Federal Circuit Rejects Broad Challenge to Section 232 Tariffs

The U.S. Court of Appeals for the Federal Circuit in a June 9 opinion dismissed a broad challenge to President Donald Trump's Section 232 steel and aluminum tariffs. The plaintiffs, led by USP Holdings, argued that the Commerce Department report preceding presidential action violated the law since it failed to outline an imminent threat to the domestic industry as required by the statute and was unsupported by substantial evidence. A three-judge panel at the court ruled against these arguments, holding that there is no "imminence requirement" in the statute and that the threat determination is not reviewable under the "arbitrary and capricious" standard since the secretary's action "is only reviewable for compliance with the statute."

Judge Timothy Dyk, author of the opinion, also ruled that the statute grants the president the discretion to set the nature and duration of the tariffs. Judge Raymond Chen issued a partial dissent over whether the threat determination is judicially reviewable. Applying the standard used by the majority in a 2003 Federal Circuit opinion, Chen said that the commerce secretary's report was reviewable, but the judge said he believes the 2003 opinion was wrongly decided after looking at Supreme Court precedent.

"We're disappointed in the result," said Lewis Leibowitz, counsel for the plaintiffs. "If we are pleased about anything it's that the court has determined that the Commerce determination is subject to judicial review, and that's useful, but we're obviously disappointed that the judgment was affirmed, and we're looking at our options."

In February 2021, the Court of International Trade issued its decision in the case, denying the broad challenge to the Section 232 tariffs (see 2102040026). The trade court rejected all the plaintiffs' claims, which included the arguments that the secretary's report failed to establish an imminent threat to the domestic industry, that the threat determination was not backed by substantial evidence and that the president erred by not laying out the nature and duration of the tariffs.

Judges Dyk, Chen and Haldane Mayer affirmed the lower court's positions on all the claims. Responding to the imminent threat arguments, the judges ruled that the statute imposes no imminence requirement. "The factors that the President and Secretary are directed to consider in making their determinations do not mention imminence but focus instead on long term health of and adverse effects on the relevant domestic industry," the brief said.

As for the substantial evidence claims, the court said that the threat determination is not reviewable under the Administrative Procedure Act's arbitrary and capricious standard. Dyk wrote that this is because the standard governing the secretary's report is the same as for the president's action. And since the president's action is only reviewable for "compliance with the statute," so is the report's, meaning that it cannot be reviewed under the substantial evidence standard.

For the nature and duration challenge, the court said that the statute grants the president discretion to set the limits how he pleases. The judges based the decision on the key Transpacific opinion at the Federal Circuit, which gave the president the power to alter the Section 232 tariffs beyond procedural deadlines (see 2107130059).

At CIT, Judge M. Miller Baker penned a partial dissent arguing against the fact that the president himself can be named as a defendant. The Federal Circuit agreed with Baker in its opinion, ruling that the trade court should have dismissed the president as a defendant. However, the court said it still had jurisdiction to consider challenges to the president's actions in lawsuits against subordinate officials in charge of implementing presidential action. The judges then reversed CIT's decision to find that the secretary's report is not a final agency action.

This point stood out as the only one garnering dissension among the ranks of the three judges. Dyk and Mayer said that a 2003 Federal Circuit decision, Corus Group PLC v. International Trade Commission, instructs the court to find that the Secretary's report is a final agency action. Since the report is required in order for the president to take action, it is thus a final agency action, the opinion said.

While Chen agreed that applying this standard would make the determination reviewable, the judge said that the Corus decision was wrongly decided since it doesn't square with two Supreme Court decisions that say that a final agency action is one that carries direct consequences for a party. Under the two SCOTUS decisions, the secretary's report would not clear this standard, Chen said.

"Because the Secretary’s report and recommendation by themselves carry no direct consequences for or effect on any party, under Franklin and Dalton, the report and recommendation should constitute unreviewable, non-final agency action," the judge said.

(USP Holdings, et al. v. United States, Fed. Cir. #21-1726, dated 06/09/22, Judges Timothy Dyk, Haldane Mayer and Raymond Chen. Attorneys: Lewis Leibowitz of The Law Office of Lewis E. Leibowitz for plaintiffs-appellants; Meen Geu Oh for defendants-appellees in U.S. government)