Last week saw two developments related to Section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. § 1862).
On Friday, February 28, 2020, the US Court of Appeals for the Federal Circuit ("Federal Circuit") held the Trump administration’s use of Section 232 to justify tariffs on certain imported steel products did not violate the US Constitution.
On March 8, 2018, the Trump administration imposed the tariff of 25 percent under authority granted to the president by Section 232. The president based his decision on a report by the Commerce Department “that the present quantities and circumstances” of steel imports “are ‘weakening our internal economy’ and threaten to impair the national security as defined in Section 232.”1
The American Institute for International Steel ("AIIS"), a trade association representing steel importers, sued to block the tariffs, alleging that Section 232 was unconstitutional on its face because the authority it conferred on the president constituted legislative power that is Congress’ alone under Article I of the Constitution. The AIIS sought an injunction against enforcement of the tariff imposed under Section 232.
The US Court of International Trade ("CIT") rejected AIIS' claim, based on a longstanding Supreme Court decision that upheld the constitutionality of Section 232, finding that an unconstitutional delegation of legislative authority to the president does not occur where Congress, through legislation, has established intelligible principles to which the president must conform.2 The Federal Circuit agreed with the CIT and noted that the administration complied with the requirements of Section 232 in setting the tariffs, including through the finding by the Secretary of Commerce that steel imports threatened national security.3
What May Happen Next
Following the issuance of the Federal Circuit's decision, the AIIS has indicated it will file for Supreme Court review again and hopes the justices can act on the petition before adjourning in June.4
The day before the Federal Circuit's decision the president issued a memorandum announcing his decision not to take action under Section 232 to adjust US imports of titanium sponge.
The memorandum notes the finding by the Secretary of Commerce in a November 29, 2019, report that imports of titanium sponge threaten to impair the national security of the United States. According to the report, imports of titanium sponge accounted for 68 percent of all titanium sponge consumed in the United States in 2018, a level that has put the sole remaining US titanium sponge producer’s operations under severe financial stress. The secretary concluded that if the remaining US facility ceases operations, the United States will have no active domestic capacity to produce titanium sponge for national defense and critical infrastructure needs.
The memorandum notes that over 94 percent of titanium sponge imports in 2018 were from Japan and cites the important security relationship that exists between the two countries, including a shared commitment to eliminating the North Korean nuclear threat, a decades-old military alliance, and a strong economic and strategic partnership.
Although the president concurred with the secretary's conclusion that imports of titanium sponge threaten to impair the national security of the United States, he also agreed with the secretary that no action to adjust imports be taken at this time since other measures are more likely to be effective. Those alternative measures include:
- The creation of a working group led by the Secretary of Defense and the Secretary of Commerce that would include other executive department heads and agencies, along with their counterpart agencies in Japan, to identify agreed-upon measures that would ensure continued access to titanium sponge in the United States for national defense and critical industries in an emergency.
- Appropriate action by the Secretary of Defense, including under the Defense Production Act (50 U.S.C. 4501 et seq.), to increase access to titanium sponge for national defense and critical industries and to support domestic production capacity.
What May Happen Next
The petitioner in this case, who is the sole remaining producer of titanium sponge in the United States, can appeal the president's decision to the Court of International Trade.
1 A similar report on aluminum imports was also released, and the president imposed a 15 percent tariff on certain aluminum products.
2 See discussion of Fed. Energy Admin. v. Algonquin SNG, Inc., 426 U.S. 548, 552 (1976) in American Inst. for Int’l Steel, Inc. v. United States, 2019-1727, No. 84 (February 28, 2020) at 13 ("AIIS").
4 Michael Cowden, "American Institute for International Steel again asks high court to intervene on Section 232," Fastmarkets.com, (February 28, 2020).