The United States Court of International Trade’s November 15, 2019 decision in Transpacific Steel Inc. v. United States held that the President was obligated to act within specific time periods in imposing adjustments on imports under Section 232 of the Trade Adjustment Act of 1962. In the case of tariffs imposed on steel and aluminum products, the Court held, the President was required to implement relief no later than March 23, 2018. Because the President’s decision to hike duties on Turkish steel from 25% to 50% was made after that date, the Court suggested, the action was unlawful.

Because the President, in imposing tariffs under Section 232, is exercising authority delegated by Congress, his failure to act within the time period specified by Congress effectively renders any tardily-imposed tariffs unconstitutional.

Immediately after the Transpacific decision was issued, importers realized that the Section 232 tariffs on steel and aluminum products from Canada, Mexico and the European Union, which were not imposed until June 1, 2018, were likely also unconstitutional. A number of judicial challenges to the imposition of tariffs on these goods have already been filed.

More recently, the President announced that, effective February 8, 2020, he would impose Section 232 tariffs on some $880 million worth of steel and aluminum “derivative” products, such as steel nails and aluminum wire. He did this without getting any new report or recommendations from the Secretary of Commerce regarding these goods, or whether they posed a threat to national security.

A number of challenges to the new tariffs were filed immediately. One has produced a truly unique and surprising early determination.

In PrimeSource Building Products Inc. v. United States, an importer of derivative products challenged the Section 232 tariffs on “derivative” products, and sought an injunction against their imposition. The grounds for the case were the same as in earlier challenges – the Section 232 measures were imposed after the President’s authority to do so had expired. Initially, PrimeSource sought a nationwide injunction, but subsequently narrowed its request to seeking an injunction against the imposition of the tariffs on its own imports. To obtain a preliminary injunction, a party must usually show (1) that it is likely to succeed on the merits, (2) that it will be irreparably harmed if the injunction is not granted, (3) that the “balance of hardships” favors the party seeking the injunction, and (4) that the public interest favors granting the injunction.

On February 13, 2020 – just 9 days after the case was filed – Primesource and the Government entered into a stipulation enjoining the collection of the Section 232 tariffs on PrimeSource’s imports of derivative products while the issue is litigated. PrimeSource agreed to post security for the injunction, in an amount believed to represent the special duties that would be assessed on six months’ worth of the company’s imports. Chief Judge Timothy Stanceu entered the injunction as a court order.

This development is truly remarkable, for a number of reasons. First, it is extremely difficult for any litigant to obtain a court order enjoining the collection of a tax. Second, instead of fighting the injunction, as would be usual practice, the Department of Justice agreed to it. The order is virtually unprecedented.

As the legality of various Section 232 tariffs is called into question, more and more importers who have paid these tariff, including on Canadian, Mexican and EU products, are mobilizing to demand refunds. There are billions of dollars at stake.

Companies wishing to seek refunds of these duties can bring their claims by filing lawsuits in the Court of International Trade, challenging the constitutionality of the assessments. Companies who file suit by May 31, 2020 can capture refunds of all Section 232 tariffs imposed on their goods. Importers can also seek refunds by filing protests with Customs – but these protests might not reach all duty payments, and Customs will not grant any protests until a court strikes the tariffs down.

So, the gold rush is on – or more appropriately, a steel and aluminum rush. In the coming months, importers will be filing claims to recover these apparently unconstitutional tariffs.

Please do not hesitate to contact a Neville Peterson attorney if you have questions regarding recovering these tariffs.