Executive Power

New Challenge to Trump’s National Security Tariffs and Executive Power

By Todd N. Tucker
Thursday, July 5, 2018, 3:44 PM

A group of steel importers filed the latest challenge to the Trump administration's steel tariffs on June 27 under Section 232 of the Trade Expansion Act of 1962. The suit, filed by the American Institute for International Steel (AIIS) and two member companies at the U.S. Court of International Trade, seeks a declaratory judgment from a special three-member panel.

Earlier this year, I wrote about an unsuccessful attempt by steel importers to get injunctive relief from the Section 232 tariffs. Presidential powers under this act—passed initially during the Eisenhower administration—are broad. While ostensibly aimed at safeguarding supplies and manufacturing needed for national defense, the language is expansive enough to include import restrictions for a broader range of industrial policy motivations. Importantly, it leaves the nature, duration and country target of these restrictions entirely up to the president’s discretion after the Commerce Department investigates the imports in question.

Unlike the Severstal steel importers case, AIIS is tackling Section 232 head-on; rather than challenging the president’s action pursuant to the statute, AIIS challenges the constitutionality of Congress’s delegation. If the plaintiffs are successful, they may upend more than 60 years of congressional deference to the executive on matters of national economic security. It would be the first time since the early New Deal era that courts ruled that Congress went too far in delegating its lawmaking powers. This is but the latest way that Trump’s aberrant behavior is prompting reactions that undermine long-standing norms.

The plaintiffs seek a declaratory judgment that Section 232’s unlimited discretion "is unconstitutional as an improper delegation of legislative power to the President, in violation of Article I, section 1 of the Constitution and the doctrine of separation of powers and the system of checks and balances that the Constitution protects." They buttress this conclusion by pointing to the absence of judicial reviewability of presidential determinations under the statute, as the president himself is not considered an agency for the purposes of the Administrative Procedures Act (a point also made by Shannon Togawa Mercer and Matthew Kahn). If the American Institute for International Steel  wins, customs officials would be forced to stop collecting the tariffs, and importers would be entitled to refunds.

The Supreme Court has almost never ruled that Congress delegated too much power—it is commonly said that the nondelegation doctrine at the federal level is dead—but there remains some reason to think that AIIS might succeed here. Since 1928, the Supreme Court has held that the complexity of rule-making means that Congress can delegate away some decision-making power, subject to the requirement that it “lay down by legislative act an intelligible principle to which the person or body authorized to [act] is directed to conform.” But in that case, J.W. Hampton, Jr. & Co. v. U.S., the court was considering an objectively ascertainable standard to which Congress could hold the executive: the equalization of costs between imported and domestic goods, as provided for under the Tariff Act of 1922. There is nothing approaching this level of concreteness in Section 232, which in the words of the American Institute for International Steel "allows the President a virtually unlimited range of options if he concludes, in his unfettered discretion, that imports of an article such as steel threaten to impair the national security, as expansively defined." Therefore, the institute argues that "section 232 lacks the intelligible principle that decisions of the United States Supreme Court have required for a law not to constitute a delegation of legislative authority." The executive branch is not asked here to simply fill in details—it is making trade policy.

Still, the chances of an AIIS victory are slim as it would upend decades of precedent. In Whitman v. American Trucking Association, a case involving Environmental Protection Agency discretion, Justice Antonin Scalia wrote for a 9-0 court that

In the history of the Court we have found the requisite ‘intelligible principle’ lacking in only two statutes, one of which provided literally no guidance for the exercise of discretion, and the other of which conferred authority to regulate the entire economy on the basis of no more precise a standard than stimulating the economy by assuring ‘fair competition’.

The two cases referenced—Panama Refining Co. v. Ryan and A. L. A. Schechter Poultry Corp. v. United States—were 8-1 and 9-0 rulings against the so-called First New Deal. Specifically, they were against the virtually unlimited power given to administrators of the National Industrial Recovery Administration to reshape the U.S. economy in response to the Great Depression. These decisions prompted President Franklin Roosevelt to threaten to pack the court. Following that threat, the court never again questioned congressional delegation.     

Moreover, there is one on-point Supreme Court decision that the justices will need to consider and potentially overrule: Federal Energy Administration v. Algonquin, a unanimous Supreme Court decision from 1976 that found that “the standards that [Section 232] provides the President in its implementation are clearly sufficient to meet any delegation doctrine attack.” In that case, plaintiffs sought a ruling that Presidents Richard Nixon and Gerald Ford had exceeded their constitutional and statutory power under Section 232 by converting a system of oil import quotas into oil import license fees.

