CIT Stays Judgment in Derivatives 232 Challenge

Still catching up. This time, I look at PrimeSource Building Products, Inc. v. United States, which is another piece of litigation spinning out of President Trump’s Section 232 duties on steel and aluminum products. I posted about the merits decision in this case here. In that decision, the Court found that the extension of the duties to derivative products occurred beyond the 105-days in which the President is authorized to act. At an earlier stage, the Court enjoined CBP from collecting the duties and required the importer to maintain a sufficient bond to ensure payment to CBP should the decision be reversed on appeal. That injunction dissolved on the issuance of the judgment by the Court of International Trade.

This new decision arises out of a request from the United States to stay the enforcement of the judgment and reinstate the terms of the injunction while the government appeals to the Federal Circuit on the merits.

A stay pending appeal is not uncommon. It is a tool that allows the losing party to preserve the status quo and prevent additional injury while the case is on appeal. Absent a stay and reinstatement of the terms of the injunction, the U.S. would not be able to collect the 25% duties on PrimeSource’s nails nor would the U.S. have a bond securing the liability in lieu of payment.

When asked to stay an action pending appeal, the Court looks at four factors:

  1. Whether the moving party has made a strong showing that it will succeed on the merits;
  2.  Whether the moving party will be irreparably harmed absent a stay;
  3.  Whether a stay will substantially injure the non-moving party; and
  4.  Where the public interest lies.

The only one of the four that is controversial here is the first. That is because after the CIT issued its decision in PrimeSource, the Federal Circuit decided Transpacific Steel LLC v. United States, which we discussed here. Transpacific challenged the President’s authority to double the Section 232 duties on steel from Turkey beyond the 105-day statutory deadline for presidential action. The Court of Appeals found that the change from 25% to 50% was a modification of a single continuing action and, therefore, was not bound by the 105-day deadline.

Despite arising out of different facts, the Court of International concluded that the Court of Appeals decision in Transpacific “potentially affects the outcome of” PrimeSource. The Court was clear that it was not deciding the issue but held that, for purposes of the motion for a stay, there was sufficient reason to believe that Transpacific provides a strong showing that the United States may succeed on the merits.

The Court went on to consider the remaining factors and found that they all support granting the stay. Reinstating the bond requirements was necessary to preserve the revenue and prevent irreparable harm to the Government. On this point, the Court noted that the irreparable ham would be the lack of a surety that would be responsible for payment of the duties in the event PrimeSource does not pay. The Court was careful to note, in footnote 2, that it was not deciding whether liquidation causes irreparable harm by making the entry final and conclusive as to both the government and the importer.

Regarding possible injury to PrimeSource, the Court noted that the plaintiff will not be required to deposit the additional duties. Rather, it will be required to maintain sufficient bonding to protect the revenue. Although there is a cost associated with the bond, this is the same condition PrimeSource found acceptable in the initial preliminary injunction. Finally, according to the Court, the public interest favors allowing the Government the ability to collect lawful duties.

The Court, therefore, granted the motion for a stay and re-imposed the requirement that PrimeSource monitor its potential duty liability and adjust its bond to cover the risk to the Government.



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