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CIT Hears Arguments Over USTR's APA Compliance in Considering Comments on Section 301 Tariffs

The Court of International Trade held oral arguments on Feb. 7 in the massive litigation over the lists 3 and 4A Section 301 tariffs. During the nearly two-hour affair, Judges Mark Barnett, Claire Kelly and Jennifer Choe-Groves probed the parties' positions on whether the Office of the U.S. Trade Representative complied with the Administrative Procedure Act by properly considering comments made on the proposed tariffs when imposing the duties on $500 billion of Chinese goods (In Re Section 301 Cases, CIT # 21-00052).

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In April 2022, the trade court sent the action back to USTR after ruling that the agency failed to adequately respond to comments submitted in advance of the tariffs, as was required under the APA (see 2204010061). The agency received thousands of comments prior to the tariff action, to which very few were given a response. USTR came back to CIT with a 90-page remand determination, spending the bulk of the submission addressing comments on specific Harmonized Tariff Schedule subheadings (see 2208020029).

The court's remand order instructed USTR to address comments related to three categories of comments: submissions on the inclusion or exclusion of particular subheadings, the impact of the duties on the broader U.S. economy and the potential availability of alternative courses of action. During oral argument, Pratik Shah of Akin Gump, counsel for Section 301 test case plaintiffs HMTX Industries and Jasco Products, said that the government did a "good job" of addressing this first category, citing it as an example of what USTR should have done, but ultimately used conclusory and post hoc rationalizations for these second two types of comments -- explanations that violate the APA.

The statute says that USTR can justify its tariff decisions as being directed by the president as long as it's "appropriate." Though for the USTR to determine whether it actually is appropriate, Shah said, "it actually has to consider and weigh those comments in some fashion." Shah said that while the government could have addressed concerns raised by these comments on broader economic effects -- supply chain disruptions, harm to manufacturing -- by saying it believes the tariffs will do more good than harm or saying supply chain disruptions are overblown, it did none of that. "They could have said any of that, but there's not a shred of that in the record, and there's not even a shred of that now in the redetermination," Shah said. "They don't say any of those things. They say we exercised our judgment in light of the president's direction and stuck with his level of trade action."

Kelly Speck of the DOJ, arguing on behalf of the government, defended the USTR's remand submission, claiming that the U.S. adequately considered the comments since 97% of them dealt with individual tariff lines. As the remand submission adequately showed the USTR's contemporaneous analysis of these exclusion requests, and the vast majority of the comments dealt with these exclusion requests, the remand submission cleared the APA's requirements, Speck argued. Speck also said comments regarding the overall effect on the U.S. economy were adequately addressed by the remand submission's discussion of the individual tariff subheading comments.

"A lot of the individual claims of economic harm, mainly supply chain disruptions, harm to the consumer economy, were addressed at the individual subheading level," Speck said. "For example, if you look at what the Retail Federation was saying, they were talking about harm to consumer electronics. .... A lot of times where there were supply chain problems, [USTR] talked about contemporaneous documents in the record where they were presented with these supply chain issues and they dealt with them in the discretion they had to hit a specific level of trade." Shah responded that this is not a volume exercise, arguing that whether one product has a supply chain issue has nothing to do with macro comments on the effects of the tariffs on the overall U.S. economy.

Speck also pointed to a 1986 U.S. Court of Appeals for the Federal Circuit decision, Medtronic v. Daig Corp., to argue that decision makers are presumed to have considered all evidence on the record. Since the comments are on the record and USTR staff were present at public hearings on these comments, the submissions must be considered properly reviewed by the agency, the DOJ lawyer said.

Shah found this to be a "shocking citation," since it is a patent case about whether a judge when issuing a patent in validity opinion is deemed to have considered prior argument and it has nothing to do with the APA. "Actual APA cases, which we cite in our reply brief, say the best evidence that the government has failed to consider comments at the time of agency decision making is their failure to respond to comments," Shah said. "That is what APA law says. APA is designed on record-based reasoned decision making, and it is absolutely false that the government is presumed to have complied with the APA ... . The fact that that's their best citation speaks volumes."