Trump Administration Implements Steel and Aluminum Tariffs With Country Exemptions, Product Exemptions Expected

Country Exemptions

Mexico and Canada are currently exempt from the tariffs. Yet while the proclamations do not make the connection, the President’s recent remarks make clear that the United States is conditioning the relief on a favorable outcome in the ongoing North American Free Trade Agreement talks.³ The United States has also invited any other country with which it has a “security relationship” to discuss “alternative means” to address any national security threats posed by its steel and aluminum imports. The U.S. Trade Representative, Ambassador Robert Lighthizer, is leading negotiations with countries seeking such exemptions, which will likely take the form of “voluntary” quotas on exports to the United States. Australia has reportedly already obtained such an exemption from the tariffs.⁴

Exclusion Procedures

By March 18, the Commerce Department is expected to publish procedures through which a U.S. party can request exclusion from the duties on a particular article of steel or aluminum. To be successful, the petitioner will need to convince the government that the article is not produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality. However, the government is also authorized to provide relief based on “specific national security considerations,” which suggests a separate set of criteria. Per the Commerce Department’s report to the President in January, the procedures are expected to include a public comment period on each exclusion request, and the Commerce Department is expected to commit to completing the consideration of each request within 90 days.

Potential Challenges to the Imposition of Tariffs

The Trump administration’s proclamations were met with threats of retaliation from major trading partners. For example, the European Commission has prepared a preliminary list of items the United States exports that may be subject to trade remedies. Many of these products were targeted to exert political pressure on congressional leadership, including goods with strong ties to the home states of some congressional leaders.

Trading partners may also consider challenging the tariffs before the World Trade Organization (WTO) as inconsistent with the United States’ WTO obligations. Article XXI of the General Agreement on Tariffs and Trade 1994 includes a national security exception that authorizes a member to take action inconsistent with certain of its WTO obligations “which it considers necessary for the protection of its essential security interests.” Historically, the U.S. position has been that the national security rationale is “self-judging,” meaning that once a country invokes Article XXI, the dispute settlement body has no authority to question this assessment. However, the extent of this exception has not yet been tested in dispute settlement, and questions will inevitably arise as to whether the United States’ actions are covered by and justifiable under Article XXI.

The latest tariffs might be also challenged in domestic U.S. courts. Generally, the U.S. Court of International Trade (CIT) has exclusive jurisdiction at the trial level over challenges to tariff-related measures. For example, in Cornet Stores v. Morton, plaintiffs challenged in the District Court for the Central District of California a presidential proclamation that imposed a 10 percent surcharge duty on certain imported merchandise. On appeal, the U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s decision that the matter was within the exclusive jurisdiction of the Customs Court (since replaced by the CIT).⁵ However, there are exceptions to the CIT’s exclusive jurisdiction where presidential proclamations involve more than import tariffs alone, such as where the measures invoke national security concerns. For example, in Federal Energy Administration v. Algonquin SNG, Inc., plaintiffs challenged the President’s authority to raise license fees on imported oil under the authority of Section 232 before the District Court for the District of Columbia.⁶ Jurisdiction was contested, but on appeal, the Court of Appeals for the D.C. Circuit held that the district court properly exercised federal question jurisdiction over the issue because the license fee program involved a question of national security.⁷

One potential challenge to the recently imposed tariffs on steel and aluminum is whether they fall within the scope of the power delegated to the President. For example, in United States v. Yoshida International, an importer of zippers from Japan challenged a presidential proclamation in which the President imposed an import duty surcharge of 10 percent, pursuant to his authority under the Trading With the Enemy Act.⁸ The Customs Court found that the act did “in fact delegate to the President ... the power to ‘regulate importation.’ ” Yet the court went on to examine whether the “means of execution of the delegated power [were] permissible.”¹⁰ In so doing, the court considered “the extent to which the action taken bears a reasonable relation to the power delegated and to the emergency giving rise to the action.”¹¹ The presidential action in Yoshida was taken pursuant to the President’s authority under the Trading With the Enemy Act rather than his authority under Section 232. However, the case demonstrates that while courts will generally not review the reasoning behind a President’s threshold determination, such as the existence of a national emergency, courts may review whether the action taken in response bears a reasonable relationship to that determination.

Some commentators believe that in the present case, the Trump administration has not established a reasonable relationship between the imports of steel and aluminum and national security.¹² For example, in 2001, the Bush administration conducted an investigation into imports of iron ore or semifinished steel pursuant to the President’s authority under Section 232.¹³ In that investigation, the Department of Commerce concluded that while the steel industry was important to U.S. national security, there was no probative evidence that imports of the subject merchandise threatened to impair U.S. national security. Parties might challenge the recent tariffs on the basis that the Department of Commerce report of January 2018 on which the present tariffs are based similarly does not establish a sufficiently strong relationship between imports and national security. 

Several recent remarks from Trump administration officials have stoked claims that the latest tariffs were not sufficiently grounded in national security considerations. After reports that European Commission representatives had complained of the steel and aluminum tariffs, President Trump noted that “[i]f [the European Union] drop[s] their horrific barriers & tariffs on U.S. products going in, we will likewise drop ours,” indicating that the steel and aluminum tariffs might have been imposed to help the United States gain a more advantageous position on trade rather than as a national security measure.

¹ Presidential Proclamation on Adjusting Imports of Steel Into the United States (March 8, 2018). 

² Presidential Proclamation on Adjusting Imports of Aluminum Into the United States (March 8, 2018).

³ https://www.politico.com/story/2018/03/08/trumps-tariff-details-debated-765614. 

⁴ https://www.nytimes.com/2018/03/09/business/trump-tariffs-exemptions.html.

⁵ Cornet Stores v. Morton, 632 F.2d 96, 97 (9th Cir. 1980). 

⁶ Fed. Energy Admin. v. Algonquin SNG, Inc., 426 U.S. 548 (1976). Id. at 1063 (“[T]he program including the fee is a regulatory measure enacted for the protection of national security.... As such, we believe our jurisdiction to decide the validity of the fee is predicated on 28 U.S.C. §§ 1331 or 1340”).  

⁷ See Algonquin SNG, Inc. v. Fed. Energy Admin., 518 F.2d 1051, 1063 (D.C. Cir. 1975) (“[T]he program including the fee is a regulatory measure enacted for the protection of national security.... As such, we believe our jurisdiction to decide the validity of the fee is predicated on 28 U.S.C. §§ 1331 or 1340”).  

⁸ United States v. Yoshida Int’l, Inc., 526 F.2d 560 (C.C.P.A. 1975).

⁹ Id. at 573.

¹⁰ Id. at 574.

¹¹ Id. at 578 (emphasis added).

¹² https://www.marketwatch.com/story/trump-tariffs-may-really-be-a-backdoor-way-to-get-out-of-the-wto-2018-03-06.

¹³ U.S. Department of Commerce, “The Effect of Imports of Iron Ore and Semi-Finished Steel on the National Security” (Oct. 2001).