USTR’s Section 301 Remand Response ‘Flunks the Court’s Test’: Plaintiffs

The U.S. Court of International Trade in its April 1 remand order gave the Office of the U.S. Trade Representative “one final opportunity” to cure its Administrative Procedure Act violations and "flesh out" the reasons why it rejected the 9,000+ comments it received in the Lists 3 and 4A Section 301 tariff rulemakings, without devising “new rationales for dismissing them,” said Akin Gump lawyers for lead Section 301 plaintiffs HMTX Industries and Jasco Products, in comments in docket 1:21-cv-52 on USTR’s Aug. 1 remand determination. “USTR’s response to that directive flunks the Court’s test,” they said.

The “vast majority” of USTR’s remand determination is “immaterial,” “unresponsive” or “post hoc,” basing the agency’s tariff decisions on considerations it came up with after the fact, said the lawyers. "The time for shoring up the manifest notice-and-comment failures of the years-old tariff actions has long past," they said. The court now should vacate the Lists 3 and 4A tariffs and order a refund of the duties paid because USTR’s APA violations remain on the books, they said. DOJ has an Oct. 28 deadline for responding to the Akin Gump comments.

USTR’s remand determination contains “zero contemporaneous evidence, from the administrative record or otherwise, that it meaningfully grappled with those substantial comments at the time Lists 3 and 4A were developed,” said the Akin Gump lawyers. USTR also “did not weigh the costs and benefits” of the tariffs to the U.S. economy, businesses and consumers, nor did it evaluate whether the tariffs would be effective in curbing China’s allegedly unfair trade practices, they said. “USTR’s post hoc, litigation-driven efforts to paper over that gaping hole falls far short of basic administrative law standards,” they said.

USTR failed to heed the court’s directive “to explain further any justifications it had given in response to the significant comments received,” without inventing new justifications, said the lawyers. “Contrary to this command, USTR chose to undertake anew the review and analysis it plainly failed to do the first time around,” they said. USTR “essentially admitted as much” when it sought additional time to submit the remand determination, they said.

The opportunity to elaborate on a previously given rationale “should not have necessitated a laborious new review of all 9,000 comments and 13 days of testimony” USTR received in the Lists 3 and 4A rulemakings, said the lawyers. “Instead, to comply with the APA and this Court’s order, those rationales should have already existed in the administrative record,” they said.

'Does Not Cure'

The remand determination “does not cure, but rather underscores, the original deficiencies in USTR’s rulemaking,” said the Akin Gump lawyers. The few “conclusory” pages USTR spends responding to the most significant comments “fail to reflect any contemporaneous engagement with those comments and cannot satisfy USTR’s basic procedural obligations under the APA,” they said.

USTR’s primary argument is that “it lacked much discretion” to remove tariff subheadings or lower the duties because then-President Donald Trump had directed the agency “to take action with respect to a certain level of imports,” said the lawyers. “That excuse is not good enough -- as a matter of law,” they said. The court’s April 1 opinion already found that presidential directives don't “obviate” the requirements “rooted in the APA that USTR provide reasoned explanations and engage in consistent decision-making,” they said.

USTR’s other rationales “are largely outside the administrative record or otherwise post hoc,” said the lawyers. USTR explained in one example that eight tariff subheadings for certain critical inputs for manufactured goods were removed at the Commerce Department's recommendation, they said. “This is the first time that detail has been revealed publicly,” the lawyers said. “Commerce’s recommendation and underlying reasoning are nowhere in the record for interested parties to review and scrutinize, and thus cannot be considered part of the agency’s contemporaneous explanation.”

In another section of the remand determination, USTR explained that it delayed the imposition of 25% duties on List 3, said the Akin Gump lawyers. “But USTR again fails to cite any contemporaneous documents explaining the reasons for that initial delay or why a three-month delay was appropriate, particularly given that many commenters explained that changing suppliers takes months or even years,” they said.

'Otherwise Inadequate'

USTR’s responses in the remand determination are “otherwise inadequate” to satisfy its APA obligations, said the lawyers. USTR claims it created the List 4 exclusion process to address comments that certain products were not available outside China or that the imposition of the tariffs would cause severe economic harm, they said.

But USTR does not explain in the remand determination, “and certainly did not explain at the time it issued List 4, how temporary product exclusions that might be issued at some indefinite point in the future -- pursuant to procedures that were not even announced until two months after List 4 was finalized -- protected companies in those circumstances,” said the lawyers. “Nor can the exclusion process for List 4 act as a sufficient response to the comments submitted with respect to List 3,” they said.

The court’s April 1 opinion already said USTR’s final decision adopting List 3 “lacked any reference to an exclusion process and thus could not satisfy USTR’s APA obligations,” said the lawyers. “These reasons thus fail to substitute for a reasoned and legally valid justification for how USTR determined the product composition of Lists 3 and 4A and the final duty levels to be applied to those products,” they said.

USTR also “failed to respond adequately to major policy concerns,” said the Akin Gump lawyers. The court said USTR, having sought comments on topics of public concern, had a duty to respond meaningfully under the APA to significant issues raised in the comments, they said: “Instead, USTR did not address them at all,” and “still has not engaged meaningfully with the strenuous objections of those most directly impacted by the List 3 and 4A tariffs. That is no surprise: the record demonstrates zero contemporaneous consideration of those significant comments.”

USTR hasn't explained “how (or even whether) it determined” that the benefits of Lists 3 and 4A would outweigh the negative impacts of higher costs on U.S. businesses, the likelihood of further harmful Chinese retaliation, or “that many Chinese products incorporate U.S. inputs or technology and are made by U.S.-owned companies,” said the lawyers. “That failure violates the APA.”