Opinions / Panel Activity

Last week, the Federal Circuit issued its opinion in Solar Energy Industries Association v. United States, a trade case we have been following because it attracted an amicus brief. In this case, the Federal Circuit reviewed a determination by the Court of International Trade that “the statutory authority to ‘modify’ a safeguard is limited to trade-liberalizing changes” and that Proclamation 10101 exceeded the President’s authority. In an opinion authored by Judge Stark joined by Judges Lourie and Taranto, the Federal Circuit reversed the judgment, holding that the “the President’s view that a ‘modification’ may include a change in a trade-restricting direction, and is not limited to trade-liberalizing changes, is not unreasonable.” This is our opinion summary.

Judge Stark began by highlighting the factual and procedural background of this case.

Section 201 of the Trade Act of 1974, codified at 19 U.S.C. § 2251, provides the President of the United States with the power to impose ‘safeguards’ (also referred to as “safeguard measures”) that protect domestic industries from serious injury caused by imports. . . . Once a particular safeguard is in place, Section 2254 governs efforts to change the existing measure. . . . Specifically, 19 U.S.C. § 2254(b), entitled ‘Reduction, modification, and termination of action,’ provides that ‘[a]ction taken under section 2253 of this title,’ i.e., a safeguard, ‘may be reduced, modified, or terminated by the President,’ after receiving the Commission Report . . . While subparagraph (b)(1)(B) permits the President to ‘reduc[e], modif[y], or terminat[e]’ a safeguard when the domestic industry has made a positive adjustment to import competition. . . . On January 23, 2018, President Trump issued Proclamation 9693, which imposed duties on imports of certain quantities of Crystalline Silicon Photovoltaic (CSPV) solar panels for a period of four years, beginning at 30% ad valorem in the safeguard’s first year and phasing down to 25%, 20%, and 15% in the ensuing years. . . . Proclamation 9693 further delegated to the USTR authority to grant ‘exclusion of a particular product from the safeguard measure.’ . . . However, just months later, in October 2019, the USTR withdrew the exclusion, re-imposing the duties on these same bifacial products. . . . the President, through the USTR, received a petition, consisting of three letters, from representatives of a majority of the bifacial solar panel domestic industry requesting, among other things, that the President (1) withdraw the bifacial exclusion and (2) slow down the rate of reduction of the safeguard duty for the remainder of the scheduled term. On October 16, 2020, the President issued Proclamation 10101. . . . As pertinent here, Proclamation 10101 modified safeguards that had been implemented in Proclamation 9693, including by withdrawing the exclusion of bifacial solar panels, thereby again re-imposing the duties on these panels. Proclamation 10101 further provided that the fourth year duty rate on CSPV modules, including bifacial solar panels, would be increased from 15% to 18%. On December 29, 2020, Plaintiffs-Appellees – Solar Energy Industries Associates (‘SEIA’) as well as Nextera Energy Inc., Invenergy Renewables LLC, and EDF Renewables, Inc. – filed suit at the trade court challenging Proclamation 10101’s modifications to the safeguards imposed by Proclamation 9693. . . . [and] Defendants-Appellants – the United States, the United States Customs and Border Protection (‘CBP’), and Christopher Magnus in his capacity as Commissioner of CBP (collectively, the ‘government’) – moved to dismiss. . . . The trade court granted summary judgment to Appellees and set aside the modifications contained in Proclamation 10101. . . . [and] [t]he government timely appealed. On December 29, 2020, Plaintiffs-Appellees – Solar Energy Industries Associates . . . filed suit at the trade court challenging Proclamation 10101’s modifications to the safeguards imposed by Proclamation 9693. . . . [and] Defendants . . . moved to dismiss. . . . The trade court granted summary judgment to Appellees and set aside the modifications contained in Proclamation 10101 . . . [and] [t]he government timely appealed.

Judge Stark emphasized that the Federal Circuit’s review “of Proclamation 10101 is limited to whether the President clearly misconstrued Section 2254(b)(1)(B).” He stressed the “sole inquiry” on review is whether the President’s interpretation, “that he is permitted to make trade restricting modifications and not just trade-liberalizing ones, is a clear misconstruction of the statute.”

To answer this question, Judge Stark examined the “language of the statute itself” and found it “does not expressly indicate whether ‘modify’ includes trade-restrictive changes or is limited to trade-liberalizing alterations.” He discussed how the silence of the statute favors “the government’s broader view.” He highlighted how, ordinarily when drafting legislation, “Congress uses words consistent with their well understood meaning.” As for the word “modify” within the statute, he analyzed dictionary definitions and found the government’s definition, “making a limited change in something” that is “non-directionally restricted,” has been applied by other courts, including the Supreme Court. 

Judge Stark explained how Solar argued its “preferred definition is better supported by the broader structure and purpose of the safeguard statute.” In contrast, Judge Stark found “the structure and purpose . . . only solidify” the court’s “conclusion that Section 2254(b)(1)(B) was not clearly misconstrued.” First, he discussed how “Section 2251 provides that the safeguard statute has a broad remedial purpose, directing the President to ‘take all appropriate and feasible action within his power.’” He highlighted how, based on the broad language of Section 2251, “the President is empowered to make modifications as necessary,” regardless of “direction of trade-restriction or trade-liberalization.” Second, he discussed how “the Trade Act has its own general definition of ‘modification’” that is open-ended and “does not exclude anything, including further restrictions.” And he discussed how “[o]ther provisions of the Trade act are similarly supportive of the government’s interpretation.”

Judge Stark rejected Solar’s contention that Congress applied different connotations to modification “throughout the Trade Act.” He also rejected Solar contention that allowing the President to make modifications that are restrictive “creates a loophole through which the President can bypass the procedural requirements Section 2253 establishes for adopting a safeguard measure in the first place.” Judge Stark disagreed, referring to Section 2253(e)(5), which requires duties to be “phased down at regular intervals,” explaining that the President is required to follow this procedure.

Judge Stark also rejected Solar’s argument that “the President lacked authority . . . to modify the safeguards imposed by Proclamation 10101 because the petition submitted by domestic industry did not base the modification request on domestic industry having made a positive adjustment to import competition.” He also concluded “the President’s view that he was not required to re-weigh the costs and benefits when modifying the safeguard pursuant to Section 2254(b)(1) is not a clear misconstruction” of the statute.

In sum, the Federal Circuit held that the “President’s interpretation of 19 U.S.C. § 2254(b)(1)(B) as permitting trade-restricting modifications is not a clear misconstruction, and because the President did not violate the procedural requirements of the statute” the Federal Circuit reversed the judgment of the Court of International Trade.