On March 10, 2021, the U.S. Court of International Trade (CIT) issued an opinion dismissing all claims by Thyssenkrupp Materials NA Inc. (Thyssenkrupp) challenging the constitutionality of the federal government’s administration of Section 232 aluminum and steel duties under the Trade Expansion Act of 1962. The CIT addressed whether the modified process created by the Department of Commerce (Commerce) for requesting exclusions from the Section 232 tariffs imposed on aluminum violated the Uniformity Clause of the U.S. Constitution that generally requires uniform taxation across all states and across the same products.
In April 2020, Thyssenkrupp and several of its subsidiaries challenged the Section 232 duties, arguing that they had imported and paid Section 232 duties on aluminum and steel products corresponding to tariff classifications contained in exclusions Commerce granted to other U.S. parties. They claimed that Commerce’s decision to grant exclusions to other parties but to deny Thyssenkrupp relief (even in instances in which it requested no exclusion) “results in an unconstitutional lack of uniformity in the application of tariffs imposed on merchandise in the same HTSUS classification and denies Thyssenkrupp the protection afforded by the Uniformity Clause of Article I, Section 8 of the U.S. Constitution.” See Update of April 28, 2020. The U.S. government subsequently moved to dismiss the complaint for failure to state a claim since Thyssenkrupp particularly had not been injured because it had made no claim either for an exclusion that had been denied or for imported merchandise identical to the merchandise imported by others that had been excluded from Section 232 duties.
In its March 10 opinion, the CIT granted the U.S. government’s motion to dismiss, finding that “the exclusion process promulgated by Commerce does not violate the Uniformity Clause of the Constitution and does not reflect an improper construction of the President’s Proclamations.” The decision targeted two key challenges advanced by Thyssenkrupp: (1) the Section 232 exclusion process discriminated against steel and aluminum importers based on geography pursuant to the Uniformity Clause; and (2) the exclusion process violated the Uniformity Clause because identical products received exclusions in some instances but not in others. Thyssenkrupp effectively argued that the Section 232 steel and aluminum exclusion process should apply to the product/tariff classification at issue and not to the company, which is how the Office of the U.S. Trade Representative has conducted the China Section 301 tariff exclusion process.
For the first challenge, the CIT determined that the steel and aluminum Proclamations “are defined in non-geographic terms,” allowing any “directly affected party located in the United States” to apply for an exclusion because the purpose of the Uniformity Clause is to prevent the federal government from discriminating between states when levying taxes and duties. “[E]ven if Thyssenkrupp could overcome this hurdle,” the CIT stated, it had failed to plead facts that show “actual geographic discrimination” or “any indication that Congress sought to benefit [one state over another] for reasons that would offend the purpose of the Clause.”
For the second challenge, Thyssenkrupp argued that the process is arbitrary, capricious, and not in accordance with law because “the process fails to provide automatic product-based exclusions once an exclusion has been granted to an importer for a particular product category.” The U.S. government argued that Commerce’s decision to grant exclusions “based on an analysis of specific products only after a request for an exclusion is made by an importer is a permissible implementation of the exclusion process, and is consistent with the purpose and plain meaning of the Proclamations.” Referencing an abundance of legal precedent, the CIT found that “Commerce has broad discretion” to implement the exclusion procedures and that, “[w]here an agency action is reasonable, and not ‘plainly erroneous or inconsistent’ with Congressionally delegated authority through Presidential action or statute, we owe the agency ‘great deference.’” The CIT concluded that Commerce’s interpretation of the Presidential Proclamations in its implementing regulations is lawful.