Section 232 Duties Aren't for Raising Revenues, Can't Be Deducted From US Price, Exporter Tells CIT

The Court of International Trade failed to consider all the relevant statutory language, legislative history and facts when it ruled in three recent opinions that Section 232 steel and aluminum tariffs can be deducted from a respondent's U.S. price in antidumping duty calculations, Nippon Steel told the trade court in a motion for judgment Feb. 25. Nippon argued the tariffs should be considered remedial, not ordinary customs duties eligible for deductions (Nippon Steel Corporation v. U.S., CIT #21-00533).

The company said the tariffs aren't ordinary customs duties because they don't have the purpose of raising revenues for the U.S. government. Nippon also said Supreme Court precedent established that U.S. laws must be read consistent with international obligations in the absence of clear congressional intent. Failing to deduct Section 232 duties from the U.S. price violates World Trade Organization commitments, Nippon argued.

The case concerns the third administrative review of the antidumping duty order on hot-rolled steel flat products from Japan, in which Commerce ultimately hit Nippon with a 11.70% dumping rate, partly due to Commerce's reduction of Nippon's U.S. price by the amount of Section 232 duties paid on its products.

Previously, the court has looked to three factors on whether the steel and aluminum duties are "United States import duties" and can thus be deducted: whether the duties are remedial, temporary and if deducting them from U.S. price would amount to a double remedy. If all three are answered yes, the duties are U.S. import duties and can be deducted. While finding that the duties aren't temporary, the court found that deducting them wouldn't amount to a double remedy and that they're not remedial. The court's analysis was partially based on Commerce's previous analysis, which found that Section 201 safeguard duties are not U.S. import duties.

The problem is that the court looked at whether Section 232 duties are "dissimilar enough" from Section 201 duties to find whether Section 232 duties aren't special import duties, when the comparison should have been between Section 232 duties and ordinary customs duties (OCDs), Nippon said.

"NSC respectfully submits that the question is not close; rather, a complete analysis that takes into account all relevant aspects of the statute, its legislative history, the particular facts upon which the Section 232 steel duties are based, and the general revenue purpose of OCDs reveals that the Department's determination on this point is arbitrary and unreasonable, and does not deserve deference," the brief argued.

What CIT missed was that Section 232 duties aren't intended to amass U.S. revenue, Nippon argued. The duties are expressly intended for national security. That is, the duties are purportedly needed so that the U.S. industry for key products -- in this case steel and aluminum -- can build up its capacity to a point so as to not be as reliant on imports of that good. Looking at actual ordinary customs duties, it's clear their purpose is to generate revenue, Nippon said.

"The fact that Section 232 duties require some finding of adverse effects of imports on the industry concerned before they are imposed, just like AD/CV duties and Section 201 duties, indicates that Section 232 duties do not have a general revenue purpose like OCDs," the brief said. "Consequently, again, Section 232 duties must be "special" duties and cannot be 'United States import duties.'"

Nippon also argued that the precedent established under the U.S. Supreme Court case Murray v. The Schooner Charming Betsy means U.S. laws must be consistent with the country's international obligations absent clear congressional intent. In this case, treating Section 232 duties as standard U.S. import duties results in a violation of WTO commitment by exceeding bound tariff rates on goods from Japan, another WTO member.

"In sum, interpreting 'United States import duties' in 19 U.S.C. § 1677a(c)(2)(A) to include the Section 232 steel duties would result in the United States violating its obligations under Articles II: 1 (a) and (b) of the GATT 1994," the brief said. "Therefore, that interpretation of the statute is not supported by substantial evidence and not in accordance with law, because the Charming Betsy canon requires U.S. statutes to be interpreted consistent with the United States' international obligations absent clear Congressional intent to violate international law, which does not exist here."