A court challenge to U.S. steel tariffs that resulted in a series of retaliatory duties on U.S. farm exports took a step toward a possible date with the Supreme Court in arguments held last week in Washington, D.C.
The venue was the Federal Circuit Court of Appeals, which is considering an appeal of the Court of International Trade’s decision last May upholding Trump’s decision to impose the 25% tariffs to protect national security.
In March, the CIT said it was “bound by” a 1976 Supreme Court decision in Federal Energy Administration v. Algonquin SNG, which found the president has broad — but not unlimited — discretion to impose Section 232 tariffs.
“I think it went about as well as could be expected,” said Alan Morrison, a George Washington University law professor who declined to speculate on the eventual ruling of the three-judge panel. In Algonquin, he told the Federal Circuit panel, “the court said there were boundaries but it didn’t tell us what the boundaries were.”
The American Institute for International Steel petitioned the Supreme Court for review of the CIT’s decision, but the high court declined review this summer, putting the case before the Federal Circuit Court of Appeals. (AIIS, which represents steel importers and other companies in the steel supply chain, is different from the American Iron and Steel Institute, which represents North American steel producers and is siding with the government in the case.)
AIIS contends that Section 232, contained in the Trade Expansion Act of 1962, delegates legislative power to the president in violation of both the Constitution and the doctrine of separation of powers.
“Under the ‘nondelegation doctrine,’ Congress may not delegate any of its law-making powers, such as its power to regulate trade, unless it provides an 'intelligible principle’ or set of clear standards defining the extent of the delegation,” according to an analysis of the CIT decision by Covington.
AIIS has the support of one farm entity — Basrai Farms, a Yuba City, Calif., walnut operation, which filed a friend-of-the-court brief in the Federal Circuit supporting AIIS.
“Retaliation’s a terrible thing,” owner Sarb Basrai said outside the courtroom Friday following the arguments. However, “It was an anticipated consequence” of the steel tariffs Trump imposed in early 2018.
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Basrai said he got involved “because I didn’t like the price of walnuts falling by 50%,” which occurred following imposition of retaliatory tariffs on his commodity by China, India and Turkey ranging from 15-100% after the steel and aluminum tariffs went into effect.
“With nowhere to go, walnuts flood the domestic market, depressing prices further,” Basrai’s brief said.
His 2017 crop was valued at $1.25 to $1.33 per pound, but “today’s disrupted market” has put the anticipated price for his 2018 nuts at between 65 and 70 cents per pound, according to the amicus brief Basrai filed in the Federal Circuit. Despite producing more walnuts in 2018 than 2017, Basrai expects his final gross revenue figure for 2018 to be about $519,000. Without retaliatory tariffs, that figure would have been nearly $1 million.
Senate Finance Committee Chair Chuck Grassley, R-Iowa
AIIS and Basrai aren't the only ones concerned about the use of Section 232. Bills have been introduced in both houses of Congress seeking to give Congress a role — or the final say — on Section 232 tariffs.
Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said in November he's working to reconcile two Senate bills and hold a markup on legislation to reform Section 232.
Section 232, Morrison told the court in his oral argument, “violates the constitutional prohibition on the delegation of legislative authority” from Congress to the executive, “because the power given to the president to adjust imports contains no substantive boundaries whatsoever.”
In arguments before the CIT, Morrison said, the government was asked whether it could restrict imports of peanut butter in the name of national security. “The government did not answer that question, but it was clear that whatever the president did, the court could not review it,” he said. But he argued the Algonquin decision "assumes there are boundaries and second, that there is judicial review."
Justice Department attorney Tara Hogan, however, said “there hasn’t been a delegation of legislative authority or lawmaking power to the president” in this case. Instead, Trump was “charged with finding facts, identifying the circumstances in which the policy is to be applied, and then applying it.”
“Absolutely, there has been a great amount of discretion that has been afforded to the president in this circumstance,” she added, but said that discretion is “consistent with the body of law of non-delegation doctrine cases.”
“Congress, in our view, clearly gave away the store when they wrote this statute,” Basrai attorney Jeff Grimson said following the arguments. “They might not ever have imagined it being used by a president the way it has been.”
Grimson said there's a chance the case will wind up before the Supreme Court.
"I think that whoever loses at the Federal Circuit will at least try to go to the Supreme Court," he told Agri-Pulse in an email. "Whether they accept the case is another question."
However, he said he thinks it's "likely under the foreseeable scenarios. It only takes four justices to vote for [review] for the case to be taken. If we win, the government will surely appeal. And if we lose, and the [Federal Circuit] says it is bound by Algonquin, then there is a growing interest by some of the justices to take a non-delegation case in order to try to put some new definition in the separation of powers."
He called for more in the ag community to support Basrai, whom he called “a guy in Yuba City really taking the weight of all the agricultural sectors on his shoulders and saying we have to be heard here in this case.” Basrai himself chose to become involved.
An attorney involved in the case said amici — friends of the court — were not sought, but added, "an ag guy suffering retaliation for 232 tariffs is helpful." A source at one major farm group said the case had not been flagged by legal advisers as something requiring their involvement.
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