Section 232 'Derivative' Tariffs Not Part of Original Plan of Action, Illegally Imposed, Importers Tell CAFC

President Donald Trump's move to expand Section 232 steel and aluminum tariffs to cover "derivative" products beyond certain procedural timelines was illegal since it was not part of the Section 232 tariffs' original "plan of action," a group of three steel importers argued. Filing a response brief at the U.S. Court of Appeals for the Federal Circuit, the appellees took into account the Federal Circuit's previous ruling permitting a different tariff action beyond procedural time limits to argue that the expansion onto derivatives was illegal.

The case concerns a procedural step lying in the Section 232 statute that lets the president take specific tariff action within 105 days of receiving a report from the Commerce secretary. In a key decision on this issue, Transpacific Steel v. U.S., the Federal Circuit said that Trump was allowed to increase the duties just on Turkish steel beyond the 105-day deadline that runs from the Commerce report (see 2107130059), reversing a Court of International Trade decision that strictly applied the deadline. The court said that action could be taken beyond this deadline so long as it fell under the president's plan of action laid out in the original report.

Originally brought by PrimeSource Building Products, the derivatives challenge concerns not just a rate hike beyond the 105-day deadline but an expansion of the tariffs onto derivative products. Rather than just continue to make the argument struck down in Transpacific that action should not be permitted after the deadline, appellees Oman Fasteners, Huttig Building Products, Inc., and Huttig, Inc., argued that the derivative expansion was not part of any plan of action.

"[The expansion] does not 'adjust' the tariff imposed by [the original tariffs] on primary steel articles," the brief said. "It instead imposes a completely new 25 percent tariff on derivative steel articles. These derivative articles were not discussed in [the original tariffs] or any of the subsequent proclamations analyzed in Transpacific II. Thus, '[r]ather than upwardly adjust the tariffs imposed by a previous Section 232 proclamation, the action contested here imposed, for the first time, tariffs of 25% on a previously unaffected group of products.'"

The appellees also argued that since derivatives were not even mentioned in the Commerce report, they are precluded from being considered part of the original plan of action. The mention of derivatives "emerged from the ether," the brief said. The derivative tariffs also departed from the key findings of the Commerce report, the appellees argued. CIT even gave the U.S. an opportunity to bolster the record with any fact finding by the Commerce secretary that would support presidential action taken on derivatives. The government declined to proffer such evidence, and the appellees expressed their doubts over whether any such fact finding, to the extent that it exists, could authorize Section 232 action, especially given that it would have been conducted outside of a Section 232 investigation.

PrimeSource also submitted a reply brief in the case, arguing that the derivative tariffs fit within the staleness and "other reasons" exceptions laid out in Transpacific as to when the president cannot take tariff action beyond the time limits. PrimeSource argues that Transpacific established that the president can exceed the authority delegated to him by Congress by acting outside the 105-day deadline if the action is based on stale information -- information such as the trade statistics that are in constant flux on which the president fastened his initial action.

"The Government waived the opportunity to provide any additional information on the 'assessments' from the Secretary that the President subsequently claims to have relied on in imposing tariffs on steel derivative products," the brief said. "The Government's claim before this Court that the President's actions were lawful based on the Steel Report must, therefore, be rejected. The President's failure to abide by the time constraints in Section 232 caused him to overstep the authority delegated to him by Congress in Section 232 because, in relying on stale information, he committed a significant procedural violation by imposing tariffs on steel derivative products without the required prior threat finding by the Secretary."