CIT Greenlights Challenge of Section 232 Tariffs on 'Derivatives'

PrimeSource had filed the challenge in February (see 2002060075, days before the derivatives tariffs took effect (see 2001270029). The importer argues that the tariffs were announced well after the 105-day deadline for tariff action following the Commerce Department's report that led to the initial imposition of Section 232 steel tariffs in 2018 (see 1801120023)). It said the derivatives tariffs violated the Administrative Procedure Act and Section 232 itself because Commerce did not follow procedure requirements for a report and a period of notice and comment. And it argued the derivatives violated its constitutional due process rights, and in general that Section 232 is an unconstitutional delegation of congressional authority. PrimeSource's lawsuit had been followed by a flurry of cases brought by affected importers (see 2003130050).

CIT dismissed all but one of PrimeSource's claims, but left the overall lawsuit standing by holding the importer's timeliness argument a valid one. In its motion to dismiss, the government had said the second tariff proclamation on derivatives was merely a modification of the first one originally setting the Section 232 tariffs, which obeyed the set time limits. It said even if the second proclamation were not in compliance with the time limits, those limits are merely directory and do not prevent the president from implementing tariffs at any time following Commerce's report.

CIT Chief Judge Timothy Stanceu, joined by Judge Jennifer Choe-Groves on the decision, disagreed, in line with CIT's decision in July in a separate case on the timeliness of increased Turkish steel tariffs (see 2007140046). “There can be no question, as a factual matter, that the two, separately published proclamations stemmed from two separate Presidential determinations and were directed at two different sets of products,” Stanceu said in the opinion. “Each necessarily required its own implementation. ... In summary, the action taken ... to adjust imports of derivatives was not implemented during the 105-day time period set forth in (the Trade Expansion Act), if that time period is considered to have commenced upon the President’s receipt of the Steel Report.”

Stanceu then addressed the defense's second argument that the time limits are merely directory rather than mandatory. “Accepting this logic would require us to conclude that Congress established the time limitations ... While at the same time intending that these limitations would have no binding effect on the exercise of the President’s discretion,” Stanceu wrote. “It also would require us to conclude that the President could take virtually any action he chose, even one adjusting imports of products that are not derivatives of those affected by an earlier action, despite the express time limitations.”

But despite finding merit to PrimeSource's timeliness claim, the trade court declined to grant the importer victory on its motion for judgment. Having not yet seen the administrative record behind the imposition of tariffs on derivatives, including the results of an "assessment" mentioned in the derivatives proclamation, Stanceu said that he could not be sure that the government had not actually met the deadline. If the assessment could be considered the report required by Section 232, then the derivatives tariffs may have been timely, he said.

Judge Miller Baker dissented from the decision. He said he would have dismissed the case entirely. “In my view, if the President timely implements Section 232 action to restrict imports -- and there is no dispute that the President did so in the original [proclamation in 2018[ -- the statute also permits him to later modify such restrictions, and that modification power is coextensive with the original power to act in the first instance,” Baker wrote. “Because the President could have also acted as to steel derivatives when he initially restricted steel article imports ... Section 232 permitted him to later extend those restrictions to derivatives.”