Dear AIIS Members & Friends:

Yesterday, a three-judge panel at the Court of International Trade heard a challenge to the Section 232 steel tariffs brought by American Institute for International Steel (AIIS) and two AIIS member companies. The AIIS legal challenge claims that Section 232 violates the US Constitution because it transfers authority over trade policy from Congress to the executive branch.

Below is coverage of yesterday’s hearing from the New York Times, Wall Street Journal and Law 360.

Additional information on the lawsuit can be found here. AIIS continues to seek support for this legal challenge. If you are interested in learning more, please contact AIIS President Richard Chriss at Chriss@aiis.org.

COURT TRANSCRIPT 

Headlines:

Trump’s Use of National Security to Impose Tariffs Faces Court Test
New York Times
By: Glenn Thrush
12/19/18

Court Questions Law That Underpins Trump’s Trade Policy
Wall Street Journal
By: William Mauldin
12/19/18

Trade Court Grapples With Trump’s Security-Based Tariffs
Law 360
By: Alex Lawson
12/19/18

Articles:

Trump’s Use of National Security to Impose Tariffs Faces Court Test
New York Times
By: Glenn Thrush
12/19/18

President Trump has weaponized tariffs to upend the global rules of international trade — but can his policies withstand the peanut butter test?

On Wednesday, a three-judge panel, deliberating in a federal courtroom in Lower Manhattan, considered the most far-reaching legal challenge to the president’s aggressive use of national security to justify placing levies on steel and aluminum imports from Europe as well as from Canada, Mexico, China and other nations.

The case, filed by an alliance of steel importers, revolves around an important constitutional question: whether a provision of United States trade law, known as Section 232 of the Trade Expansion Act of 1962, gives the president too much power over taxes and tariffs — powers that the founding fathers explicitly granted to Congress.

Mr. Trump has used Section 232 to impose tariffs on foreign steel and aluminum after a Commerce Department investigation determined the metals pose a threat to national security by degrading the American industrial base. Mr. Trump has also initiated investigations into whether imports of uranium, as well as autos, pose a national security threat and should somehow be limited.

Judge Claire R. Kelly of the United States Court of International Trade quickly cut to the heart of the matter, asking the Trump administration’s legal team if it could think of a single product or service that the president did not have the authority to tariff in the name of national security.

“Could he, say, put a tariff on peanut butter?” Judge Kelly asked, peering over her glasses.

Tara Hogan, the Department of Justice lawyer handling the case, declined to answer the question in yes-or-no fashion. Instead, she countered with a lengthy explanation of the process, which includes a Commerce Department investigation, required to determine if anything, even peanut butter, was a substance necessary to preserve national security.

“O.K. But I did not hear an answer on the peanut butter,” said Alan B. Morrison, a George Washington University Law School professor who argued on behalf of the plaintiffs.

The constitutional challenge is considered something of a long shot in legal circles because the Supreme Court almost never overturns a congressional decision to delegate power to the executive branch.

“There are very few cases, but the precedents all suggest that Congress can delegate this authority to the president, and he has a wide discretion when it comes to issues of national security,” said Mark Wu, a professor at Harvard Law School who studies international trade issues. “The question here is whether the court is going to use this case to demarcate any limits on what the president can do when it comes to tariffs.”

Still, the issues raised in the case — the widening use of national security concerns to justify trade barriers — were deemed important enough to warrant the appointment of the three-judge panel, the first time the court has assigned more than a single judge to a trade case since 2005.

“It would be the first time since the early New Deal era that courts ruled that Congress went too far in delegating its lawmaking powers,” Todd N. Tucker, a political scientist with the progressive Roosevelt Institute, wrote this year on the Lawfare website. “This is but the latest way that Trump’s aberrant behavior is prompting reactions that undermine longstanding norms.”

The trade law’s provision has been used previously — before Mr. Trump took office, there had been 26 investigations into whether imports pose a risk to American national security. In six of those cases, the president imposed a trade action, such as quotas, according to the Congressional Research Service.

But, according to Ms. Hogan, no president had used Section 232 to impose tariffs before Mr. Trump placed tariffs of 25 percent and 10 percent on steel and aluminum imports this past spring.

In June, the American Institute of International Steel, an association of companies that trade with the affected countries, filed a lawsuit attacking the law itself, after a legal challenge to Mr. Trump’s authority to use it was dismissed this year.

“We are challenging the law because no president before Trump ever used the law like this,” Mr. Morrison said. “The law has an opening, and he has taken advantage of it. There are no limits on what he can do.”

