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Trade Court Upholds Section 301 Tariff Action Over APA Compliance Concerns

The Office of the U.S. Trade Representative complied with Administrative Procedure Act requirements when it set lists 3 and 4A Section 301 tariffs on China, the Court of International Trade held in a much-anticipated opinion on March 17. After USTR provided more explanation of its tariff decisions on remand, judges Mark Barnett, Claire Kelly and Jennifer Choe-Groves held that the explanations were not made impermissibly post hoc and cleared APA requirements.

The decision stems from the massive Section 301 litigation involving thousands of litigants, which at this stage is centered on USTR's lack of initial response to thousands of comments before enacting the Section 301 tariffs covering virtually all trade from China. CIT held that USTR acted within its authority to impose the tariffs, but sent the tariff actions back after finding the lack of responses didn't satisfy APA requirements (see 2204010061). USTR came back with a 90-page remand decision that mostly addressed comments on specific Harmonized Tariff Schedule subheadings (see 2208020029).

One of the core claims from the plaintiffs was that USTR's responses to comments on remand were illegal post hoc rationalizations as established in the 2020 Supreme Court case, DHS v. Regents of the University of California. USTR can only use evidence showing it considered these comments at the time the tariff moves were being made, making any responses to these comments issued after the action was taken illegal, the companies said.

CIT disagreed, holding that USTR's remand results are not illegally post hoc simply because USTR addressed the comments on remand. The court cited a U.S. Court of Appeals for the D.C. Circuit opinion, Alpharma Inc. v. Leavitt, which found that an agency can provide an "amplified articulation" of a prior "conclusory" rationale. While USTR's responses to the comments are more expansive than previous submissions, USTR did not offer any new "determinative reasons" for its decisions, the opinion said.

"USTR further explained the removal or retention of certain tariff subheadings, its decision to set the level of duties on the specified aggregate level of trade notwithstanding the stated concerns, and its decision to proceed despite the proffered alternatives," the judges said. "In so doing, USTR responded to significant concerns within the context of China’s actionable conduct and the specific direction of the President." As a result, USTR's responses were a fuller explanation of its analysis at the time of agency action.

The plaintiffs also attacked USTR's responses to the comments as insufficient, arguing that the agency relied too heavily on presidential direction to explain its imposition of tariffs.

But CIT found USTR was not "required to provide additional explanation regarding its reasons for agreeing with the President that the chosen actions were 'appropriate.'" Nothing more was required other than USTR's conclusion that "statutory language linking any modification to the specific direction of the President constrained USTR’s ability to depart from that direction and explained USTR’s position vis-a-vis the President’s direction," the opinion said.

The plaintiffs claimed that while USTR did a "good job" of addressing its decisions under specific HTS subheadings, its responses came up short on comments relating to the harm to the overall U.S. economy, efficacy of the tariffs and alternatives to the duties. However, a disagreement with the conclusions USTR reached is not a basis for the court to overturn its actions, the court said.

(In Re Section 301 Cases, Slip Op. 23-35, CIT # 21-00052, dated 03/17/23; Judges: Mark Barnett, Claire Kelly and Jennifer Choe-Groves; Attorneys: Pratik Shah of Akin Gump for plaintiffs, led by HMTX Industries; Elizabeth Speck for defendant U.S. government; Alexander Koff of Venable for amici curiae led by VeriFone; Joseph Palmore of Morrison & Foerster for amici curiae, led by Retail Litigation Center, et al.)