Leibowitz on Trade: Court Cases, Tariffs and Quotas

After two years, the legality of the Section 232 tariffs is wending its way through the courts. One of the early cases was brought by the American Institute for International Steel and two of its members, Kurt Orban Partners and Sim-Tex. The case challenges the constitutionality of Section 232 in its entirety. The plaintiffs argue that the statute is a blanket transfer of the power to impose tariffs and other import restrictions from Congress to the president. Under the Constitution, the legislative power, including the power to regulate international trade, is vested exclusively in Congress and Congress cannot give this power away.

The federal courts have historically been reluctant to strike down statutes on the ground of excessive delegation of legislative power. In March 2019 the Court of International Trade, which heard the case in the first instance, ruled that the issue of delegation under Section 232 was decided by the Supreme Court in a 1976 case. Under precedents of the Supreme Court, lower courts are duty-bound to follow the precedents of higher courts. The plaintiffs appealed the decision to the Court of Appeals for the Federal Circuit, which is the next court in line. Before that, the plaintiffs petitioned the Supreme Court to take the case immediately; it is lawful for the Supreme Court to take a case before normal appeals are concluded, but it is rare. The Supreme Court declined to take the case last June.

The parties (the plaintiffs and the government) briefed the constitutional issues and participated on Friday in oral argument before a three-judge panel on the Court of Appeals for the Federal Circuit (Judges Schall, Taranto and Stoll). The arguments were, as is customary, essentially a reprise of the written briefs. The government argued that the president has essentially unlimited authority to determine the meaning of “national security” because the definition of “national security” is a “judgment call” of the president without any guidance from Congress. This is the essence of the “delegation” issue.

The case has now been submitted to the three judges, and a decision is expected within the next few months. The arguments did not telegraph much to indicate how the judges will approach the case. The central issue is whether the 1976 Supreme Court case really controls the AIIS case. The government argues that it does, and the plaintiffs argue that it does not.

If the government wins the case in the Federal Circuit, the plaintiffs will be able to appeal directly to the Supreme Court, which could, but does not have to, take the case. If the plaintiffs win the case in the Federal Circuit, the government will very likely appeal the decision. The Supreme Court takes cases the government loses more often than it takes cases that go the other way. At this point, however, little else is certain.

One thing that is certain is that, if the Appeals Court finds that the old case is binding, the plaintiffs will argue that the Supreme Court should take the case and overrule the 1976 case. They cannot legitimately ask the Court of Appeals to do the same. In short, there is, whatever happens in the Federal Circuit, still a lot of uncertainty.

A few other cases challenge various aspects of Section 232, and I’ve written about them previously. One case challenges the 50 percent tariffs on Turkish steel imports; another challenges the procedures and results of product exclusion requests; a third has challenged the Commerce Department’s report that was submitted to the White House just two years ago.

If one or more of these cases succeeds, and the Section 232 tariffs must end, how will that affect the steel business? That is probably more uncertain than the outcome of the cases challenging Section 232. It is very unlikely to lead to an immediate surge in steel imports because of lead times for deliveries and other trade remedies that will kick in (e.g., antidumping and countervailing duties). As I’ve noted before, the impact of the Section 232 tariffs is negative for most steel users and isn’t really helping steel producers. Recent articles are instructive: Wetherbee, the chairman of Allegheny Technologies, recently wrote in the Wall Street Journal in support of the Section 232 tariffs, but only if his company gets a product exclusion—not a ringing endorsement of the policy; and U.S. Steel has voted with its feet, buying a large piece of Big River Steel, a new electric furnace flat-rolled facility in Arkansas—not a ringing endorsement of the future of blast furnace integrated steel production.

There will, no doubt, be some winners and some losers if the Section 232 tariffs go away—perhaps more winners than losers. But the world will go on, and the problems of global overproduction will remain with us, as they will even if the Section 232 tariffs continue. To date, there is no evidence that overproduction problems have been or are likely to be reduced because of the Section 232 tariffs..

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