Case 1:18-cv-00152-CRK-JCG-GSK Document 10 Filed 06/27/18 Page 1 of 21 IN THE UNITED STATES COURT OF INTERNATIONAL TRADE ) AMERICAN INSTITUTE FOR INTERNATIONAL) STEEL, INC., SIM-TEX, LP, and KURT ORBAN ) PARTNERS, LLC ) ) Plaintiffs, ) Court No. 18-00152 v. ) ) UNITED STATES and KEVIN K. MCALEENAN, ) Commissioner, United States Customs and ) Border Protection, ) ) Defendants. ) ) COMPLAINT Plaintiffs American Institute for International Steel, Inc. (“AIIS”), Sim-Tex LP (“Sim- Tex”), and Kurt Orban Partners, LLC (“Orban”), by and through their attorneys, hereby submit their complaint in this action seeking a declaratory judgment that section 232 of the Trade Expansion Act of 1962, as amended, 19 U.S.C. § 1862 (“section 232”), 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. Plaintiffs also seek an order of this Court enjoining defendants from enforcing the 25% tariff increase for imports of steel products and other trade barriers imposed by Presidential Proclamation 9705 of March 8, 2018 (the “25% tariff increase”), as subsequently amended. Plaintiffs’ claims arise under the Constitution, and this Court has jurisdiction over this action under 28 U.S.C. § 1581(i)(2) and (4). Because this action raises an issue of the constitutionality of an Act of Congress and the constitutionality of a proclamation of the President, and because this action has significant implications for the administration of the 1 Case 1:18-cv-00152-CRK-JCG-GSK Document 10 Filed 06/27/18 Page 2 of 21 customs laws, Plaintiffs request that the Chief Judge of this Court designate three judges of this Court to hear and determine this action in accordance with 28 U.S.C. § 255. PARTIES 1. Plaintiff AIIS is a non-profit membership corporation that brings this action on behalf of its more than 100 members. AIIS is incorporated in the District of Columbia and has its principal place of business in Alexandria, Virginia. It is the only steel-related trade association that supports free trade. AIIS’s members, which include the Plaintiffs Sim-Tex and Orban, have various business connections with the imported steel products that are subject to the 25% tariff increase challenged in this action. Those members include companies that use imported steel in the manufacture of their own products, traders in steel, importers, exporters, freight forwarders, stevedores, shippers, railroads, port authorities, unions, and many other logistics companies, all of which have been and will continue to be adversely affected by the 25% tariff increase on imported steel products. AIIS’s members handle, import, ship, transport, or store approximately 80% of all imported basic steel products in the United States. Through its international trade counsel, AIIS testified in opposition to the use of section 232 at the public hearing at the U.S. Department of Commerce during the investigation held on May 24, 2017. 2. Plaintiff Sim-Tex is a limited liability company organized under the laws of Texas, with its principal place of business in Waller, Texas. Sim-Tex is an importer and the leading wholesaler in the United States of Oil Country Tubular Goods (OCTG) casing and tubing, which are carbon and alloy steel pipe and tube products used in the production and distribution of oil and gas. Sim-Tex imports directly, as the importer of record, and indirectly, through traders, approximately 40,000 – 45,000 tons per month from Korea, Taiwan, Brazil, Germany, Italy and other sources. Sim-Tex also purchases and sells OCTG tubing (sizes 2” 2 Case 1:18-cv-00152-CRK-JCG-GSK Document 10 Filed 06/27/18 Page 3 of 21 through 3 1/2”) produced in the United States. Domestic OCTG producers generally do not produce these smaller sizes in sufficient quantities to fulfill Sim-Tex’s needs of approximately 20,000 – 25,000 tons of tubing per month because they can make larger diameter pipe on the same equipment at much higher profit margins. Sim-Tex’s domestic allocation of smaller size OCTG tubing is less than 3,000 tons per month, and the balance must be made up with imports. 