Section 232 drives Severstal subsidiaries to sue US gov’t

Subsidiaries of Russian steelmaking giant Severstal have filed a lawsuit against the United States government, seeking a court injunction to prevent Section 232 tariffs from being applied to imports of its product.

President Donald Trump’s Section 232 tariffs are “unconstitutional” and failed to provide “fair notice,” the lawsuit alleges.

The court should declare the tariffs and Trump's related proclamation “unlawful,” according to the filing in the US Court of International Trade on Thursday March 22 by Severstal Export GmbH and Severstal Export Miami Corp.

The lawsuit, which targets Trump and relevant personnel like US Commerce Secretary Wilbur Ross, seeks to stop US officials from imposing tariffs on Severstal’s imports specifically. Severstal also requested an expedited court hearing within 14 days to determine whether any temporary restraining order should be extended.

Severstal Export Miami will likely go bankrupt if it is forced to pay duties on material already on the water and awaiting import, according to the complaint, filed by Washington-based law firm Thompson Hine LLP.

Once they are paid, "there is no lawful way [for the company] to recover the tariffs ... in the event that [they are] ultimately declared invalid," so immediate action is needed, according to the filing.

“President Trump exceeded the authority delegated to him by Congress in Section 232, since that authority was limited to circumstances where he was legitimately acting in the interest of national security,” the complaint states. “Since the asserted national security grounds were a thinly veiled pretext for the president's political agenda and his America First economic policy, the [Section 232] steel proclamation is unconstitutional and should be struck down.”

“Not only was the steel proclamation a political move, but the true rationale was simply that of seeking leverage in other trade negotiations,” the lawsuit alleges, citing exemptions quickly granted to Canada and Mexico.

Severstal will suffer “irreparable harm” if those duties are imposed, partly because it has steel volumes on the water under deals signed before March 8, when Trump first announced the tariffs.

“Under the terms of the contracts SSE Miami is responsible for paying the duties, but SSE Miami does not have sufficient funds to pay these tariffs,” according to the complaint.

Severstal Miami has several long-term US customers, some of which have done business with the importer for more than 20 years. The company’s steel specifications are set by contract and can’t be easily rerouted to other customers.

Still, the success of such a lawsuit is uncertain.

A court injunction could face an uphill battle, because the relevant “irreparable harm” standard is hard to meet, lawyers affiliated with the Alexandria, Virginia-based American Institute for International Steel (AIIS) said in a March 22 webinar.

Although pundits have drawn parallels to Trump’s so-called travel ban executive order, which a federal judge enjoined in a matter of days, the topic of steel imports lacks comparable “emotional appeal,” they said.

Additionally, the Section 232 law itself arguably gives Trump wide discretion on matters of national security.

A judge will effectively have to “take on the president on national security,” Lawrence Hanson, who runs his own law firm, said during the AIIS webinar. “It’s hard to show harm from just a tariff.”

But any legal relief in US courts will likely come faster than that from the World Trade Organization dispute settlement system, since the latter can take up to five years.

A court hearing has been scheduled for March 29.

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