Trump Faces Potential Hurdles in Expanding Use of Sections 232, 301 Should IEEPA Tariffs Fall, Lawyers Say
President Donald Trump may look to ramp up his use of sections 232 and 301 should the Supreme Court rule that the International Emergency Economic Powers Act can't be used for levying tariffs, various lawyers told us. However, the expanded use of these statutes, both as they are being used now and how they may be used to supplant the existing reciprocal and fentanyl trafficking tariffs, may encounter legal difficulties.
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One such difficulty may come from the Trump administration's interpretation of the term "derivative" in Section 232, both Joshua Kurland, partner at Hogan Lovells, and Daniel Cannistra, partner at Crowell & Moring, said. Kurland said that while derivative products "are within the ambit of the statute," the "line-drawing exercise of 'how far you can go' may be something that will come under scrutiny."
Cannistra was more direct in his assessment, saying that he suspects there will be a challenge "relatively soon about what" the "natural limit" is to the government's interpretation of the word "derivative." He noted that in the government's defense of a case on the use of Section 232 that came from the first Trump administration, PrimeSource Building Products v. U.S., the government itself defended the term derivative as meaning something containing 75% or greater of the item being investigated.
The government's expanded use of the term derivative as it has aggressively expanded Section 232 duties in the second Trump administration could get them into trouble, Cannistra suggested. A derivative is "something made of something else" and not something that contains that thing, he said, pointing to a computer as an example of something that has steel in it but isn't made of steel. "I don't think that's a very reasonable interpretation of the word derivative," he said.
Cannistra said he's "fairly optimistic that the phrase derivative cannot be limitless," adding that another reasonable interpretation of the term is that a derivative is made of at least 50% of the originally investigated article. John Peterson, partner at Neville Peterson, also thinks the administration's interpretation of the word derivative could be subject to challenge, noting that it's hard for him to see "how pots and pans are endangering national security."
Another potential limit in the use of Section 232 came from another case that stemmed from the first Trump administration: Transpacific Steel v. U.S. In that case, the U.S. Court of Appeals for the Federal Circuit allowed the U.S. to buck certain procedural limits in the government's ability to alter or expand Section 232 duties if those expansions are pursuant to an original "plan of action" underlying the initial tariffs.
Kurland said this "plan of action" standard is "fairly forgiving," though he said if the administration "were to do something that was significantly out of sync with that standard, then maybe there would be a basis for litigation."
Should the administration turn to Section 301 and not Section 232, the administration may face procedural hurdles under the Administrative Procedure Act if it speeds through various investigations. Kurland noted that during litigation on the lists 3 and 4A Section 301 tariffs on China, which also came from the first Trump administration, the Court of International Trade initially remanded the tariffs for failing to adequately respond to comments made on the new lists of products subject to the duties. However, the trade court ultimately upheld the tariffs after the Office of the U.S. Trade Representative added additional explanation for its responses to the tariffs.
Kurland said "maybe [the remand] came to a big nothing," but it still involved an administrative process. He added that there's "an administrative process there that's going to be subject to some amount of scrutiny, because the agency does have to go through the hoops of the investigative process" that currently doesn't exist with the president's use of the IEEPA.
Should the administration look to use sections 232 and 301 to replace the existing IEEPA tariffs, it's unclear if the president would attempt to engage in one sweeping investigation under either statute covering all countries and goods currently subject to the tariffs or engage in dozens and dozens of individual investigations covering every country or industry subject to the tariffs.
Peterson and Cannistra said it wouldn't be feasible for USTR to investigate every individual country to replace the reciprocal tariffs, with Cannistra adding that USTR would have to find an unfair trade barrier in every single country to identify as the basis for the Section 301 action. Beyond these procedural limits, the biggest difference between the use of the IEEPA and the use of sections 232 and 301 is the time it takes between an announced investigation and the actual imposition of duties.