The judges in the case, all appointed by President Barack Obama, seemed to acknowledge the constraints placed on them by Supreme Court precedents, including the landmark 1976 case FEA v. Algonquin SNG Inc., which upheld the broad use of national security as a justification to impose quotas and licensing fees on imports.

But they also questioned specific provisions of the 1962 law granting the executive branch nearly unfettered authority to impose tariffs or fees on trading partners, especially the exemption of presidential decisions from judicial review.

And they quickly moved beyond hypothetical peanut butter scenarios to the national security justifications for the aluminum and steel tariffs.

Judge Gary S. Katzmann grilled Mr. Trump’s lawyers repeatedly about a letter from Defense Secretary Jim Mattis, which supported the administration’s efforts to limit imports but said the action should be aimed more squarely at China, rather than at allies like Canada. Mr. Mattis, in the memo, said imports of steel and aluminum accounted for a negligible percentage of materials used in the production of military hardware.

“I’m scratching my head about your rationale,” he said.

It is not clear when the court will decide in the case. Both sides have suggested they will appeal directly to the Supreme Court if they lose.

Court Questions Law That Underpins Trump’s Trade Policy
Wall Street Journal
By: William Mauldin
12/19/18

A tribunal of trade-focused judges raised constitutional questions over President Trump’s expansive regulation of trade, focusing on a national security law the president has used to impose tariffs on imported goods.

Judges at the U.S. Court of International Trade, presiding over a suit against the Trump administration brought by steel importers and foreign producers, quizzed administration lawyers on whether Congress has improperly delegated too much of its constitutional power to the president. The lawsuit targets Section 232 of the 1962 Trade Expansion Act, in which Congress delegated the president some of the authority to set tariffs.

“It seems Congress has given away an awful lot,” said Judge Claire Kelly. “Maybe it shouldn’t be able to do that.”

Mr. Trump has used Section 232 to impose tariffs on key industries in the name of national security. It was the rationale behind global tariffs of 25% on steel and 10% on aluminum products entering the U.S. earlier in the year, with the administration arguing a vibrant and viable steel industry is crucial for the nation to defend itself. The administration then granted exemptions to some trading partners, including Australia, in exchange for steel quotas.

“No president has ever used Section 232 in the way that President Trump has,” said Alan Morrison, the lead lawyer representing the international steel firms.

The court heard arguments on both sides Wednesday. Justice Department lawyers cited a U.S. Supreme Court ruling in the 1970s that upheld Section 232, and they defended Mr. Trump’s broad use of the law as part of a president’s special authority to make decisions based on national security and international relations.

“We would say that the area of foreign trade is within the president’s realm,” said Tara Hogan, a lawyer for the Justice Department.

The domestic steel industry has celebrated the president’s tariffs on steel imports, which have raised steel prices in the U.S. and led to wage increases for steelworkers. “We continue to strongly believe this case is without merit,” said Thomas Gibson, president of the American Iron and Steel Institute, a domestic industry association.

The lawsuit is a direct challenge to a cornerstone of Mr. Trump’s trade policies, filed at a court that specializes in hearing trade disputes. Beyond the tariffs on metals, the president has threatened to also affix tariffs on auto imports under the same national security rationale. A decision on the suit isn’t expected until 2019, and could take months. A loss would legally curtail the president’s discretionary power to use national security as a reason to impose punitive measures against a trading partner.

The president has other powers to impose duties or otherwise penalize trading partners, as Mr. Trump has done with tariffs, for example, on Chinese imports. But the president’s critics have cited the national security argument as an egregious example of presidential overreach, a theme that came up in the deliberations on Wednesday.

Judge Gary Katzmann noted that the White House proceeded with the steel tariffs even after Defense Secretary Jim Mattis, who is required to be consulted under the law, said very little steel and aluminum is needed for national defense purposes.

“I scratch my head a little bit about the rationality of a presidential action which ignores that,” he said.

Ms. Hogan, the lawyer for the Justice Department, sought to distinguish between national defense in the narrow sense and economic well-being as a broader aspect of national security, a point made frequently by Mr. Trump’s trade advisers.

The Justice Department lawyer told the court that the 1976 Supreme Court case, upholding presidential actions under Section 232, “has not been overturned, and this court is bound to follow it.”

The judges in the trade panel acknowledged the Supreme Court precedent and also questioned lawyers about another federal case on the delegation doctrine that the court has agreed to hear.

The importers and their lawyers say the 1976 case was focused on the action the president took at the time rather than the law overall. They say if they lose at the Court of International Trade they will appeal, and are ready to take the case to the U.S. Supreme Court.

