Opinions / Panel Activity

The Federal Circuit recently issued its opinion in PrimeSource Building Products, Inc. v. United States, an international trade case we have been following because it attracted an amicus brief. In this case, the government appealed a determination by the Court of International Trade that the President exceeded his authority by issuing a proclamation outside a statutory time limitation. In an opinion authored by Judge Taranto and joined by Judges Chen and Stoll, the Federal Circuit reversed the judgment of the Court of International Trade. This is our opinion summary.

Judge Taranto presented the facts of the case:

Section 232 [of the Trade Expansion Act of 1962, Pub. L. No. 87-794, 76 Stat. 872, 877, codified as amended at 19 U.S.C. § 1862] “empowers and directs the President to act to alleviate threats to national security from imports.” Id. at 1311. For the President to act, the Secretary of Commerce must, under § 232(b), first investigate the effects on national security of imports of an article and submit to the President within 270 days a report detailing the Secretary’s findings about such effects.

In 2017, the Secretary began investigating steel imports and concluded that they posed a threat to national security. J.A. 232–35. On January 11, 2018, the Secretary reported to the President that the imports were “weakening our internal economy” and harming “the [domestic] steel industry,” the continued vitality of which “is essential for national security applications.” Id. The Secretary recommended that the President “take immediate action by adjusting the level of these imports through quotas or tariffs” with the goal of “reducing import penetration rates to approximately 21 percent,” so that “U.S. industry would be able to operate at 80 percent of their capacity utilization.” J.A. 236, 288

On March 8, 2018, the President announced his concurrence and remedial plan. Proclamation 9705: Adjusting Imports of Steel into the United States, 83 Fed. Reg. 11,625 (Mar. 8, 2018). He concurred that “steel articles are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security.”

In light of, e.g., negotiations between the United States government and some foreign governments, the President issued a variety of follow-up proclamations to make changes in the impositions of Proclamation 9705, including the August 2018 Proclamation 9772 that was challenged (and upheld by this court) in Transpacific. 4 F.4th at 1314–16. The Secretary monitored relevant imports, as required,
and in January 2020, the President issued a new proclamation—now covering derivatives of the earlier-covered steel articles—based on information supplied by the Secretary.

The President recited that the Secretary had informed him that “domestic steel producers’ capacity utilization ha[d] not stabilized for an extended period of time at or above the 80 percent capacity utilization level” that was the objective of Proclamation 9705. Id.

The Secretary stated that “imports of certain derivatives of steel articles have significantly increased since the imposition of the tariffs,” and “[t]he net effect of the increase of imports of these derivatives has been to erode the customer base for U.S. producers of . . . steel and undermine the purpose of the proclamations adjusting imports of . . . steel articles to remove the threatened impairment of
the national security.” Id. ¶ 5, 85 Fed. Reg. at 5282. The Secretary characterized this increase in imports of steel derivatives as “circumvent[ing] the duties on . . . steel articles imposed in . . . Proclamation 9705” and “threaten[ing] to undermine the actions taken to address the risk to the national security of the United States found in . . . Proclamation 9705.” Id. ¶ 8, 85 Fed. Reg. at 5282. The Secretary “assessed that reducing imports of the derivative articles” at issue “would reduce circumvention and facilitate the adjustment of imports that . . . Proclamation 9705, as amended, made to increase domestic capacity utilization to address the threatened impairment of the national security of the United States.” Id. Accepting the foregoing determinations by the Secretary, the President in Proclamation 9980 extended the 25 percent tariff to certain steel derivatives, including nails, staples, and tacks. Id.

PrimeSource and Oman Fasteners, which import steel nails and fasteners covered by Proclamation 9980, brought suit in the Trade Court to challenge the proclamation. As relevant now, they contended that the proclamation’s extension of the increased tariff to derivatives was contrary to § 232 because it occurred in January 2020, more than 105 days after the President received the Secretary’s report. The Trade Court agreed.

In both cases, the government timely appealed and also moved for at least a partial stay of the judgment pending appeal. The Trade Court granted stays, reflecting the government’s newly enhanced chance of success on the merits in light of the intervening decision of this court in Transpacific.

After providing this background, Judge Taranto explained that “Proclamation 9980 comes within the interpretation of § 232 we adopted in Transpacific.” Moreover, he reasoned, “[t]he initial proclamation (Proclamation 9705) is the same here as in Transpacific” because “that proclamation rested on the Secretary’s finding that imports of steel articles were threatening national security by impairing achievement of an 80 percent capacity utilization level found important for domestic steel makers to sustain their operations to meet national-security needs.” Judge Taranto then concluded that “the President, having ‘announce[d] a continuing course of action within the statutory time period’ (Proclamation 9705), ‘modif[ied] the initial implementing steps . . . by adding impositions on imports’ (extending the tariffs to derivatives in Proclamation 9980).” This, Judge Taranto said, was “‘in line with the announced plan of action’ (Proclamation 9705’s directive to the Secretary to monitor imports and inform the President of any relevant changes) ‘to achieve the stated implementation objective’ (long-term stabilization of the capacity utilization rate at or above 80 percent).”

Judge Taranto then turned to PrimeSource’s argument that Transpacific is distinguishable from the present case. He explained that “the fact that the Secretary’s 2018 report and Proclamation 9705 did not address the effect of imports of derivatives is immaterial” because “[t]he President may take action against derivative products regardless of whether the Secretary has investigated and reported on such derivatives.” Further, he reasoned, “the greater gap in time between the Secretary’s finding and the challenged proclamation (here, nearly two years; in Transpacific, seven months) does not render Transpacific inapplicable” because “[t]here is no textual basis for a specific time limit on adjustments under a timely adopted plan.”

Finally, Judge Taranto addressed whether there was an unconstitutional delegation. He concluded that “[r]eading § 232 to permit the President to modify an initial plan of action to include derivatives, as he did here, does not render it an unconstitutional delegation.” He explained that “[t]he Supreme Court has already rejected a delegation-doctrine challenge to § 232 (in an earlier form), holding that the ‘clear preconditions to Presidential action’ established by § 232, e.g., a finding by the Secretary regarding the existence of a national-security threat, and consideration by the President of ‘a series of specific factors,’ make that authority ‘far from unbounded.'”

In short, in this case, the Federal Circuit held that the President did not exceed his authority by issuing Proclamation 9980 outside the time limitations in 19 U.S.C. § 1862(c)(1). As a result of its analysis, the Federal Circuit reversed and remanded for entry of judgment against PrimeSource and Oman Fasteners.