Industry News

U.S. Court of International Trade Hears Case on Constitutionality of Section 232 Steel and Aluminum Duties

December 19, 2018

    On Wednesday, December 19, 2018, a panel of three judges from the U.S. Court of International Trade heard oral argument on whether President Trump’s authority to impose tariffs on aluminum and steel based on national security is based on an impermissible delegation of Congress’ constitutional authority to “lay and collect taxes, duties, imposts and excises . . ..” Judges Claire R. Kelly, Jennifer Choe-Groves and Gary S. Katzmann made up the panel. Plaintiffs are the American Institute for International Steel, Sim-Tex LP and Kurt Orban Partners LLC. The United States is the defendant.

    Under Article 1, Section 8 of the U.S. Constitution, and consistent with the separation of powers among the executive, legislative and judicial branches of the U.S. government, Congress has the authority to lay and collect duties. This authority, however, can be delegated by the legislative branch to the executive branch, which occurred with the passage of Section 232 of the Trade Expansion Act of 1962. Section 232 delegated to the President the authority to restrict imports if those imports posed a national security risk. The scope of restriction is not defined in Section 232, giving the President much latitude for forming a remedy. In the case of steel and aluminum, he chose to assess additional duties on steel and aluminum from certain countries, while imposing quantitative restrictions (quotas) on those products from other countries.

    Plaintiffs argued that the delegation created via Section 232 is without limitation, and thus contrary to existing U.S. Supreme Court precedent that requires such delegations to contain an “intelligible principle” to guide the President. Specifically, the plaintiffs stated that the Section 232 delegation is open-ended as to the type of remedy the President can craft and contains no criteria for him to consider in determining whether a risk to national security exists as a predicate to implementing a remedy. The United States countered, citing other U.S. Supreme Court precedent as upholding Section 232 as a proper delegation of Congress’ authority under Article 1, Section 8. The government argued that the plain language of Section 232 sets out the necessary criteria and restrictions to support the delegation, so that any remedy chosen by the President would be limited to imports negatively impacting U.S. national security.

    The panel’s questioning identified some of the issues concerning the individual judges. Judge Katzmann asked plaintiffs’ counsel why the panel was not bound to follow a 1976 Supreme Court decision, Federal Energy Administration v. Algonquin, upholding the delegation found in Section 232. Plaintiffs’ counsel offered argument distinguishing their case factually from Algonquin, most importantly on how Section 232 had been amended after the Algonquin decision to remove judicial review of the President’s determination, effectively unfettering his authority to act. Judge Kelly seemed concerned by this amendment, asking both parties whether a decision by the President to assess Section 232 duties on imports of peanut butter in the name of national security could be challenged. Plaintiffs stated no, while the United States felt that a challenge could be raised where the President had obviously overstepped his authority but offered no legal basis based on the statutory language to support that argument. Judge Choe-Groves focused on this statutory language and whether national security constituted an intelligible principle to support the delegation.

    The case has been submitted to the panel for decision, which will likely be issued during the first quarter of 2019. Thereafter, appeals to the U.S. Court of Appeals for the Federal Circuit, and perhaps the U.S. Supreme Court, should be anticipated. We will update this matter as it proceeds down this path. Specific questions on Section 232, how to seek an exception from duties assessed thereunder, or how to minimize the impact of these duties can be directed to a Barnes/Richardson attorney. Specific question about the CIT hearing discussed above can be directed to Sandra Friedman or Rick Van Arnam, as both attended the hearing at the Court of International Trade in New York.