A new federal court ruling has invalidated some of President Trump’s “national security” tariffs, and in the process addressed one problematic procedural aspect of one of the worst U.S. trade laws on the books. Congressional action is still needed, however, to fix the statute’s many other problems.
This week, the U.S. Court of International Trade ruled against the Trump administration’s January 2020 action (Proclamation 9980) to expand tariffs of 25% on steel and 10% on aluminum, implemented pursuant to Section 232 of the of the Trade Expansion Act of 1962, to “derivative” (downstream) products like nails and car fenders. As we discussed in a recent policy analysis, Section 232 allows the president to “adjust” imports that “threaten to impair the national security,” but the statute suffers from numerous procedural and substantive flaws – errors that allow the executive branch to declare imports of almost anything a threat and cut procedural corners in restricting those imports.
The new USCIT case, brought by PrimeSource Building Products, Inc., addresses one of those corners, which we discussed in our paper:
After the tariffs went into effect, an importer of Turkish steel sued the Trump administration in the USCIT, arguing (among other claims) that the president cut corners in the procedures required by law. In November 2019, a unanimous three‐ judge panel agreed that “the President’s expansive view of his power under Section 232 is mistaken, and at odds with the language of the statute, its legislative history, and its purpose.”
Despite the court’s order that the Trump administration’s “expansive view” of presidential power is “mistaken,” however, President Trump soon advanced an even more expansive view of his power. On January 24, 2020, Trump announced that he was broadening the original “national security” tariffs to include “derivative” steel and aluminum products such as nails, pins, and staples. Again, he pointed to the original proclamations as his source of legal authority—the same justification that the USCIT had denied weeks earlier. Furthermore, the tariffs were scheduled to go into effect on February 8, 2020, just 16 days after the announcement, leaving little room for public consultation and thorough consideration of the impact of such actions. Several companies filed lawsuits against these tariffs at the USCIT, challenging the actions being taken outside Section 232’s prescribed 90‐ day window, the lack of public consultations, and disrespect to their due process. Since February 13, 2020, the USCIT has granted injunctions to these companies, preventing U.S. Customs and Border Protection from collecting tariffs on their “derivative” steel and aluminum imports, until it hears their cases.
Trump’s derivatives tariffs clearly violated the law’s time limits for implementing an “action” against imports (the president has 90 days to decide whether to act, and 15 more days to take any such action), and they were a prime example of cascading protectionism. On the latter point, the Trump administration admitted as such in the proclamation expanding the Section 232 tariffs to steel and aluminum “derivates” where it asserted that the original tariffs (25% on steel and 10% on aluminum) had not achieved the administration’s initial capacity utilization goals, in part because the tariffs lead to price increases in steel and aluminum imports (as one would expect when you tax something), and this prompted industrial consumers to purchase “derivative” products from abroad, which ended up hurting domestic derivative products producers and depressing domestic demand for the tariffed metals.
The USCIT ruled narrowly on the former point (the deadlines for action). The court’s decision will likely be extended to other companies that filed lawsuits similar to Primesource’s and should be welcomed by free traders and importers – particularly U.S. construction companies that are now reeling from sky high materials prices.
It does not, however, solve the problem of Section 232.
As we explain in our paper, Trump did far more than simply ignore this procedural requirement in implementing the steel and aluminum tariffs and investigating other products under Section 232. His administration’s actions revealed several major substantive and procedural flaws in Section 232 – flaws that are in desperate need of reform but that the USCIT, by its own admission, won’t touch. Absent legislative action, the abuse of Section 232 will thus remain a serious risk – checked only by the president’s self‐restraint.
The ruling will also provide a test for the Biden administration because it can appeal the USCIT’s decision, thus keeping Trump’s derivatives tariffs alive, and defending Trump’s expansive (abusive) interpretation of executive power. Doing so, however, would not only hurt many U.S. companies (and the economy more broadly) but also provide a clear and unfortunate indication that the Biden administration – for all its talk of countering Trump’s trade abuses and restoring U.S. alliances – condones Trump’s approach to Section 232 and “national security” and might even seek to open pandora’s box even further.
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