Trade Update (April 1)
|Challenges to Section 232
In June 2018, the American Institute for International Steel (AIIS) and two of its members — Sim-tex LP and Kurt Orban Partners — filed a lawsuit challenging the constitutionality of the Section 232 tariffs. Their case focused on the “improper delegation of Congress’ constitutional power to the president to regulate international trade, and the absence of a provision for judicial review of presidential orders.” The Court of International Trade (CIT) heard oral arguments before a three-judge panel in mid-December.
This week, CIT denied AIIS’ motion. In their decision, Judges Claire R. Kelly and Jennifer Choe-Groves stated the broad guidelines give the president the flexibility to regulate commerce but noted a gray area “where the president could invoke the statute to act in a manner constitutionally reserved for Congress.” However, that gray area was deemed to be beyond the scope of the court. Judge Gary S. Katzman wrote a dubitante opinion, which signals he is doubtful about the majority decision, but hesitates to declare it wrong. (This differs from a typical dissent.)
AIIS applauded parts of Judges Kelly and Choe-Groves’ decision, but vowed to appeal immediately. You can read the full court opinion here.
In Congress, Senate Finance Chairman Chuck Grassley (R-IA) announced he would be leading a bipartisan effort to reform the Section 232 process. The legislation would impose consultation and reporting requirements during the Section 232 process and allow Congress to weigh in “without stripping a president of Constitutional authority as commander-in-chief.” Additionally, it would provide reports to Congress regarding the national security and economic impact of the president’s action.
Other members of the Senate Finance Committee have already introduced bills regarding presidential powers and Section 232. Senators Pat Toomey (R-PA) and Mark Warner (D-VA) introduced S. 287 – “Bicameral Congressional Trade Authority Act.” Representatives Mike Gallagher (R-WI-08) and Ron Kind (D-WI-03) introduced a companion bill, H.R. 940, in the House of Representatives. Cosponsors of the Senate bill include Lamar Alexander (R-TN), Ron Johnson (R-WI), Angus King (I-ME), James Lankford (R-OK), Mike Lee (R-UT), Jerry Moran (R-KS), Brian Schatz (D-HI), Jeanne Shaheen (D-NH), and Chris Van Hollen (D-MD). The House bill has 20 cosponsors.
Additionally, Senators Rob Portman (R-OH) and Doug Jones (D-AL) introduced S. 365 – “Trade Security Act of 2019.” Cosponsors of the bill include Senators Lamar Alexander (R-TN), Joni Ernst (R-IA), Dianne Feinstein (D-CA), Deb Fischer (R-NE), Kyrsten Sinema (D-AZ), Dan Sullivan (R-AK), Todd Young (R-IN), and Roger Wicker (R-MS). Representatives Ron Kind (D-WI-03), Jackie Walorski (R-IN-02), Terri Sewell (D-AL-07), and Darin LaHood (R-IL-18) introduced the companion bill, H.R. 1008, in the House of Representatives.
The bills are similar in that they both grant additional power to Congress in the Section 232 process and increase the role of the Department of Defense in determining the “threat to national security.” However, the Bicameral Congressional Trade Authority Act would require congressional approval before the president can take any action under Section 232, while the Trade Security Act would allow Congress to issue a resolution of disapproval. Both bills would require the Department of Defense to determine and justify the national security risk and narrow the definition of “national security.” But only the Trade Security Act would divide the Section 232 process into an investigation phase led by the Department of Defense and a remedy phase led by the Department of Commerce. Finally, only the Bicameral Act would require the International Trade Commission (ITC) to administer and oversee the exclusion process.
Section 232 and the US-Mexico-Canada Agreement (USMCA)
The Trump administration’s decision to impose Section 232 tariffs of steel and aluminum on Canada and Mexico continues to complicate the USMCA negotiations. This week, Canadian Foreign Minister Chrystia Freeland met with US Trade Representative Robert Lighthizer to discuss the tariffs. Freeland stated, “The existence of these tariffs for many Canadians raises some serious questions about NAFTA ratification.” The Trump administration has suggested Canada and Mexico accept quotas on their steel and aluminum exports in lieu of tariffs, but both Mexico and Canada oppose the measure.
Senate Finance Chairman Grassley, Senate Republicans, and Democrats have sided with Canada and Mexico on this issue and continue to pressure the administration to remove the Section 232 tariffs as part of the USMCA approval process.
President Trump met with Republican lawmakers on Tuesday (March 26) and urged them to approve the USMCA by August. Ranking Member of the Ways and Means Committee Rep. Kevin Brady (R-TX-08) said he is ready to send legislation to the House floor, once Speaker Nancy Pelosi (D-CA-12) “gives the green light.” Trade Subcommittee Ranking Member Rep. Vern Buchanan (R-FL-16) is hopeful the USMCA will pass and called it a deal that was “too big to fail.” In response, Trade Subcommittee Chairman Rep. Earl Blumenauer (D-OR-03) said Democrats would not be bound by “artificial deadlines.”
The Ways and Means Trade Subcommittee is holding a series of hearings to assess the changes between NAFTA and USMCA. They held their first hearing on Tuesday (March 26), which focused on enforcement mechanisms and labor provisions.
 Yvonne Li. “CIT rebuffs AIIS’ Section 232 challenge.” AMM.com. 25 Mar 2019. https://www.amm.com/Article/3865815/Steel/CIT-rebuffs-AIIS-Section-232-challenge.html
 William Mauldin. “Court Questions Law That Underpins Trump’s Trade Policy.” WSJ.com. 19 Dec 2018. https://www.wsj.com/articles/court-questions-trumps-use-of-national-security-law-to-impose-tariffs-11545255708
 “Slip Op. 19-37.” United States Court of International Trade. 25 Mar 2019. https://www.cit.uscourts.gov/sites/cit/files/19-37.pdf
 Richard Chriss. “AIIS Comment on U.S. Court of International Trade Ruling.” AIIS.org. 25 Mar 2019. http://www.aiis.org/2019/03/aiis-comment-on-u-s-court-of-international-trade-ruling/
 “Toomey and Warner Renew Fight to Restore Congressional Authority over ‘National Security’ Tariffs.” Toomey.Senate.gov. 30 Jan 2019. https://www.toomey.senate.gov/?p=op_ed&id=2338
 “Portman, Jones, Ernst, Alexander, Feinstein, Fischer, Sinema & Young Introduce Trade Security Act to Reform National Security Tariff Process.” Portman.Senate.gov. 6 Feb 2019. https://www.portman.senate.gov/public/index.cfm?p=press-releases&id=D95CA551-75CF-451D-9401-E28F53FB2209
 Janyce McGregor. “Tariffs raise ‘serious questions’ about NAFTA ratification, Freeland says.” CBC.ca. 25 Mar 2019. https://www.cbc.ca/news/politics/tariffs-freeland-nafta-ratification-monday-1.5070659
 Jacob Pramuk. “Trump’s NAFTA face-lift hits bipartisan roadblock in Congress.” CNBC.com. 29 Mar 2019. https://www.cnbc.com/2019/03/29/trumps-nafta-usmca-trade-deal-faces-bipartisan-roadblock-in-congress.html
 Ed Krayewski. “USMCA can pass before August, congressman who met with Trump says.” FoxBusiness.com. 26 Mar 2019. https://www.foxbusiness.com/politics/usmca-can-pass-before-august-congressman-who-met-with-president-trump-says
 “Trade and Labor: Creating and Enforcing Rules to Benefit American Workers.” WaysAndMeans.com. 2019. https://waysandmeans.house.gov/legislation/hearings/trade-and-labor-creating-and-enforcing-rules-benefit-american-workers