PrimeSource Overturned at Federal Circuit

Section 232 of the Trade Expansion Act of 1962 allows the President, following an investigation by the Department of Commerce, to adopt a plan of remedial action to protect the national security from harm caused by imports. The statute has several procedural requirements including that the Commerce Department complete its investigation within 270 days and that the President decide within 90 days of receiving the report whether the President concurs in Commerce's finding. If so, the President must come up with a plan of action, including the steps that "must be taken to adjust the imports of the article and its derivatives so that such imports will not threaten to impair the national security." For this discussion, the key point is that the President must implement the plan within 105 days of the findings in Commerce's report.

On March 8, 2018, President Trump imposed 25% duties on listed steel products in an effort to ensure that U.S. steel production was operating at 80% of its capacity, which is what the Department of Commerce deemed necessary to ensure the national security. That was done in Presidential Proclamation 9705 (there was a companion proclamation 9704 imposing 10% duties on aluminum products). The steel proclamation stated that the President retained the right to "remove or modify" the tariffs as a result of negotiated agreements with other countries. Moreover, the proclamation recognized the need for monitoring and possible "further action."

In January of 2020, apparently unsatisfied with the level of progress made by the steel industry in reaching 80% capacity utilization, the President issued Proclamation 9980 extending the steel tariff to derivative products (e.g., nails, wire, and staples). In addition, the Commerce Department characterized increased shipments of these articles as evidence of efforts to circumvent the tariff imposed on other steel items. This extension of the Section 232 tariff was beyond the 105-day period in which the President is required to announce and implement a plan of action.

PrimeSource and other companies challenged this late extension to derivatives in the U.S. Court of International Trade. That Court held that the 105-day time limit prohibits subsequent modifications of the announced plan of action. As a result, the extension of 232 duties to steel derivates was, according to the CIT, untimely and unlawful. This led, as a Monty Python character might say, to "much rejoining" among steel importers and consumers.

That rejoicing has now been thwarted by the Court of Appeals for the Federal Circuit in PrimeSource Building Products, Inc. v. United States (President Bident and a bunch of other named officials are also defendants).

The gist of the decision is simple enough. It follows from a prior case called Transpacific. In that earlier case, the plaintiff challenged an increase to the rate of duty applied to steel products. The Court of Appeals determined that the statute authorizes the President to adopt and carry out a plan of action that includes adjustments to the announced measure. 

In PrimeSource, the Court found the same rule applies. According to the Court, the initial Proclamation 9705 announced a "continuing plan of action aimed at achieving" the stated goal of 80% capacity utilization. Later, after Commerce found an increase in the imports of steel derivatives and opined that the increase was indicative of circumvention, the President had the authority to adjust the remedy to address that circumstance. Hence, the extension to derivatives was allowed. According to the Court of Appeals, this action closed a "loophole." 

This is another way to look at that alleged loophole. Plaintiffs argued that the Commerce Department had the opportunity to investigate steel derivative products and did not do so. Or, I would assert, Commerce might have looked at derivatives and found that they do not constitute a threat to national security. Rather than constitute a loophole, limiting the President's authority to act to items Commerce found to be a threat to national security is consistent with the limited delegation of authority Commerce gave the President to regulate trade (a power the Constitution gave to Congress, not the President). 

The Federal Circuit rejected that argument, primarily on the basis of the pesky language of Section 232. The statute specifically addresses derivatives at § 1862(c)(1)(A)(ii), where it grants the President the authority to adjust both imports of the article "and its derivatives." 

As a result, the Federal Circuit reversed and remanded the decision of the Court of International Trade, resulting in rejoicing by steel producers and, presumably, the United States government.