Previously known as the Customs Court, the Court of International Trade is a part of the federal court system that handles trade-related cases from around the country. Cases are usually handled by a single judge in New York, but in rare circumstances, including on some constitutional questions, a three-judge panel presides. The court’s decisions can typically be appealed to the federal appeals court in Washington, D.C.

Washington trade lawyers describe efforts to strike down Section 232 as a long shot. Still, some conservative justices, including Trump appointee Justice Neil Gorsuch, have recently embraced limits on the delegation of constitutional powers, although the delegation doctrine hasn’t proved fatal to a federal law in decades.

Trade Court Grapples With Trump’s Security-Based Tariffs
Law 360
By: Alex Lawson
12/19/18

A U.S. Court of International Trade panel posed tough questions Wednesday regarding President Donald Trump’s authority to impose tariffs based on national security, with at least one judge voicing skepticism about the scope of the law he used to set levies on steel and aluminum earlier this year.

The case, spearheaded by the American Institute for International Steel, asserts that the law Trump used for those duties — Section 232 of the Trade Expansion Act of 1962 — violates the U.S. Constitution because it effectively transfers authority over trade policy from Congress to the executive branch.

A special three-judge CIT panel has been convened to hear the constitutional challenge, and the plaintiff’s concerns over Section 232’s broad authority for national security-based tariffs appeared to find a sympathetic ear in at least one member, Judge Claire Kelly, during Wednesday’s oral arguments.

“My concern is that at some point, is there any limit on what kind of power you can give away?” Kelly asked the government counsel. “Without judicial review, it seems Congress has given away a whole lot, and maybe you shouldn’t be allowed to do that.”

The question at the center of the case is whether Section 232 violates the so-called nondelegation doctrine of the Constitution, which governs whether and how much authority lawmakers can surrender to the White House.

Past U.S. Supreme Court decisions have said that such a delegation can only be made if the executive branch is given an “intelligible principle” to guide its execution of the law in question.

The government and the AIIS are at odds over whether Section 232 contains an intelligible principle. George Washington University Law School dean and Public Citizen co-founder Alan Morrison told the panel that no such principle exists, and that Section 232 functions essentially as a blank check for the president to impose any remedy he sees fit in the name of security.

Trump slapped a 25 percent tariff on imported steel and a 10 percent levy on imported aluminum in March after deeming those imports a threat to national security, a rationale that critics quickly bashed as a veil for economic protectionism.

“No president has used Section 232 the way President Trump has used it here,” Morrison told the panel, adding later that to the extent Congress drafted its statute broadly on purpose, “I don’t know if Congress intended to give the president that kind of latitude.”

Government attorney Tara Hogan countered by asserting that the statute does place prudent limits on what the president can do, pointing out that the executive can only take action against imports and can only do so using national security as his justification. That guidance in and of itself is an intelligible principle, she said.

“It can’t be a tariff on everything.” Hogan said when describing the limits Section 232 places on the president.

The panel also questioned whether the Supreme Court’s 1972 decision in Federal Energy Administration v. Algonquin, which held that Section 232 did not violate the nondelegation doctrine, should effectively foreclose the new case in the government’s favor.

Taking the lead on that point for much of the hearing was Judge Gary Katzmann, who said that while Algonquin involved other legal strands, it appeared to be a “major case that needs to be addressed” and that the nondelegation issue was “specifically raised” in the context of that case.

Hogan repeatedly said that Algonquin should indeed warrant dismissal of the AIIS complaint, while Morrison attempted to draw differences between his case and the 1972 decision.

Specifically, he noted that the question in Algonquin was narrower, asking whether the president’s decision to impose import fees, rather than quotas, exceeded his delegated authority.

Furthermore, Morrison added, Section 232 was amended in 1980 to remove judicial review of the president’s determination, a game-changer that he said considerably strengthened the nondelegation claim.

The lack of judicial review appeared to be a sticking point for Judge Kelly, who constructed an extreme hypothetical situation to explore the issue further: If the president decided that peanut butter was a national security risk and imposed tariffs on the product, would there be an opportunity to challenge that decision?

Morrison said he didn’t think there would be any room for a court challenge even to such a facially absurd policy decision. Hogan did not directly answer the query but suggested that review could be available in an instance of “severe misconstruction of the statute.”

Following the arguments, AIIS counsel Donald Cameron of Morris Manning & Martin LLP welcomed the questioning from the panel and expressed an eagerness to see the question resolved.

“The court understands the arguments, let’s see what they have to say,” Cameron said.

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