Reject ‘Breathtaking Claim’ of ‘Unlimited’ USTR Tariff Authority: Akin Gump

The 1974 Trade Act “does not authorize” the Office of the U.S. Trade Representative to increase the “original” Section 301 Lists 1 and 2 tariffs on Chinese goods under the “circumstances present” in the Lists 3 and 4A duties, argued Akin Gump lawyers for sample case plaintiffs HMTX Industries and Jasco Products in their final written brief Monday at the U.S. Court of International Trade before the litigation moves to oral argument Feb. 1. HMTX and Jasco, plus the thousands of complaints their September 2020 lawsuit sparked, seek to get the tariffs thrown out and the paid duties refunded with interest.

The “massive” Lists 3 and 4A tariffs “rely exclusively” on USTR’s Trade Act Section 307 modification authority, and are the largest in U.S. history “by several orders of magnitude,” said Akin Gump. In the more than three decades since Congress enacted Section 307, USTR “had never invoked it to increase a trade action by a single penny, let alone up to a half-trillion dollars,” it said. “One would expect such an unprecedented action” involving the government’s “breathtaking claim of unlimited, unreviewable Executive Branch authority" would be based on “well-supported” facts, it said.

But DOJ offers only a “hodge-podge of justifications for the challenged modifications,” said Akin Gump. “The statutory scheme is clear,” it said. USTR can increase tariffs under its Section 307 modification authority “only when the burden on U.S. commerce has increased from the investigated practices that were the subject” of the original Section 301 action, it said.

The government wrongly argues that once USTR imposes tariffs after a “targeted” Section 301 investigation into a foreign trade partner’s allegedly bad behavior, Section 307 authorizes the agency “to ratchet up those tariffs to any level to address any conduct of a foreign government at any time,” said Akin Gump. “Neither prong” of Section 307 “permits such unconstrained discretion,” it said.

International trade law experts surmised even before Akin Gump brought the HMTX-Jasco suit that the Trade Act gives broad policy discretion to the president and USTR in a way that makes it hard to challenge their actions (see 1809170022). Akin Gump’s brief acknowledged DOJ is “correct” to argue that courts “generally defer” to the executive branch’s policy choices “when a lawsuit challenges a genuinely discretionary foreign affairs judgment.”

But the Section 301 litigation “does not actually challenge a policy judgment,” said Akin Gump. “Rather, it challenges whether USTR possessed the statutory authority to act at all.” Even if USTR’s “statutory interpretations were entitled to some deference, that deference is hardly insurmountable,” it said. “No degree of deference could allow USTR to override the clear limits on its modification authority that Congress enumerated” in Section 307, it said.

DOJ’s “notion of what is proper” under Administrative Procedure Act safeguards against sloppy rulemakings, including the “various shortcuts” USTR took to reach its “preordained conclusion” to impose the Lists 3 and 4A tariffs, “makes a mockery of notice-and-comment rulemaking,” said Akin Gump. “USTR’s rushed approach telegraphed that it had no intention of giving meaningful consideration to public input as to the legality, wisdom, or even workability of the tariffs.”

The government admits USTR “provided zero response to the nearly 10,000 comments” it received, overwhelmingly opposing the tariffs, said Akin Gump. “The primary defense Defendants now raise -- that the opportunity for public participation was extended purely by the grace of the Executive Branch such that any deficiencies cannot be held against USTR -- underscores the dismissiveness with which USTR approached its procedural obligations.”

USTR failed to “engage meaningfully” with the public comments it received during the Lists 3 and 4A rulemakings, as the APA requires, said Akin Gump. “USTR finalized List 3 and imposed additional duties on $200 billion in imports barely two months after List 3 was first proposed,” it said. “The timeframe and process for List 4, which subjected $300 billion in imports to additional duties, was similarly compressed.”

Despite the “rushed process,” USTR received nearly 10,000 comments “from interested parties operating in nearly every corner of the U.S. economy,” said Akin Gump. butt all USTR offered in response was a “blanket statement” that it had carefully reviewed the comments, it said. “That striking silence violates the APA.” For List 3 for example, “it would have been impossible” for any agency to carefully review six days of hearing testimony from hundreds of witnesses, and more than 6,000 comments from interested parties, in the 11 days “between the submission of final comments and the announcement of List 3 duties,” it said.