Leibowitz on Trade: Court Considers Constitutionality of Section 232

The case was brought by the American Institute for International Steel (AIIS) and two of its member companies, against the United States and the Commissioner of Customs Kevin McAleenan. For that reason, the case is titled AIIS v. McAleenan. 

The plaintiffs want to overturn the steel tariffs on the ground that the statute authorizing those tariffs is contrary to the United States Constitution. Congress, AIIS alleges, gave the president more power over tariffs than is permissible under the Constitution. Basically, the legislative power in the federal government rests with Congress. Congress cannot pass a law that gives legislative authority to the president without violating the fundamental principle of separation of powers. That’s what this case is about.

Plaintiffs say that the Section 232 statute gives the president power to declare that imports of an article “threaten to impair national security” (subject to a report by the Secretary of Commerce that also cites “national security”), and then the president can take any action to “adjust imports” that he thinks is appropriate. This, plaintiffs say, is an excessive delegation of legislative power, because the statute lacks any “intelligible principles” limiting the president’s discretion.

The government countered that the issue of excessive delegation was decided by the Supreme Court in 1976 in the case of Algonquin v. United States. That case dealt with oil import restrictions. The issue of excessive delegation was raised in that case, and the Supreme Court held that there was not excessive delegation.

Much of the argument centered around the Algonquin case and whether it was binding in this case. The three-judge court asked very penetrating questions of both sides. Algonquin decided that an import licensing scheme was a lawful “import adjustment” in the context of that case, which dealt with oil imports. Indeed, most Section 232 actions since 1962 have dealt with oil imports.

Another major issue concerned whether the president’s decision (the proclamations announcing the tariffs) were subject to court review at all. Not surprisingly, the government contends the decision is not subject to court review. Plaintiffs, perhaps more surprisingly, agreed. The absence of meaningful judicial review may add strength to the argument that the whole statute must be struck down, but even that may not be enough.

The reality of judicial review is more complex than either party acknowledged—judicial review depends on many factors. In general, presidential decisions are subject only to limited review—clear misconstruction of the authorizing statute, or procedural correctness. The parties did not mention the prospect of court review of the Commerce Department’s report. That report, as you know, is a legal requirement for the president to have the authority to take the actions he took.

The court also mentioned the letter from Secretary of Defense Mattis, which essentially took national defense off the table. The letter from last December stated that defense requirements for metals were less than 3 percent of domestic production, and that there was no realistic prospect of any harm to defense preparedness by reason of steel imports.

That leaves only the issue of the connection between the U.S. economy and steel production. The Section 232 statutory language talks about impacts on the American economy from imports in terms of lost jobs, harm to communities, etc. The government and the plaintiffs agreed that the steel case was the first that relied solely on economic arguments to restrict imports in a Section 232 case.

This is an important case with potentially major impact on steel producers and consumers. The argument did not discuss the possibility that overturning the steel tariffs would disrupt the market and give many companies potential claims against the government. Even though it was not mentioned, the implications of this decision were clearly on everyone’s mind.

A decision in the case is expected sometime in 2019, probably by spring—but there are no guarantees of that. 

Lewis Leibowitz

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