Oral arguments in US steel tariff legal challenge start Friday

The future of the Section 232 tariffs on steel depends largely on whether a federal appeals court upholds the determination in a 1970s-era case involving oil, as oral arguments in a lawsuit brought by steel importers challenging the constitutionality of the tariffs is set to begin Friday, a trade attorney familiar with the case told S&P Global Platts.

Friday's proceeding, which will be held in front of a three-judge panel in the Court of Appeals for the Federal Circuit, follows a March 2019 decision from the US Court of International Trade which ruled against steel importers due to the precedent established in the 1976 Algonquin oil case, which upheld the broad use of national security as a justification for quotas and tariffs and established that congress acted within its constitutional authority in authorizing the US president to take action.

The American Institute for International Steel (AIIS), plus two of its members, filed a lawsuit in June 2018 challenging the constitutionally of the 25% import tariff US President Donald Trump's administration issued on steel in March of that year under Section 232 of the 1962 Trade Expansion Act.

The plaintiffs argue that the law does not place any real boundaries or limits to what the president can do in respect to imposing tariffs or other restraints on trade, either in terms of the justification for the remedy, or the actual remedy itself, the source said.

Regarding the Algonquin precedent, the plaintiffs feel the court should not view that decision as binding as it only dealt with the president establishing a licensing fee at the time and not Section 232 more broadly overall, the source added.

"Nobody was raising the spectre of a president unilaterally imposing massive duties on huge swaths of the economy and nobody was really wrestling with the argument as to whether the definition of national security in the law has any real content, or places any real boundaries on what the president can do," the source said.

A decision should come in two to five months, but given that the case itself is not factually complicated, a decision is expected closer to two months, or potentially less, the source said.

Should whatever decision the court issues be appealed again, there are indications the Supreme Court may be more interested in hearing the case than when it declined to hear it in June 2019, according to the source, particularly in regards to the non-delegation doctrine, which has become a hot topic of sorts in constitutional law due to recent decisions issued by the Supreme Court.

The non-delegation doctrine holds that since the Constitution vests "all legislative powers" in Congress, it is unconstitutional for Congress to turn those powers over to the executive branch.

"There's reason to think that the court is going to want to, and there may be five votes to revitalize this non-delegation doctrine," the source said, noting the conservative majority of the Supreme Court. "The question is if this is the case they want to do it in."

Should the steel tariffs be deemed unconstitutional, it would also impact the Section 232 tariffs on aluminum and other other applications of the trade remedy.