AIIS maintains that Algonquin should not control its steel tariff case, arguing that the precedent was about the president’s responsibilities under the statute—much like the Severstal case—not Congress’s improper delegation.

There are also atmospheric factors that might push the court to distinguish rather than overrule. Unlike Trump's sui generis steel tariffs, the policy regime at issue in Algonquin had been in place in some form going back to the Eisenhower administration—all iterations of which cited Section 232 and were tied to recognized national security concerns related to the adequate supply of oil. Moreover, in Algonquin, Justice Thurgood Marshall conceded that

Our holding today is a limited one. As respondents themselves acknowledge, a license fee as much as a quota has its initial and direct impact on imports, albeit on their price as opposed to their quantity... As a consequence, our conclusion here … in no way compels the further conclusion that Any action [sic] the President might take, as long as it has even a remote impact on imports, is also so authorized.

Trump’s actions are orders of magnitude more serious than the narrow technical issue at stake in the 1976 case.

This core holding, however, may also encourage the court to overrule. Algonquin found both that the president was within his authority and that Section 232 in fact contained an “intelligible principle.” Marshall cited a two-step process. Before import restrictions can be imposed under the statute, the Commerce Department must first furnish a report with recommendations. As a second step, the president then may act only "to the extent 'he deems necessary ... so that such imports will not threaten to impair the national security." In other words, the court could interpret that as a limitation on the president’s power to address the impact of such imports on national security. Even read in this light, this is a thin reed on which to delegate such massive powers, and it is difficult to see how AIIS succeeds without getting the court to revisit the adequacy of these two steps.

The steel institutes argument is more compelling than Marshall’s. After all, there is no statutory requirement that the president’s action at the second step match the specific policy recommendations or even underlying reasoning of the first step. Indeed, Trump’s proclamations have deviated from Secretary Wilbur Ross’s recommendations—initially exempting allies and to this day applying a 25 percent tariff, moves that are respectively much less and slightly more restrictive than what the Commerce Department recommended if steel capacity was to be corrected. More fundamental to the delegation argument, there is no requirement that either step match congressional guidance or preferences—from the 1950s or today. Section 232, even in less extreme applications, is a statute allowing the executive to feed the executive.

To succeed, the American Institute for International Steel  has to persuade the court to breathe new life into the nondelegation doctrine and to overturn, or at least side-step, the arguably controlling—and unanimously decided—Algonquin. There is not much antecedent for that in the Roberts Court or any other. And if AIIS is successful, this challenge could well invite cases peeling back even further pockets of executive-branch discretion in the national security. Before the Trump presidency, fans of greater economic regulation would have been loath to revert to the way the court operated before the New Deal. It is a sign of how desperate times have gotten—and perhaps no small amount of resignation regarding the anti-New Deal bonafides of newer members of the high court such as Neil Gorsuch—that measures like AIIS’s long shot are even being considered. But with Congress yet unable to come up with veto-proof majorities to roll back Trump's steel tariffs, the courts (or impeachment) may be the only game in town.

What’s next? Plaintiffs are asking for expedited consideration of their claims. Under the governing statute of the U.S. Court of International Trade, Chief Judge Timothy Stanceu is responsible for docket control and assigning cases to the court’s nine judges. The default procedure is for a single judge to hear a case; their decisions can be appealed in the federal circuit. When, however, an action raises an issue of the constitutionality of a statute or “has broad or significant implications in the administration or interpretation of the customs law,” the chief judge has the discretion to appoint a special three-judge panel. Plaintiffs have requested that he do so in this case, saying that they believe this would allow them to bypass an intermediate step in the federal circuit and, if necessary, appeal directly to the Supreme Court.

While they have yet to detail their arguments, case law suggests that this procedural gambit will be tough. In Barnhart v. U.S., the trade court denied such a request, noting that the legislative history of the authorizing statute, the Customs Court Act of 1970, set a clear preference for single-judge panels so as to reduce docket backlog. In Cemex v. U.S., the court ruled that the newness of an issue was insufficient grounds for convening a three-judge panel. And in Fundicao Tupy S.A. v. U.S. (1987), in which the chief judge had permitted a three-judge panel, the federal circuit nonetheless heard appeals. Plaintiffs appear to be banking that—just as President Trump’s use of Section 232 deviates from past practice—their legal claims merit the court doing the same.