In Re Section 301 Cases
Case Information
Slip Op. 22- (cid:22)(cid:21)
UNITED STATES COURT OF INTERNATIONAL TRADE
Bеfore: Mark A. Barnett, Claire R. Kelly, and IN RE SECTION 301 CASES Jennifer Choe-Groves, Judges OPINION AND ORDER
[Remanding the Office of the United States Trade Representative’s determinations with respect to List 3 and List 4A; granting in part and denying in part Defendants’ Motion to Correct the Administrative Record.]
Dated: April 1, 2022 Pratik Shah, Akin Gump Strauss Hauer & Feld LLP, of Washington, D.C., argued for Plaintiffs HMTX Indus. LLC, Halstead New England Corp., Metroflor Corp., and Jasco Prods. Co. LLC. With him on the brief were Matthew R. Nicely, James E. Tysse, Devin S. Sikes, Daniel M. Witkowski, and Sarah B. W. Kirwin.
Justin R. Miller, Attorney-In-Charge, International Trade Field Office, Elizabeth A. Speck, Trial Attorney, and Jamie L. Shookman, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., argued for Defendants. With them on the brief were Brian M. Boynton, Acting Assistant Attorney General, Patricia M. McCarthy, Director, L. Misha Preheim, Assistant Director, Sosun Bae, Senior Trial Counsel, and Ann C. Motto, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C. Of Counsel on the brief were Megan Grimball, Associate General Counsel, Philip Butler, Associate General Counsel, and Edward Marcus, Assistant General Counsel, Office of General Counsel, Office of the U.S. Trade Representative, of Washington, D.C., and Paula Smith, Assistant Chief Counsel, Edward Maurer, Deputy Assistant Chief Counsel, and Valerie Sorensen-Clark, Attorney, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection, of New York, N.Y.
Joseph R. Palmore, Morrison & Foerster LLP, of Washington, D.C., argued for Amici Curiae Retail Litigation Center, et al. With him on the brief was Adam L. Sorensen. Christine M. Streatfeild, Baker McKenzie LLP, of Washington, D.C., argued for Amici Curiae Am. Trailer World Corp., et al. With her on the brief was Kevin M. O’Brien, as well as Nancy A. Noonan and Angela M. Santos, Arent Fox LLP, of Washington, D.C. George W. Thompson, Thompson & Associates, PLLC, of Washington, D.C., for Amici Curiae Ecolab Inc., et al.
Barnett, Chief Judge: Plaintiffs HMTX Industries LLC, Halstead New England Corporation, Metroflor Corporation, and Jasco Products Company LLC commenced the first of approximately 3,600 cases (the “Section 301 Cases”) contesting the imposition of a third and fourth round of tariffs by the Office of the United States Trade Representative (“the USTR” or “the Trade Representative”) pursuant to section 301 of the Trade Act of 1974 (“the Trade Act”), 19 U.S.C. § 2411, et seq . See generally Am. Compl., HMTX Indus. LLC v. United States, Court No. 20-cv-00177 (CIT Sept. 21, 2020), ECF No. 12 (“20-177 Am. Compl.”).
Defendants United States, et al. (“the Government”) move to dismiss Plaintiffs’ claims as non-justiciable pursuant to U.S. Court of International Trade (“USCIT”) Rule 12(b)(6) or, alternatively, for judgment on the agency record pursuant to USCIT Rule 56.1. Defs.’ Mot. to Dismiss or, Alternatively, Mot. for J. on the Agency R. (“Defs.’ Mot.”), ECF No. 314. Plaintiffs cross-move for judgment on the agency record. Pls.’ Cross-Mot. for J. on the Agency R., and accompanying Mem. in Supp. of Pls.’ Cross- Mot. for J. on the Agency R. and Resp. to Defs.’ Mot. to Dismiss/Mot. for J. on the Agency R. (“Pls.’ Cross-Mot. & Resp.”), ECF No. 358.
The Government also moves to correct the administrative record. Defs.’ Mot. to Correct the R. (“Defs.’ Mot. Correct R.”), ECF No. 441. Plaintiffs oppose that motion, in part. Pls.’ Partial Opp’n to Defs.’ Mot. to Correct the Agency R. (“Pls.’ Opp’n Correct R.”), ECF No. 442.
For the following reasons, the court remands the contested USTR determinations and grants in part and denies in part the Government’s motion to correct the record.
B ACKGROUND
I. Legal Framework
Article I, Section 8 of the U.S. Constitution vests Congress with the “Power To lay and collect Taxes, Duties, Imposts and Excises” and to “regulate Commerce with foreign Nations.” U.S. Const. art. I, § 8, cl. 1, 3. Section 301 of the Trade Act, which governs actions taken in response to a foreign country’s violation of a trade agreement or conduct that is otherwise harmful to U.S. commerce, constitutes a congressional delegation of some of that authority to the Executive Branch. See 19 U.S.C. § 2411 (2018). [2] Specifically, section 301 sets out the circumstances under which action by the USTR is mandatory (subject to certain exceptions), see id. § 2411 (a)(1)–(2), [3] and when such action is discretionary, see id. § 2411(b).
