Trade Court Says Commerce's Rejection of Section 232 Exclusions Raises Process Questions

The Commerce Department failed to address contradicting that the U.S. industry couldn't timely provide tin mill products when it denied Seneca Foods' requests for exclusions from Section 232 steel and aluminum duties, the Court of International Trade ruled in an Oct. 18 opinion.

Judge Gary Katzmann said Commerce's treatment of six of Seneca's exclusion requests "raises broader questions about the administration of steel tariff exclusions." The agency didn't treat Seneca's evidence of past and present failure to secure an adequate amount of the tin mill products from the U.S. industry as evidence contradicting U.S. Steel's comments on its future capacity. Katzmann said that if this is the case, the administrative process "only perpetuates the precise result Commerce claims it wants to avoid: allowing domestic producers to object but then 'refus[e] to fill orders,'" the opinion said.

Seneca said a "purely prospective approach" to evaluating the U.S. industry's capacity "would be arbitrary and capricious." Katzmann noted, though, that the court need not rule on Seneca's "as-applied and facial challenges" since the remand proceeding "will likely provide a fuller context in which to assess such challenges, if pursued."

Seneca, a U.S.-based fruit and vegetable canning company, requested eight Section 232 exclusions in all -- five in October 2021, one in January 2022 and two in March 2022. U.S. Steel objected, arguing that, while it didn't have the capacity to fill Seneca's orders in 2020 and a good chunk of 2021 due to the COVID-19 pandemic, at the time of the importer's requests, it did have the capacity. The steelmaker also claimed that it supplied materials to Seneca in the prior two years and that it could make all of the requested quantity within a shorter time frame than the foreign suppliers.

The importer argued at CIT that the claims were "plainly false," noting that it placed orders with foreign suppliers after confirming that no domestic producers were able to supply the requested volumes (see 2307140071). In the end, Commerce denied all of the exclusion requests after finding that nothing in the record contradicted U.S. Steel's declaration that it could timely make and deliver identical products. At the trade court, the agency requested a voluntary remand for two of the exclusions in March 2022, which are differentiated from the other six requests because Commerce said it couldn't render a decision due to "uncertain issues with the request," despite having the same evidentiary record.

Katzmann ultimately granted remands for all eight exclusion requests, ruling that an open remand "is the appropriate remedy." While Seneca showed that the agency failed to consider certain evidence, it has not shown that the court must compel Commerce to grant the exclusion requests, he said.

The judge also discussed Commerce's apparent holding that Seneca's requested quantity was available through U.S. Steel's spot sales but not contract sales, given that the steelmaker was only offering additional spot and not contract volumes for 2022. "That determination was in error," Katzmann said. "Commerce did not clearly address evidence on the record that contradicted the conclusion that Seneca’s requested quantity was available through spot sales. Without explaining why, Commerce disregarded Seneca’s representations and evidence that emphasized that [U.S. Steel] was unwilling to offer any volume -- spot or contract -- and instead construed Seneca’s representations as limited to contractual volume."

It is not clear why any of Seneca's communications with U.S. Steel were limited to contractual sales, as opposed to any sales, from Commerce's explanation, the opinion said. Katzmann also found the U.S.'s claim that it's entitled to rely on certain factual statements in finding whether a party will comply with certain requirements unavailing. While U.S. Steel made a certified statement that it could fill all of Seneca's demand via spot sales, Commerce's obligation to review all data and create a proper explanation for its action "is unflagging," he said.

(Seneca Foods Corp. v. United States, Slip Op. 23-152, CIT # 22-00243, dated 10/18/23; Judge: Gary Katzmann; Attorneys: James Smith of Covington & Burling for plaintiff Seneca Foods; Kyle Beckrich for defendant U.S. government)