Leibowitz on Trade: Initial Thoughts on Challenging Denied Exclusions

“[The International Trade Administration of Commerce] recommends finding, based on all of the evidence presented, that the product referenced in the above-captioned exclusion request is produced in the United States in a sufficient and reasonably available amount and of a satisfactory quality, and recommends denying the request for an exclusion.” That language is the sum total of analysis in the decision memo of the BIS.  Some companies are outraged about these denials, which may jeopardize the continued viability of steel rerollers, especially in the western U.S. People are asking, “Is there something I can do?”

I will begin my answer by uttering the words that clients find frustrating: “It depends.” Let’s put some possible facts on the table as a starting point. Say that Downstream Steelco has filed a request to exclude from the steel tariffs a particular size and grade of slab. Downstream claims in the request that the precise steel product they need is not “reasonably available” from domestic sources because domestic steel producers do not offer the slabs for sale to outside customers.

In response to the exclusion requests, Upstream Steel files an objection claiming that it is capable of producing the exact product for which Downstream requests an exclusion from the tariffs, and that the request for exclusion is excessive. Upstream does not claim that it actually offers the product for sale to downstream rerollers.

BIS denies the exclusion request, citing that “all the evidence” shows that the product is “produced in the United States in a sufficient and reasonably available amount,” without further explanation.

Outraged at the denial, Downstream calls their attorney, asking if they can sue Upstream for making a false statement. 

There are many avenues to approach this problem. I will highlight only a few:

Suit Against the BIS—To call the BIS decision memorandum inadequate is an understatement. The exclusion requests by a number of companies and the objections by domestic producers raised a large number of issues that were not addressed at all in the decision memorandum. One of the key issues is whether a product that is not offered for sale by domestic producers can possibly be “produced…in a reasonably available amount.” A company denied an exclusion on grounds not permitted by the presidential proclamation, for example, might have grounds to appeal the denial. But the government would vigorously argue that it could deny any exclusion request. 

Suit Against the Objecting Party—Downstream can sue Upstream for an injurious false statement. However, was the statement actually false? Upstream may not have actually said it offered the product for sale, only that the product was “produced in the United States.” Any lawsuit should be based on the violation of a duty of truthfulness that Upstream owes to Downstream or the government. 

A civil suit could result in a damage award, perhaps based on “tortious interference with prospective advantage.” In order to win, Downstream would have to show, among other things, that the false statement was a tortious act (against public policy) and the “proximate cause” of the Department’s denial. 

The criminal statute is clear evidence of an act against public policy, if the statement was in fact false.

False Claims Act—Some have mentioned a possible False Claims Act theory for issues such as this, but those actions generally relate to false claims that result in a government payment. Here, the denial of an exclusion request would benefit a private party rather than the government. 

No doubt other legal theories could be developed and very well might be. Any lawsuit would certainly be vigorously contested by any company that fits the description of Upstream, and any lawsuit against the Commerce Department for wrongly deciding an exclusion request would also be defended vigorously. 

Lewis Leibowitz

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