Presidential Proclamation 9980 expanded the existing Section 232 tariffs on aluminum and steel imports to certain derivative products effective February 8, 2020. Companies have since challenged the expansion of the tariffs and obtained initial relief in the form of preliminary injunctions.
The US Court of International Trade (CIT) issued the first such injunction on February 13, 2020 in an appeal filed by PrimeSource Building Products, Inc. (PrimeSource), a US importer of steel derivative products, challenging the expansion of the tariffs on constitutional and procedural grounds.
In its complaint, PrimeSource claimed that:
- The expansion of the Section 232 tariffs was procedurally deficient because the Department of Commerce did not provide reasonable notice to the public, did not hold hearings, and did not follow other procedures required of a Section 232 investigation
- The expansion of the Section 232 tariffs occurred long after the statutory period to adjust imports had lapsed
- The failure to provide notice and opportunity to comment prior to the expansion of the tariffs violated PrimeSource‘s due process rights under the Fifth Amendment of the Constitution and
- Section 232 is unconstitutional because it represents an over-delegation by Congress of its legislative powers to the President by failing to set forth an intelligible principle for the President to follow when implementing Section 232.
The preliminarily injunction prevents US Customs and Border Protection (CBP) from collecting the expanded Section 232 duties on entries of covered products by PrimeSource retroactive to the effective date of the expanded tariffs and remains in effect until the CIT renders its final judgment. The injunction was the result of an agreement between PrimeSource and the US government. As stated in the court order, the agreement was reached “without the defendants admitting that the plaintiff has demonstrated a likelihood of success on the merits.” Finally, the injunction establishes bonding requirements for PrimeSource to cover the expanded tariffs that would be otherwise due in the event final judgement is rendered against PrimeSource.
On February 21, 2020, the CIT issued another preliminary injunction blocking the expanded Section 232 tariffs on imports by a second company, Oman Fasteners LLC (Oman Fasteners), a US importer of steel nails. Oman Fasteners filed its own complaint on February 7, covering claims similar to those of PrimeSource. The injunction in Oman Fasteners’ appeal is substantially similar to that in the PrimeSource appeal.
Other US companies weigh in
The recent CIT actions have prompted companies to seek to intervene both for and against the imposition of the expanded Section 232 duties or to file their own appeals.
Recently, a group of ten US importers of derivative steel articles sought to intervene in support of the complaint filed by PrimeSource. In their motion, the importers claim that they have been “severely and adversely impacted by the imposition of the additional tariffs, without any opportunity to provide input into the decision.” Intervention is typically permitted when the intervening party can demonstrate a common question of law or fact with the main action before the court.
Subsequently, at least five additional importers have filed complaints with the CIT alleging that the expanded tariffs violate the law. These additional plaintiffs include Huttig Building Products, Inc. (Huttig), New Supplies Co. Inc., Fry Fastening Systems, Turkey-based Aslanbas Nail and Wire Co., and Lithuania-based LitNaglis JSC. In addition to arguments already raised by PrimeSource, Huttig also alleges that the expansion of the tariffs to derivative steel and aluminum products in Proclamation 9980 exceeded the scope of the original Section 232 tariffs and is not rationally related to the purported threat to the national security of the United States.
Today, the CIT issued a preliminary injunction in Huttig’s appeal similar to the preliminary injunctions in the prior appeals by PrimeSource and Oman Fasteners.
Furthermore, some US companies have sought to intervene on the side of the defendant – the United States – in support of the expanded Section 232 tariffs. On February 21, 2020, a coalition of seven US steel nail manufacturers filed a motion to intervene in the case brought by Oman Fasteners. According to the coalition’s motion, the manufacturers account for “a super-majority of the US production of the steel nails included in Annex 2 to Presidential Proclamation 9980.” The motion includes the argument that since the issuance of the Proclamation, coalition members “have experienced significant increases in orders, leading to increases in production, employment, and purchases of raw materials from upstream steel producers” and that these “are directly intended benefits of the Proclamation.” The motion also states that “imports from Oman Fasteners . . . are a major cause of the surge in imports of steel nails into the United States that led to the Proclamation.”
Further important developments
On February 28, 2020, the US Court of Appeals for the Federal Circuit affirmed the CIT decision from March of 2019 that Section 232 is constitutional and does not violate the non-delegation doctrine. The Federal Circuit held that it could not overturn precedent established in the Supreme Court’s decision in Fed. Energy Admin. v. Algonquin SNG, Inc., 426 U.S. 548 (1976) which found Section 232 to be a constitutional delegation of authority. In particular, the Federal Circuit noted that “there has been no material change to the judicial review of presidential action pursuant to section 232 that undermines the controlling force of Algonquin.”
As of this publication, the CIT has not rendered final judgement in any of the above-mentioned cases, and the two preliminary injunctions issued by the CIT (covering imports by PrimeSource and Oman Fasteners) remain in place.