Trade Court Won’t Vacate Tariffs for APA Flaws If USTR Can ‘Cure the Defect’

The unanimous three-judge opinion at the U.S. Court of International Trade remanding the lists 3 and 4A Section 301 tariffs to the Office of the U.S. Trade Representative on April 1 for correcting deficiencies in the agency’s Administrative Procedure Act compliance extends the current litigation at least until mid-summer. The opinion, written by Chief Judge Mark Barnett and coming two months to the day after Feb. 1 oral argument was held (see 2202010059), gives USTR 90 days, to June 30, to respond to the remand order, and orders the plaintiffs and the government to submit a joint status report 14 days after that, including a proposed schedule on “the further disposition of this litigation.”

Akin Gump lawyers for sample-case plaintiffs HMTX Industries and Jasco Products “don’t intend to issue a statement” on Friday’s opinion, lead attorney Matt Nicely said in an email. “The case is on remand so it’s premature to comment,” he said.

The court’s “first decision” on the merits of plaintiffs’ argument that USTR’s imposition of lists 3 and 4A tariffs was unlawful went the government’s way when the judges ruled the agency was within its Trade Act Section 307 discretion to modify the tariffs without another Section 301 investigation authorizing the new duties, blogged Larry Friedman of Barnes Richardson, who sits on the 15-member plaintiffs steering committee. USTR’s remand response correcting its APA deficiencies “must elaborate” on its lists 3 and 4A tariffs decisions without providing “any new rationale for the actions,” Friedman said.

The opinion “could have been a lot better” for the Section 301 plaintiffs, emailed a lawyer whose firm also is represented on the steering committee. The lawyer likened the decision to “a score after the first quarter of a football game,” suggesting the plaintiffs think the litigation is far from over, especially with the likelihood of an appeal to the U.S. Court of Appeals for the Federal Circuit from whoever loses.

USTR “failed to respond adequately” to the thousands of comments it received in the lists 3 and 4A rulemakings as the APA requires, the judges ruled. Though a comment-by-comment agency response “is not the standard required by the APA,” the opinion said, USTR “was required to address comments regarding any duties to be imposed, the aggregate level of trade subject to the proposed duties, and the products covered by the modifications, all in light of section 301’s statutory purpose to eliminate the burden on U.S. commerce from China’s unfair acts, policies, and practices.”

Lists 3 and 4A now “require reconsideration or further explanation regarding the USTR’s rationale for imposing the tariffs and, as necessary, the USTR’s reasons for placing products on the lists or removing products therefrom,” the opinion said. If, on remand, USTR seeks to rely on about a dozen secret internal decision memos from 2018 and 2019 (see 2203250038) as evidence of its reasons “for acting when and how it did such that a future rationale is not post hoc,” or conjured up after the fact, the agency “must explain why that reliance is justified” in light of recent case law. A 2020 CIT decision, Invenergy Renewables LLC v. United States, held that a “contemporaneous but nonpublic” memo as grounds for an agency action needs to have been made public in some manner, enabling interested parties to review and scrutinize it, the opinion said.

Should USTR decide on remand “that certain products should have been added to or omitted from” the lists 3 and 4A “determinations from the beginning,” the agency in its June 30 response “should also establish and describe a lawful process for implementing that decision, the opinion said. Observers are sure to weigh in on the complications of adding or deleting lists 3 and 4A product subheadings years after the tariffs took effect.

Whether to remand the tariffs to USTR to fix its APA deficiencies, or vacate the duties and refund the money to importers with interest, spurred prolonged debate in the last half-hour of the three-hourslong Feb. 1 oral argument. Remand is the “standard under the APA, the ordinary rule,” DOJ attorney Jamie Shookman said. “The default rule under the APA is actually vacatur," responded Akin Gump lawyer Pratik Shah, using the Latin word for "it is vacated."

The three-judge panel sided with Shookman, finding, in its opinion, that “in a case arising under the APA, the court may -- and regularly will -- remand for reconsideration deficient agency action when further explanation is required.” As for ordering the tariffs vacated during the 90 days USTR has to file a remand response, “the court weighs heavily the disruptive consequences of (potentially interim) vacatur,” and decided not to do so, it said.

Since the court found that lists 3 and 4A were “modifications” of a prior Section 301 action “taken to exert leverage on China to cease unfair trade actions burdening U.S. commerce,” the tariffs are “part of a continuum of actions taken in conjunction with ongoing negotiations with China,” the opinion said. Vacating the tariffs “would disrupt a complex and evolving process that was designed by Congress to allow for ongoing negotiations,” it said. “For now, the court declines to try to unscramble this egg.” Case law supports “declining to vacate unlawful agency action when it was possible for the relevant agency to cure the defect,” the opinion said.