CAFC Again Says President Can Make Restrictive Modifications to Section 201, Refuses to Ditch Maple Leaf

The U.S. Court of Appeals for the Federal Circuit in an Aug. 13 opinion again affirmed the president's ability to make trade-restrictive modifications to Section 201 safeguard tariffs. Judges Alan Lourie, Richard Taranto and Leonard Stark partially granted a group of solar cell exporters' motion for panel rehearing of its 2023 decision, which came to the same conclusion, so that the court could conduct a de novo review of the applicable statute, instead of reviewing whether the president's interpretation of the law was a "clear misconstruction" of the statute.

However, the panel said the case wasn't an "appropriate vehicle" for deciding whether to entirely scrap the "clear misconstruction" deferential standard generally, as requested by the exporters, led by the Solar Energy Industries Association.

The court's judges in active service declined to hold a full court rehearing of the case.

In 2023, the appellate court said President Donald Trump didn't clearly misconstrue the statute -- 19 U.S.C. 2254(b)(1)(B) -- when he revoked a Section 201 tariff exclusion on bifacial solar panels (see 2311130031). The statute says existing safeguards can be "reduced, modified, or terminated," leading SEIA to claim that this language, particularly the word "modified," doesn't include trade-restrictive action. The court said nothing in the statute limits the president's authority to make trade-liberalizing moves.

SEIA applied for panel rehearing and rehearing en banc -- an effort bolstered by the U.S. Supreme Court's recent decision in Loper Bright Enterprises v. Raimondo, which eliminated the Chevron principle of deferring to federal agencies' interpretations of ambiguous statutes (see 2406280051). The trade group said that Loper Bright, along with various other high court and CAFC decisions, compels the eradication of the "clear misconstruction" standard, which was established in the CAFC decision Maple Leaf Fish Co. v. U.S., and that the law should be reviewed de novo (see 2407090054).

In response, the same three judges said a de novo review of Section 2254(b)(1)(B) leads to the same result, so the tariff exclusion revocation is sustained and there's no need to visit the Maple Leaf standard more broadly.

Stark, who wrote the opinion, said the statute's text, the law's legislative history, the broader structure and history of the Trade Act and the act's general definition of "modification" support the government's interpretation of the law. Stark said Congress ordinarily uses words in line with their "well-understood meaning" and the "well-understood" meaning of "modify" includes "moderate changes in either direction."

Echoing the original decision, Stark then discussed the act's legislative history, which includes an unenacted version of the law that defined "modify" as not including an increase in tariffs. That an "unambiguous prohibition on trade-restrictive modifications was deleted during the legislative process" stands as "strong evidence" that Congress didn't want to limit the scope of the term "modify" only to trade-liberalizing changes.

The panel also sustained its original decision rejecting SEIA's policy concerns, which said the government's interpretation would lead to an "impermissible loophole." The court said "Congress has cabined the President’s modification authority in other significant ways (e.g., by imposing a phase-down requirement), though we also recognized that Congress is free to create 'loopholes' if it wishes.”

Stark also addressed SEIA's claims that Trump committed procedural errors in revoking the tariff exception. The statute says the president can take such tariff action if he "determines, after a majority of the representatives of the domestic industry submits to the President a petition requesting" the action "on such basis, that the domestic industry has made a positive adjustment to import competition." The U.S. said action could thus be taken based on a report from the ITC, while SEIA said "on such basis" refers to a request from the domestic industry.

The panel said that while both readings are "reasonable," the government's reading is "more reasonable." The word "such" as used in "text like this typically refers to something that has already appeared earlier in a sentence or paragraph." Because the law here "refers to the domestic industry's positive adjustment to import competition only after 'on such basis,' the plain language of the statute is more supportive of the government's position."

"That commas subdivide the provision into several clauses does not alter our conclusions," the brief said.

Stark said the Trade Act's structure further supports this position, "as its reading of the statute promotes the Trade Act’s goals by predicating the President’s authority to act on his own Commission’s report -- an independent, expert analysis," instead of leaving it to an express industry petition. It would be "an unusual choice for Congress" to tell the president to base his fact-finding on claims from the industry when in the same provision the legislature lets the president wait until he gets a report from his own agency.

Regarding the law's requirement that before ordering tariff action the president must find the domestic industry has made a positive adjustment to import competition, the court sustained its previous finding that the law is "sufficiently broad" to include a finding that the domestic industry "has begun to make" the required adjustment. The provision is "written in the present perfect tense, which can be used to refer to an action that was completed entirely in the past as well as an action still in progress."

Lastly, Stark stuck with the panel's finding that the president isn't required to re-weight costs and benefits when modifying a Section 201 tariff. Despite SEIA's claims, the law "makes no mention whatsoever of cost-benefit determinations.”

(Solar Energy Industries Association v. U.S., Fed. Cir. # 22-1392, dated 08/13/24; Judges: Alan Lourie, Richard Taranto and Leonard Stark; Attorneys: Matthew Nicely of Akin Gump for plaintiff-appellees led by the Solar Energy Industries Association; John Brew of Crowell & Moring for plaintiff-appellee Invenergy Renewbles; Christine Streatfeild of Baker McKenzie for plaintiff-appellee EDF Renewables; Joshua Kurland for defendant-appellant U.S. government; Anastasia Boden for amicus curiae Cato Institute)