President, USTR Had ‘Discretionary’ Power to Levy Lists 3, 4A Tariffs: DOJ

The Department of Justice motioned the Court of International Trade late June 1 to dismiss the HMTX-Jasco sample case in the massive Section 301 litigation for “failure to state a claim upon which relief may be granted.” HMTX-Jasco can’t establish that the Office of the U.S. Trade Representative exceeded its “statutory authority” under the 1974 Trade Act when it ratcheted up the lists 3 and 4A tariffs on Chinese imports, nor did its actions violate the Administrative Procedure Act (APA) “as they were not arbitrary and capricious,” the government’s 77-page filing in docket 1:21-cv-52 said.

USTR’s implementation of the lists 3 and 4A duties in response to China’s “increasingly aggressive and discriminatory trade practices” was “wholly discretionary and thus non-justiciable” under the Trade Act, DOJ said. China’s refusal to “cease its unlawful practices,” and instead pressure the U.S. to drop its Section 301 tariffs by adopting retaliatory measures, “revealed” that the “initial action” imposing the lists 1 and 2 duties was “insufficient,” it said. Modification of that action was statutorily “appropriate and authorized,” it said.

Akin Gump lawyers for HMTX and Jasco declined to comment. The court’s April 13 scheduling order gives them until Aug. 2 to respond. Their Sept. 21 HMTX-Jasco complaint argued that the Trade Act doesn’t authorize the defendants “to litigate a vast trade war for however long, and by whatever means, they choose.”

Judicial review is “unavailable” in this case because President Donald Trump’s decision to impose additional tariffs, and the USTR’s implementation of that decision, was "entirely discretionary” and would require the court “to move beyond the areas of judicial expertise,” DOJ’s motion said. The HMTX-Jasco challenge of lists 3 and 4A “presents a non-justiciable political question,” it said. Such questions can arise “when consideration of trade issues would require the Court to second guess decisions made by the President, the USTR, or Congress that appear to be rooted in policy,” it said.

“Prudential considerations weigh against reviewing” the president’s Section 301 actions, the government said. “Here, plaintiffs invite competing policies and statements regarding United States trade policy from the Judicial Branch, potentially disrupting the conduct of United States foreign relations. Negotiations with China have been proceeding for over two years without formal complaint from the plaintiffs (and with considerable Congressional support), and disruption of those negotiations could have significant international repercussions.”

Courts are “ill-equipped to review complex and on-going negotiations regarding trade agreements,” DOJ said. If the court were to “undermine” the president’s Section 301 authority, “there could be significant repercussions for our national interests, national economy, and credibility with foreign nations,” it said. It’s not the judiciary’s role “to insert itself into this highly political process of negotiating and resolving the trade dispute with China and to limit the Executive Branch’s international negotiating flexibility,” it said. “USTR’s actions, as specifically directed by the President, are beyond this Court’s review.”

HMTX and Jasco wrongly interpret the Trade Act’s Section 307 modification authority as limiting presidential power to delaying, tapering or terminating the Section 301 tariffs, not increasing them, DOJ said. Their interpretation “is also at odds with the plain text of the provision because it includes modifications which, as noted, may address situations in which the burden on U.S. commerce has increased,” it said.

Citing the fact, as Akin Gump does, that USTR historically has used Section 307 only to reduce, terminate or delay Section 301 actions “fails to demonstrate that this statutory provision may not also be used to increase actions,” the government said. “USTR previously invoked this provision after foreign governments took steps to remedy some or all of their investigated unfair trade practices, or requested review of its trade agreement with the United States. None involved a foreign government that refused to cease its unreasonable and harmful practices and, instead, adopted measures intended to pressure the United States to drop its section 301 action, like China did here.” That USTR previously used Section 307 “for a different purpose in markedly different circumstances has no bearing on the present cases,” DOJ said.

Contrary to the HMTX-Jasco allegations that the lists 3 and 4A tariff rulemakings were sloppy and lacked transparency in violation of the APA, USTR “complied with all relevant APA requirements,” DOJ said. USTR “provided a sufficient opportunity for comment,” and considered “all relevant factors” in deciding to impose the duties, it said. The agency “was not required to find any increased burden on U.S. commerce” as a basis for implementing lists 3 and 4A, it said.

The government denies HMTX and Jasco claims that USTR’s actions were arbitrary and capricious under the APA on grounds that it failed to connect the facts in the record to the choices it made, DOJ said. Akin Gump argued that despite receiving approximately 10,000 comments in the two rulemakings, USTR said absolutely nothing about how those comments shaped its final lists 3 and 4A policies and that the agency’s “preordained decision-making bears no resemblance to the standards that the APA demands.”

DOJ countered that it’s “well established” in case law that an agency need not address every comment it receives,” only the “significant comments.” The Federal Register notices imposing lists 3 and 4A “clearly demonstrate” that USTR “considered the views expressed in written comments and at the public hearings,” the government said. USTR in both rulemakings bowed to public pressure and dropped certain product categories from final tariff exposure, it said.

USTR also twice delayed hiking the List 3 duties to 25% from 10% “to ease the burden on the domestic industry,” and did so after taking the public comments into account, it said. “USTR also established a time-consuming and extensive exclusion process for List 3.”