3. Plaintiff Orban is a limited liability company organized under the laws of California, with its principal place of business in Burlingame, California. Orban is a specialty steel trader that purchases globally from leading carbon, alloy, and stainless and high nickel alloy manufacturers and sells to manufacturers in the United States. It is a member of Plaintiff AIIS, and it purchases between 200,000 and 250,000 tons of imported steel per year, all of which is subject to the 25% tariff increase. As the importer of record on most of these purchases, it is directly responsible for paying all tariffs, including the 25% tariff increase. Among the products that Orban imports and sells are the following: (cid:120) Oil country tubular goods and line pipe for the oil, gas and energy industries; (cid:120) Oil country couplings and fittings as well as standard pipe; (cid:120) Hot-rolled coil for the production of downhole tubing and casing as well as general durable goods manufacturing; (cid:120) Cold rolled and coated flat steels for residential construction as well as the manufacture of steel drums and barrels that serve the U.S. chemical sector; (cid:120) Wire rod that is drawn into a multitude of finished wire products for agricultural, durable and non-durable goods applications; (cid:120) Stainless steel tubes, bars and wire for specialty applications where corrosion resistance is required; 3 Case 1:18-cv-00152-CRK-JCG-GSK Document 10 Filed 06/27/18 Page 4 of 21 (cid:120) Reinforcing bars for residential, non-residential and certain civil construction applications; and (cid:120) Hot-rolled bars and grating used in various construction applications. Many of these products are available in the United States, but the prices globally for the same or even higher quality products are much more competitive than the prices for those products from domestic mills. 4. The defendant United States of America is the entity to which the 25% tariff increases are being paid and is the statutory defendant under section 1581(i)(2) and (4). 5. The defendant Kevin K. McAleenan is the Commissioner of U.S. Customs and Border Protection. He is responsible for collecting the payments made on account of the 25% tariff increase imposed by the President. He is sued in his official capacity only and is a defendant solely to assure that the injunctive relief sought in the complaint can be directed to an individual as well as the United States. OPERATION OF SECTION 232 6. Section 232 was enacted pursuant to the power granted to Congress in Article I, Section 8 of the Constitution “to lay and collect [t]axes, [d]uties, [i]mposts and [e]xcises” as well as its authority “[t]o regulate [c]ommerce with foreign [n]ations.” Section 232(b) directs the Secretary of Commerce (the “Secretary”), on the application of any department or agency, the request of an interested party, or on his own motion, to undertake an investigation to determine the effects of imports of a particular article of commerce on the national security (the “subject article”). After following certain procedural steps, and within 270 days of initiating the investigation, the Secretary is required to submit a report to the President, which includes his findings on whether the subject article is being imported into the United States in such quantities 4 Case 1:18-cv-00152-CRK-JCG-GSK Document 10 Filed 06/27/18 Page 5 of 21 or under such circumstances as to threaten to impair the national security, and his recommendations for action by the President. 7. Under section 232(c), the President has 90 days to determine whether to concur with the findings of the Secretary, and if he concurs, to “determine the nature and duration of the action that, in the judgment of the President, must be taken to adjust the imports of the [subject] article and its derivatives so that such imports will not threaten to impair the national security.” 8. Although the initial determination by the Secretary under section 232(b) and the President’s action under section 232(c) are tied to “national security,” section 232(d) includes an essentially limitless definition of national security and directions as to how that term is to be applied: the Secretary and the President shall further recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports shall be considered, without excluding other factors, in determining whether such weakening of our internal economy may impair the national security. Because section 232(d) allows the Secretary and the President to consider, in essence, anything in the Nation’s economy that imports might affect, there is nothing that the President may or may not take into account in determining whether the national security, as elastically defined, may be threatened or impaired by the imports of the subject article and no limit on the import adjustments that he may impose to remedy the threat to section 232(d)’s unbounded meaning of national security. 