This case concerns the latter scenario. Pursuant to section 301(b), the USTR has discretion to act when it determines that “(1) an act, policy, or practice of a foreign country is unreasonable or discriminatory and burdens or restricts United States commerce, and (2) action by the United States is appropriate.” Id. When both conditions are met, the USTR
shall take all appropriate and feasible action authorized under subsection (c), subject to the specific direction, if any, of the President regarding any such action, and all other appropriate and feasible action within the power of the President that the President may direct the Trade Representative to take under this subsection, to obtain the elimination of that act, policy, or practice. Actions may be taken that are within the power of the President with respect to trаde in any goods or services, or with respect to any other area of pertinent relations with the foreign country.
Id. § 2411(b)(2).
Subsection (c) describes the actions the USTR may take in order to implement mandatory or discretionary actions under subsections (a) and (b). Id. § 2411(c). For investigations not involving a trade agreement, the USTR must make its determination as to whether conduct is actionable under section 301(a) or (b) and, if so, what action to take, no later than “12 months after the date on which the investigation [was] initiated.” Id. § 2414(a)(2)(B). Generally, such actions must then be implemented within 30 days of the date of the determination. § 2415(a)(1).
Central to this litigation, section 307 of the Trade Act governs the modification or termination of the USTR’s actions taken pursuant to section 301. See generally id. § 2417. The statute provides, inter alia :
(a) In general
(1) The Trade Representative may modify or terminate any action, subject to the specific direction, if any, of the President with respect to such action, that is being taken under section 2411 of this title if—
(A) any of the conditions described in section 2411(a)(2) of this title exist,
(B) the burden or restriction on United States commerce of the denial rights, or of the acts, policies, and practices, that are the subject of such action has increased or decreased, or
(C) such action is being taken under section 2411(b) of this title and is no longer appropriate. § 2417(a)(1).
II. Factual Background
On August 14, 2017, the President of the United States issued a memorandum instructing the USTR to consider, consistent with section 302(b) of the Trade Act, initiating an investigation addressing the Government of the People’s Republic of China’s (“China”) “laws, policies, practices, or actions that may be unreasonable or discriminatory and that may be harming American intellectual property rights, innovation, or technology development.” Addressing China’s Laws, Policies, Practices, and Actions Related to Intellectual Property, Innovation, and Technology , 82 Fed. Reg. 39,007, 39,007 (Aug. 17, 2017). The USTR initiated such an investigation on August 18, 2017. Initiation of Section 301 Investigation; Hearing; and Request for Public Comment: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 82 Fed. Reg. 40,213 (Aug. 24, 2017) (“ Initiation Notice ”).
On March 22, 2018, the USTR published a report announcing the results of the investigation. O FFICE OF THE U NITED S TATES T RADE R EPRESENTATIVE , F INDINGS OF THE I NVESTIGATION INTO C HINA ’ S A CTS , P OLICIES , A ND P RACTICES R ELATED TO T ECHNOLOGY T RANSFER , I NTELLECTUAL P ROPERTY , AND I NNOVATION U NDER S ECTION OF THE T RADE A CT OF (2018) (“USTR Report” or “the Report”), https://ustr.gov/sites/default/files/ Section 301 FINAL.PDF. The Report summarizes the ways in which China’s conduct in the areas subject to the investigation was unreasonable and burdened U.S. commerce. See id. Also on March 22, 2018, the President issued a memorandum directing the USTR, inter alia , to “take all appropriate action” pursuant to section 301 “to address the acts, policies, and practices of China that are unreasonable or discriminatory and that burden or restrict U.S. commerce” and to “consider whether such action should include increased tariffs on goods from China.” Actions by the United States Related to the Section 301 Investigation of China’s Laws, Policies, Practices, or Actions Related to Technology Transfer, Intellectual Property, and Innovation , 83 Fed. Reg. 13,099, 13,100 (Mar. 27, 2018). In that memorandum, the President further instructed the USTR to “publish a proposed list of products and any intended tariff increases within 15 days of the date of this memorandum,” subject to notice and comment pursuant to section 304(b), and, “after consultation with appropriate agencies and committees,” to “publish a final list of products and tariff increases, if any, and implement any such tariffs.” Id.
On April 6, 2018, the USTR published notice of its determination “that the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation covered in the investigation are unreasonable or discriminatory and burden or restrict U.S. commerce.” Notice of Determination and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 83 Fed. Reg. 14,906, 14,906 (Apr. 6, 2018) (“ USTR Determination ”). Accordingly, the USTR proposed tariffs on products worth “approximately $50 billion in terms of estimated annual trade value” in 2018. Id. at 14,907. The USTR considered the size of the action to be “appropriate both in light of the estimated harm to the U.S. economy, and to obtain elimination of China’s harmful acts, policies, and practices.”
