CIT Strikes Down Doubled 232 Duties on Turkey
In TransPacific Steel v. United States, the United States Court of International handed the Commerce Department and the President a defeat with respect to the Section 232 duties imposed on aluminum and steel products from Turkey. This case is narrow in scope but important.
The specific issue before the Court was whether Presidential Proclamation 9772 which made aluminum and steel products from Turkey subject to twice the rate of Section 232 duty than has been applied to products of other countries. Plaintiffs in this case raised several arguments seeking to overturn the proclamation and recover the excess duties paid.
The first argument is statutory and procedural. Section 232 duties are the result of a process that begins when the Commerce Department initiates an investigation. The results of that investigation are then communicated to the President who can chose to take action. The President only has 90 days in which to decide whether he (in this case) is going to act and what that action will be. Then, he has 15 days in which to implement that action and 30 days to report to Congress the reasons for the action taken.
In this case, the initial 232 investigation was initiated by Commerce on April 19, 2017 and the Secretary issued the report on January 11, 2018. That started the clock running. On March 8, 2018, the President issued Proclamation 9705, imposing 25% 232 duties on steel products. Then, on August 10, 2018, the President issued Proclamation 9772, doubling the duties on steel products from Turkey. The August 2018 action was more 211 days after Commerce issued the report.
Plaintiffs argued that an action taken more than 105 days (i.e., 90 + 15) after the President receives the report is in violation of the statute. The government defended the action on the grounds that rather than being a new action, the increased duties on Turkish steel were a modification of the existing action.
The Court reiterated a point it made in its previous decision involving TransPacific that “[t]he 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.”
Rather than find strict adherence to the statutory timeline to be a "sanction" imposed on presidential actions, the Court noted that nothing prevented the President from returning to the Department of Commerce for a new report related specifically to Turkey to satisfy the statutory requirements. Given that the source of this authority is a delegation from Congress to the President, it makes sense that the limitations imposed by Congress be applicable.
Thus, the Turkey proclamation was made in violation of the statute and, therefore, is void. Although the Court stated only that judgment will enter accordingly, it appears that the judgment will require that Customs refund the duties excess paid. Of course, this case will make it at least as far as the Federal Circuit and likely someone will ask for Supreme Court review.
The plaintiffs raised additional arguments that are interesting. The first was an equal protection argument that the President had inappropriately singled out products from Turkey for additional duties. Part of this relates back to the original Commerce Department report on steel, which included Turkey in an aggregate analysis of the industry but did not single out Turkey as a specific concern. The question for the Court was whether singling out products from Turkey for additional duties was justified by a sufficient legitimate governmental purpose. If there is a justifiable purpose, the disparate impact may not result from arbitrary or irrational implementation.
Section 232 duties are intended to promote and protect national security, which is a legitimate governmental purpose. However, the Court could find no justification in the steel report for treating Turkish products more harshly. As mentioned, Turkey was not singled out in the report and it is the sixth largest exporter of steel to the U.S. Thus, the action was not rational and appears arbitrary if the alleged support for it is the steel report. The reality, only mentioned in passing and not really considered by the Court, is that the President appears to have taken this action to pressure Turkey for the release of a U.S. citizen held in Turkey.
Proclamation 9772 was, therefore, a violation of the plaintiff's equal protection rights.
The remaining argument was that the increased duties on Turkish steel are a violation of constitutional due process. The basis for the due process claim is essentially that the government failed to follow the process set out in the statute before imposing the additional duties. Because the Court had already decided that the Proclamation was void because of the failure of the government to follow the statutory process, there was no need for the Court to address this claim.
All in all, this is a good decision for importers seeking to know that the Court of International Trade will hold the government, including the President, to the statutory and constitutional requirements applicable to trade regulation. The President had a statutory path to follow to impose these duties and did not do so. The Court, therefore, rightly invalidated the action. Checks and balances in action, just like we learned in eighth grade (not to mention law school).