AIIS prepared to take fight over Section 232 tariffs to US Supreme Court

The American Institute for International Steel (AIIS) has appealed its case seeking to tear down President Donald Trump’s Section 232 tariffs and quotas on imported steel.

The AIIS plans to take the case as far as the highest court in the US if necessary, it said in an email to members on Tuesday April 2 seeking funds for a potentially protracted legal battle.

“We strongly believe that in the end this matter will be settled by the Supreme Court,” AIIS chairman John Foster wrote in the email.

Trump can, in the meantime, use Section 232 to increase existing tariffs on steel or roll out new tariffs on automobiles or automobile parts “at any time,” Foster warned. “There is no reason to believe that the damaging, trade-distorting [Section] 232 steel tariffs will go away anytime soon.”

The case
The US Court of International Trade (CIT) on March 25 ruled against the AIIS’ case, which contends that Section 232 violates the US Constitution.

The AIIS immediately appealed the case to the US Court of Appeals for the Federal Circuit, that court’s docket shows. If the Court of Appeals were also to rule against the AIIS, the final venue for appeal would be the Supreme Court.

The CIT in its ruling against the AIIS relied heavily on a precedent set by a 1976 Supreme Court decision – Federal Energy Administration versus Algonquin SNG Inc – to rule that Section 232 did not violate the Constitution.

But the AIIS said it interpreted the CIT’s decision not as a loss but as “an invitation to appeal,” Foster wrote.

Judge Gary S. Katzmann, part of the three-judge CIT panel that ruled against the AIIS, pointed out in his opinion that Section 232 provides “virtually unbridled” power to the president in matters of trade.

“In short, it is difficult to escape the conclusion that the statute has permitted the transfer of power to the president in violation of the separation of powers,” Katzmann wrote.

The Constitution delegates the power to make law to the US House of Representative and the US Senate to provide a check against the power of the president and the executive wing of government.

“If the delegation permitted by Section 232, as now revealed, does not constitute excessive delegation in violation of the Constitution, what would?” Katzmann asked in his opinion.

He acknowledged that the CIT had been bound by the precedent set by the Algonquin case. “I respectfully suggest, however, that the fullness of time can inform understanding that may not have been available more than 40 years ago,” he added.

The price
Trump used Section 232 to justify placing tariffs and quotas on imported steel in March of last year. Steel imported from most countries faces tariffs of 25%. And Trump doubled tariff against Turkey to 50% in a predawn tweet in August.

Trade experts have warned that Trump could, on a whim, “blow up” the existing rules-based trading system if he were to extend the measure to foreign cars and car parts.

Section 232 led US steel prices to surge to their highest point in nearly a decade. It also resulted in unprecedented price volatility.

Hot-rolled coil prices started 2018 at $32.63 per hundredweight and rose by 40.5% to an annual peak of $45.84 per cwt in early July in the aftermath of duties being extended in June to traditional US allies and trading partners in Canada, Mexico and the European Union.

Fastmarkets AMM’s daily Midwest hot-rolled coil index has fallen steadily since then to stand at $34.50 per cwt ($690 per short ton) on April 2, or 24.7% below July’s high.