CIT Grants Stay in Section 232 'Derivatives' Challenge Due to DOJ's Likelihood of Success on Appeal

The Court of International Trade granted the Department of Justice's motion to stay a case challenging the expansion of Section 232 duties on steel and aluminum “derivatives,” in an Oct. 14 order, due in part to the defendant's likelihood of succeeding on appeal. Finding that a recent U.S. Court of Appeals for the Federal Circuit opinion indicates DOJ's chances of success at the appellate court, CIT also stayed any resulting liquidation but noted that the fact pattern in the present case reads differently from that of the recent Federal Circuit case.

Oman Fasteners and Huttig Building Products had argued that President Donald Trump's 2018 decision to expand Section 232 national security tariffs onto steel and aluminum “derivatives” was wrongly made beyond the 105-day deadline laid out in the Section 232 statute. Under 19 USC 1862, the president must decide whether to impose tariffs 90 days from a Commerce Department report on the need for such restrictions, then must implement the tariffs within 15 days. The decision came after the court previously made an identical ruling in PrimeSource Building Products, Inc. v. U.S.

In July the Federal Circuit said that the president was able to hike Section 232 tariffs on Turkish steel imports beyond the 105-day deadline, in Transpacific Steel LLC, et al. v. U.S. (see 2107130059). According to the appeals court, as long as the tariffs continue their original purpose as laid out in the Commerce report, the president has the authority to hike tariffs as he pleases. The court said the president can take this action so long as the measures are part of a broader “plan of action." The U.S. then filed its appeal of the Oman Fasteners ruling (see 2108090029) and sought a stay at CIT, arguing that the Transpacific decision gives it a likelihood of success on appeal.

In its decision to stay Oman Fasteners' case, CIT said that the Transpacific ruling “causes us to conclude that defendants have made a sufficiently strong showing that they will succeed on the merits on appeal.” However, the three-judge panel acknowledged that certain, potentially impactful, facts remained different between the cases. For one, the Transpacific case concerns the mere hike of tariffs solely on Turkish steel, while Oman Fasteners deals with extending the duties onto new products. For another, the Turkish steel decision was made seven months after the 2018 report, while the steel derivatives expansion was made two years after the report, highlighting another difference in the fact pattern of the cases, the court pointed out.

“In reaching this conclusion, we do not opine on whether Transpacific II necessarily controls that outcome, i.e., whether the President’s adjusting of tariffs on derivatives of steel products falls within what the Court of Appeals termed, in a different factual setting, 'a continuing series of affirmative steps deemed necessary by the President to counteract the very threat found by the Secretary,'” the panel said. “But for purposes of ruling on the instant stay motion, it suffices that the discussion in Transpacific II of the 'continuing' nature of Presidential Section 232 authority is expressed in broad terms.”

The panel ordered the stay of liquidation to the entries subject to the litigation and ordered DOJ to consult with Oman Fasteners and Huttig to reach an agreement on monitoring and such bonding for entries within the scope of the derivatives tariff order.

(Oman Fasteners, LLC, et al. v. United States, Slip Op. 21-144, CIT Consol. #20-00037, Judges Jennifer Choe-Groves, M. Miller Baker and Timothy Stanceu; Attorneys: Michael House of Perkins Coie for plaintiffs Oman and Huttig; Tara Hogan for defendant U.S. government)