At the Intersection of Trade and Antitrust

In an unusual case that spotlights the tensions between U.S. trade and antitrust laws, JSW Steel (USA), Inc. recently launched a lawsuit against several major U.S. steel manufacturers in federal district court in Houston, TX. JSW Steel (USA), Inc. et al v. Nucor Corp. et al., No. 21-CV-1842 (S.D. Tex.) (complaint filed June 8, 2021). JSW’s complaint alleges that the defendants, which include U.S. Steel, Nucor, AK Steel, and Cleveland-Cliffs, engaged in a conspiracy in violation of the U.S. antitrust laws, through conduct that included their involvement in proceedings before the U.S. Department of Commerce.

JSW explains that it relied on imports of semi-finished steel slab to produce its finished products in the United States, but that pattern was disrupted when the U.S. Department of Commerce imposed tariffs in 2018 on imported steel products under Section 232 of the Trade Expansion Act of 1962, 19 U.S.C. § 1862 (the so-called “national security” tariff statute). JSW alleges that the defendants certified to Commerce that they had abundant supplies of semi-finished steel slabs and a strong economic incentive to sell those products to JSW, and relying on those representations, JSW undertook significant expansion plans for its steel mills in Texas and Ohio.

The defendants, however, are not only producers of semi-finished feedstock but also JSW’s competitors in the markets for the downstream finished steel goods, such as plate, pipe, and steel coils. JSW alleges that when it approached the defendants for the promised supplies of semi-finished slab, they declined, and that the supply disruption has drastically impacted JSW’s production capability and expansion plans in the United States. JSW alleges that this refusal to deal on the part of the defendants is a coordinated boycott in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and it seeks treble damages.

It is well established that coordinated participation in government decision-making, such as administrative proceedings and lobbying, is exempt from U.S. antitrust liability under the First Amendment right to petition the government, even in the furtherance of an anti-competitive strategy. However, actions taken outside of Commerce’s Section 232 proceedings would not be immune from antitrust challenge. It will be interesting to see if JSW is able to prove the existence of an illegal conspiracy that engaged in non-immune actions, and to demonstrate a causal connection between those actions and the economic injury it has suffered.

This lawsuit is similar to an action commenced by the steel producer NLMK in January against U.S. Steel in Pennsylvania state court, NLMK Pennsylvania, LLC et al. v. United States Steel Corp., No. GD-21-000719 (Ct. Common Pleas, Allegheny Cty, PA) (complaint filed Jan. 22, 2021). NLMK alleged that U.S. Steel, in opposing NLMK’s requests for exemptions from Section 232 tariffs, intentionally misrepresented its ability and willingness to supply NLMK with steel slab, and engaged in “anticompetitive abuse of the tariff exclusion process.” (Complaint at 9) NLMK alleged that US Steel’s conduct comprised the state law tort of unfair competition by interfering with NLMK’s business relations and impairing its ability to compete.

Please contact us at neil@neilellislaw.com for more information on the Section 232 “national security” tariff exemption process and on the antitrust issues raised by coordinated action under Section 232.

WTO Panel Issues Report on U.S. Section 301 Tariffs on $250 Billion of Imports from China

In United States – Tariff Measures on Certain Goods from China, WT/DS543/R (15 Sept 2020), a WTO panel grappled with issues raised by China’s challenge to the United States’ highly-contentious decision to impose tariffs on approximately $250 billion of imports from China, under Section 301 of the Trade Act of 1974. A link to the panel’s report is here.

The panel first addressed an important preliminary issue, by rejecting the United States’ argument that there was no need for the panel to resolve the issues raised by China because the United States and China had entered into bilateral negotiations to address the underlying trade issues and hence had reached a “mutually satisfactory solution” under Article 12.7 of the DSU.

On the merits of the dispute, the panel noted that the United States did not attempt to directly refute China’s arguments that the Section 301 tariffs violated the MFN provision of Article I:1 of the GATT and the prohibition against excessive duties under Article II:1(a) and (b). Rather, the United States claimed that the tariffs were necessary to protect “public morals” and thus were excepted under GATT Article XX(a). The panel agreed with the United States (and several third parties) that economic concerns can have a “public morals” dimension, which would permit an exception under Article XX. But the panel concluded that the United States had failed to explain the necessity of the specific measures at issue. That is, the United States had failed to articulate a “genuine relationship” between the challenged measures (tariffs imposed on a broad range of imports from China) and the public morals objective.

The report includes unusual closing comments in which the panel recognized the larger context of this dispute and the existence of “a range of unprecedented global trade tensions”. Meanwhile, response to this report has been remarkably muted – perhaps signifying either that the outcome was not a surprise or, more ominously, that the credibility of the WTO as a dispute settlement body has been eroded. And given that there is currently no method by which a panel report in a dispute involving the United States may be appealed, this panel decision will remain on uncertain ground for the foreseeable future.

Lawsuits Launched to Challenge Section 301 Tariffs on Imports from China

In 2018 the Administration launched a series of tariffs targeting a broad range of imports from China, under the authority of Section 301 of the Trade Act of 1974. These tariffs initially targeted $50 billion of goods, but the scope was quickly and dramatically expanded to cover an additional $300 billion. Over the past few days, several lawsuits have been launched in the U.S. Court of International Trade, challenging the imposition of the expanded tariffs. The lawsuits challenge both the justifications for the expanded tariffs and the process by which the Administration adopted them. If you would like more information, please contact us at neil@neilellislaw.com.