9. After having made these determinations, the President has an unlimited menu of options that he may employ. These include imposing tariffs on goods that are currently duty-free 5 Case 1:18-cv-00152-CRK-JCG-GSK Document 10 Filed 06/27/18 Page 6 of 21 and increasing tariffs above those currently existing under the law for the subject article—with no limit on the level of the tariff—and/or the imposition of quotas—whether or not there are existing quotas—and with no limit on how much a reduction from an existing quota (or present level of imports) there can be for the subject article. In addition, the President could choose to impose licensing fees for the subject article, either in lieu of or in addition to any tariff or quota already in place. Conversely, the President may also reduce an existing tariff or increase a quota, whenever he concludes that such a reduction or increase is in the interest of the national security. And for all these changes in the law, the President may select the duration of each such change without any limits on his choice, and he may make any changes with no advance notice or delay in implementation. 10. Under section 232(c) the President has a virtually unlimited range of other choices in determining what adjustments to imports he wishes to make, with no guidance from Congress as to how to make them. (a) There is no requirement in section 232 that the President treat imports from all countries on a non-discriminatory basis with regard to such matters as the amount of the tariff or level of quota to be imposed, or whether to exempt some countries, but not others from an otherwise applicable tariff or quota. Nor is there any prohibition on such discriminatory treatment. (b) As more fully described below, although imported steel products vary widely in their uses, quality, specifications, availability in the United States, and relation to national security, the President is permitted to disregard those differences, or take them into account, in his unfettered discretion; 6 Case 1:18-cv-00152-CRK-JCG-GSK Document 10 Filed 06/27/18 Page 7 of 21 (c) There is no requirement that the President take into account adverse consequences from a proposed tariff, although he may, if he chooses, do so for any or all such consequences. Those consequences include (1) raising the prices of domestic products; (2) causing workers outside the domestic industry of the subject article to lose their jobs or work fewer hours; (3) favoring imported products that contain the subject article and that can be sold at lower prices in the United States because the tariff does not apply to them; or (4) reducing foreign markets for U.S. exports as a result of higher domestic input prices. (d) There is no requirement that the President be consistent in his interpretation and implementation of section 232, even for the same articles from one proceeding to the next. 11. Because section 232 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, 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, which would violate Article I, section 1 of the Constitution. 12. Section 232 also lacks procedural protections that might limit the unbridled discretion that the President has under it. The range of omitted procedural protections include the following: (a) Although the President may order a remedy under section 232 only if he concurs with a finding by the Secretary that imports of the subject article may threaten to impair the national security, the President is not bound in any way by any remedial recommendations of the Secretary, and he is not required to base his remedy on the report or the information provided to the Secretary through any public hearing or submission of public comments. 7 Case 1:18-cv-00152-CRK-JCG-GSK Document 10 Filed 06/27/18 Page 8 of 21 (b) The President is not required to provide an opportunity for the public to comment on the actual tariff or quota that he is considering imposing, and the Secretary’s request for comments in this case did not identify any specific remedies that he or the President were considering; (c) The President is not required to explain his decision in light of what prior presidents have done with the same article under section 232, or in light of the Secretary’s report or the information provided at the public hearing or from public submissions; and (d) No one is required to prepare an environmental impact statement or a cost benefit analysis under Executive Order No. 12866 (Sept. 30, 1993), as amended from time to time, or make any kind of rigorous analysis of the positive and negative effects of a proposed tariff or quota. 13. Section 232 does not have a provision for judicial review of orders by the President under it, and because the President is not an agency, judicial review is not available under the Administrative Procedure Act, 5 U.S.C. § 706. Furthermore, the Department of Justice, on behalf of the United States, in a lawsuit challenging the 25% steel tariff increase on the ground that the President exceeded his statutory authority under section 232, Severstal Export GMBH, et al. v. United States, et al., No. 18-00057 (Ct. Int’l Trade 2018), has taken the position, with which Plaintiffs agree, that once the President received the report that constitutes the single precondition for his exercise of discretion under Section 232(c), concurred in its findings, and took the action to adjust imports that was appropriate “in the judgment of the President.” 