DOJ Gives Hypotheticals in Which Section 232 Would Violate Procedural Limits, During CAFC Oral Argument

January 11, 2023 by Jacob Kopnick|Top News

The U.S. Court of Appeals for the Federal Circuit, during Jan. 10 oral arguments, heard disputes over whether the court should follow the Court of International Trade in setting aside Section 232 national security tariffs on derivative products made of steel and aluminum. Seeking to differentiate the appeal from the Federal Circuit's decision in Transpacific Steel v. U.S., in which the court said the president can take certain Section 232 action beyond procedural deadlines, counsel for plaintiff-appellants PrimeSource Building Products, Oman Fasteners and Huttig Building Products said the matter is different for derivative goods, while the government said Transpacific has settled the matter (PrimeSource Building Products v. U.S. , Fed. Cir. # 21-2066).

In Transpacific, the Federal Circuit said that President Donald Trump was allowed to raise the duties 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 (see 2104050049). The court said that so long as a tariff move is part of the president's original "plan of action," further duties can be levied beyond the statute's procedural limits. Questions lingered, however, over how this would impact the remaining litigation over the president's use of Section 232. Some lawyers differentiated the tariff hike on the same products in the Transpacific case from an extension of the tariffs to new products in the PrimeSource case (see 2107150051).

The dispute was the central question raised in front of the appellate court during the oral arguments in the PrimeSource case. Meen Geu Oh of DOJ said that the question is whether the expansion of the Section 232 duties to derivatives is so divorced from the original plan of action so as to retrigger the statute's procedural requirements. Oh answered the question firmly, declaring that a square application of Transpacific decides the matter. The president received notes from the Commerce secretary laying out how foreign steel makers were using derivative goods to circumvent the duties and, in his proclamation, described how imposing duties on derivatives plays toward the goal of establishing a certain domestic utilization rate of steel and aluminum.

Judge Raymond Chen, however, expressed a concern that the government's reading of the statute grants the president boundless authority. The judge, somewhat facetiously, asked Oh to make him feel better about what boundaries the government believes are set up around the president under the statute. Oh said he believes Transpacific "laid out pretty decent guardrails" under Section 232 such that the president may not take action unrelated to the original plan of action without undertaking the procedures required by the statute again.

"The test is whether it's in-step with what the president did in the initial implementation of his course of action, and whether it fulfills that implementation objective, and then it says, 'Let's take each subsequent proclamation on a case-by-case basis,'" the DOJ lawyer said. Judge Kara Stoll then asked Oh whether there were any circumstances under which there wouldn't be a continuing course of action given that the secretary did not report it to the president or it was outside the bounds of the original proclamation.

"I could think of proclamations where if there was a steel report and the president said, 'I want to cover neckties.' That's clearly out of bonds," Oh responded. "There are probably closer questions, and I'm not exactly sure if this qualifies, but if there was some report that said we need a 50% domestic capacity utilization rate, and 50 years later, the president issues a proclamation saying, 'I'd rather see 100%,' there's probably a much better argument there that that's not exactly in line with the stated implementation objective, so there could be that issue. But I think the cases need to be taken on a case-by-case basis, which is what Transpacific recognized."

Andrew Caridas, counsel for Oman Fasteners and Huttig, argued that since there is no mention of derivative products in the president's original plan of action, the president cannot violate the statute's procedural guardrails to impose tariffs on these products. Stoll asked whether the appellees would still have a case if the president's initial proclamation referred to derivative products. Caridas, and also Jeffrey Grimson, counsel for PrimeSource, said that they would not be standing in front of the court that day if indeed that were the case.

Judge Richard Taranto further questioned the appellees, asking Grimson about the relationship between derivatives to the original goods subject to the tariffs. The judge asked whether, if the point is to maintain a high domestic utilization capacity rate and foreign steel makers start using derivatives to circumvent the issue, extending the duties onto derivative goods functions as a part of the original plan of action? Grimson said that this theory is not complicated, meaning that it would not have been difficult for the president to understand this and abide by the law and include derivatives in the original proclamation.