, the Court found the relevant standard of review to be the “rational-basis” test. To prevail under that test, Transpacific would need to show that there is no “reasonably conceivable state of facts that could provide a rational basis” for singling out Turkish merchandise for higher duties. Looking at the relevant Presidential Proclamation, the Court found that President Trump noted reasons for the action including that Turkey is a major exporter of steel to the United States. Accordingly, increasing tariffs on steel from Turkey was consistent with the goal of reducing imports and increasing domestic production capacity utilization. Transpacific had argued that Turkey was singled out for reasons unrelated to the trade remedy and related to an animus toward Turkey. Given the deferential standard, the Federal Circuit found no violation of the Fifth Amendment.

In a dissenting opinion, Circuit Judge Reyna, focused on the role of Congress in trade regulation. The Constitution places the power to set tariffs and regulation trade in Congress. Section 232 is a delegation of that legislative power to the President. As a result, when the President Acts pursuant to Section 232, he is bound by the limitations Congress imposed on him. In other words, the President has no more authority under Section 232 than Congress provided. Thus, Circuit Judge Reyna read the statute more strictly and argues that the majority opinion is “untethered from the U.S. trade law context.” According to the dissent, if the President fails to act within the specified time limit, he forfeits the right to do so until Commerce issues a new report on which he can act.

It remains to be seen how this decision will impact other ongoing litigation. With respect to the challenges to duties on derivative steel and aluminum products, this may impact arguments around the timing of those duties. Separate from the timing issues, however, is the question of what constitutes a derivative product that can be covered by Section 232 duties based on the original Commerce Department Report. With respect to challenges to Section 301, the impact is even less clear. Most important, Section 301 is a separate statute with different language and different history. Possibly in relation to the Section 301 case, the Federal Circuit noted in Transpacific that “We do not address other circumstances that would present other issues about presidential authority to adjust initially taken actions without securing a new report with a new threat finding from the Secretary.”

It seems likely that this matter will be subject to further litigation. An initial possibility is a request for a rehearing by the entire Federal Circuit. The alternative is an immediate petition for review by the Supreme Court.

If you have any questions, please contact any of the professionals at Barnes/Richardson.