19 U.S.C. § 1862(c). [The] decision to take action was the President’s to make, and his exercise of discretion is not subject to challenge [in court]. Defendants’ Mot. to Dismiss at 16-17. Id. at 19 (“the President’s exercise of discretion pursuant to Section 232 is nonjusticiable”). 8 Case 1:18-cv-00152-CRK-JCG-GSK Document 10 Filed 06/27/18 Page 9 of 21 THE PRESIDENT’S 25% TARIFF INCREASE 14. On April 19, 2017, the Secretary opened an investigation into the impact of steel imports on U.S. national security. As part of that investigation, the Secretary held a public hearing on May 24, 2017, and provided for the submission of written statements by interested persons. On January 11, 2018, the Secretary sent the President his report entitled “The Effects of Imports of Steel on the National Security” (hereinafter, the “Steel Report”) (available at https://www.commerce.gov/sites/commerce.gov/files/the_effect_of_imports_of_steel_on_the_na tional_security_-_with_redactions_-_20180111.pdf). The Steel Report, which was released to the public on February 16, 2018, recommended a range of alternative actions, including global tariffs, each of which had the objective of maintaining 80 percent capacity utilization for the U.S. steel industry. Steel Report at 58–61. At the same time, the Secretary issued a report with similar conclusions regarding imports of aluminum. 15. On February 18, 2018, the Secretary of Defense sent a memorandum to the Secretary, with copies to various individuals who work directly for the President, stating that the Defense Department “does not believe that the findings” in the reports on steel and aluminum “impact the ability of DoD programs to acquire the steel and aluminum necessary to meet national defense requirements.” (available at https://www.commerce.gov/sites/commerce.gov /files/department_of_defense_memo_response_to_steel_and_aluminum_policy_recommendation s.pdf). 16. On March 8, 2018, the President issued Proclamation 9705, which imposed the 25% tariff increase at issue in this action, applicable to all imported steel articles from all countries except Canada and Mexico, effective March 23, 2018. Proclamation No. 9705, 83 Fed. Reg. 11,625 (Mar. 15, 2018). On the same date, the President imposed a similar tariff, but in the 9 Case 1:18-cv-00152-CRK-JCG-GSK Document 10 Filed 06/27/18 Page 10 of 21 lesser amount of 10%, on aluminum imports, also based on section 232. Proclamation No. 9704, 83 Fed. Reg. 11,619 (Mar. 15, 2018). 17. Section (3) of Proclamation 9705 authorized the Secretary “to provide relief from the additional duties [the 25 % tariff increase] set forth in clause 2 of this proclamation for any steel article determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality and is also authorized to provide such relief based upon specific national security considerations.” 83 Fed. Reg. at 11,627. On March 16, 2018, the Secretary issued an interim final rule setting forth the requirements for obtaining such relief. Requirements for Submissions Requesting Exclusions From the Remedies Instituted in Presidential Proclamations Adjusting Imports of Steel Into the United States and Adjusting Imports of Aluminum Into the United States; and the Filing of Objections to Submitted Exclusion Requests for Steel and Aluminum, 83 Fed. Reg. 12,106 (Mar. 19, 2018). 18. The 25% tariff increase imposed under section 232 is not based on any showing of illegal or unfair trade practices by steel producers in other countries. Those practices are already the basis of additional tariffs and/or quotas issued under the antidumping and countervailing duty laws of the United States. According to the Steel Report, as of January 11, 2018, for the steel industry alone, there were 164 such orders in effect, and there were an additional 20 publicly announced investigations underway. Steel Report at Appendix K, pp.1-3. 19. In Proclamation 9711, issued on March 22, 2018, the President noted the continuing discussions with Argentina, Australia, Brazil, Canada, Mexico, South Korea, and the European Union (EU) on behalf of its member countries, on alternative means to address the threatened impairment to the national security posed by imports of steel articles from those countries. He determined that the preferred means to address the threat to national security 10