Retailer Groups Tell CAFC USTR Failed to Respond to Comments on China Tariffs

A group of retail trade groups, led by the American Apparel and Footwear Association, said that the Office of the U.S. Trade Representative failed to adequately respond to comments when imposing its lists 3 and 4A Section 301 tariffs on China. Submitting an amicus brief at the U.S. Court of Appeals for the Federal Circuit in the massive case against the duties, the retail representatives argued that USTR illegally relied on the president's discretion as a response to the comments, violating the Administrative Procedure Act (HMTX Industries, et al. v. U.S., Fed. Cir. # 23-1891).

The amicus brief said that an agency's response to significant comments cannot rely on post hoc rationalizations nor conclusory statements, adding that USTR's responses to the amici's comments on the tariffs' efficacy and possible alternatives "were unreasoned or non-existent." The justification USTR did offer, "that the President told USTR what to do so it didn't need to fully explain itself," violated the APA, the brief said.

USTR "did not meaningfully explain" why it agreed with the president's directive, nor whether or how it weighed the president's order against the interested parties' comments or even what discretion the agency believed it had to deviate from the president's direction, the amici argued. USTR's "apparent position" that the Trade Act of 1930's reference to presidential direction supersedes the APA's requirement to respond to significant comments is legally erroneous, the brief said.

Courts have ruled that later statutes cannot be read to modify the APA's reasoned decision-making requirements "absent a clear statement." The Trade Act has no such clear statement, the brief said. USTR's "conclusory and non-responsive" statements failed to address concerns on the adverse economic impact of the duties, the efficacy of the tariffs and proposed alternatives, the amici said.

The retail groups' comments highlight one track of the arguments being advanced by the lead appellants, led by HMTX Industries and Jasco Products Co. (see 2307180069). In their opening remarks, the appellants said that USTR didn't have the authority to set the duties since the statute doesn't let the agency impose tariff modifications on the grounds that it's responding to retaliatory action, adding that the duty modifications must be responding to further practices harmful to U.S. commerce identified by the original Section 301 action. In this case, those practices constituted Chinese theft of intellectual property.

Two other amicus briefs also were filed following the appellants' opening remarks -- one by parties led by American Kenda Rubber Industrial Co. and the other led by Acushnet Co. The Acushnet arguments doubled down on the APA claims, telling the appellate court that USTR failed to address issues central to the tariffs both administratively and on remand at the trade court. "The CIT should have stuck to its guns and held USTR to its obligation to provide a thorough and reasonable explanation for its decision to nonetheless impose the List 3 and 4A tariffs, which had extremely harsh consequences for U.S. companies, their customers, and the broader U.S. economy," the brief said.

The Kenda Rubber brief echoed the claims made by the appellants, arguing that USTR did not have clear Congressional authorization under Section 301 to impose the lists 3 and 4A duties, and that USTR failed to follow "other Congressional requirements" for taking Section 301 action.

Kenda Rubber argued that Congress in Section 301 did not allow USTR to double the duties collected on imports. Congress instead meant for the law to be used to "incentivize foreign countries to negotiate removal of its practices that harm U.S. commerce through limited actions that do not have an adverse impact on the United States economy substantially out of proportion to the benefits of such action." The brief added that the Supreme Court of the U.S. has found that an agency's authority to modify its action "must be read to mean to change moderately or in minor fashion" -- a characterization that the U.S. cannot champion.

The amici also reiterated the appellants' claim that the imposition of the duties was an example of the agency acting on a major element of the economy without clear authorization from Congress, in violation of the "major questions" doctrine articulated by SCOTUS in West Virginia v. EPA.