On June 20, 2018, the USTR published notice of a final list of products “with an approximate annual trade value of $34 billion” that would be subject to an additional duty of 25 percent ad valorem , referred to as “List 1.” Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 83 Fed. Reg. 28,710, 27,711 (June 20, 2018) (“ Final List 1 ”). On August 16, 2018, the USTR published notice of an additional list of products with an approximate annual trade value of $16 billion that would be subject to an additional duty of 25 percent ad valorem , referred to as “List 2.” Notice of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 83 Fed. Reg. 40,823, 40,823–24 (Aug. 16, 2018).
During the time between the USTR’s finalization of List 1 and List 2, the President directed the USTR to identify $200 billion worth of Chinese goods on which to impose an additional duty of 10 percent ad valorem “after the legal process is complete” if China refused to change its practices. Statement from the President Regarding Trade with China (June 18, 2018) (“June 2018 Presidential Statement”), ECF No. 441-1; see also USTR Robert Lighthizer Statement on the President’s Additional China Trade Action (June 18, 2018), PR 27. In accordance with that direction, the USTR identified 6,031 tariff subheadings comprising goods imported from China, referred to as “List 3 . ” Request for Comments Concerning Proposed Modification of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 83 Fed. Reg. 33,608, 33,608–09 (July 17, 2018) (“ List 3 NPRM ”). In proposing the additional duties, the USTR relied on its authority to modify the action pursuant to section 307(a)(1)(C) of the Trade Act. Id . at 33,609. The USTR explained that China had responded “to the initial U.S. action in the investigation by imposing retaliatory tariffs on U.S. goods[] instead of addressing U.S. concerns” regarding the unfair practices identified in the investigation. Id. at 33,608. The USTR also explained that “a supplemental $200 billion action is appropriate” because China had failed to respond favorably to the $50 billion action and instead imposed “retaliatory duties” in the amount of $50 billion on U.S. products. at 33,609.
The USTR later extended the public comment period concerning the List 3 duties after the President directed the USTR “to consider increasing the proposed level of the additional duty from 10 percent to 25 percent.” Extension of Public Comment Period Concerning Proposed Modification of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 83 Fed. Reg. 38,760, 38,760–61 (Aug. 7, 2018) (“ List 3 Cmt. Extension ”).
On September 17, 2018, the President directed the USTR to impose an additional duty of 10 percent ad valorem on $200 billion worth of Chinese goods, to take effect on September 24, 2018, and to increase the additional duty to 25 percent ad valorem on January 1, 2019. Statement from the President (Sept. 17, 2018) (“Sept. 2018 Presidential Statement”), PR 4. On September 21, 2018, the USTR published final notice of List 3 duties at a rate of 10 percent ad valorem with an effective date of September 24, 2018. Notice of Modification of Action Pursuant to Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 83 Fed. Reg. 47,974 (Sept. 21, 2018) (“ Final List 3 ”). In accordance with the President’s direction, the rate of additional duty on products covered by List 3 was set to increase to 25 percent ad valorem on January 1, 2019. Id. at 47,974.
As authority for the List 3 duties, the USTR relied on section 307(a)(1)(B) and (C). See id. at 47,974–75. The USTR explained that “the burden or restriction on United States commerce of the acts, policies, and practices that are the subject of the Section 301 action continues to increase” and, further, that “China’s unfair acts, policies, and practices include not just its specific technology transfer and IP polices [ sic ] referenced in the notice of initiation in the investigation, but also China’s subsequent defensive actions taken to maintain those policies.” at 47,974. The USTR noted that China had “impose[d] approximately $50 billion in tariffs on U.S. goods” to persuade the United States to end the section 301 action and to protect the investigated practices, which led to “increased harm to the U.S. economy.” Id.
With respect to subsection (C), the USTR explained that “[t]he term ‘appropriate’” used in that provision links to section 301(b), which authorizes the USTR to “take all appropriate and feasible action” in order “to obtain the elimination of [the] act, policy, or practice.’’ Id. (quoting 19 U.S.C. § 2411(b)). According to the USTR, the action that will achieve that aim “is a matter of predictive judgment, to be exercised by the [USTR], subject to any specific direction of the President.” Id. at 47,974–75. While the USTR previously judged that “a $50 billion action would be effective in obtaining the elimination of China’s policies[,] China’s response . . . ha[d] shown that the current action no longer [was] appropriate.” Id. at 47,975.
The USTR also explained thаt, during the public comment period, it had received more than 6,000 written submissions and held a six-day public hearing. Id. at 47,974. The USTR stated that it had “carefully reviewed the public comments and the testimony from the six-day public hearing” and, consequently, removed “certain tariff subheadings” from the list. Id. at 47,975. The final list identified “5,745 full and partial tariff subheadings.”
After several extensions of the effective date of the increase in List 3 duties issued in connection with ongoing trade negotiations, List 3 duties increased to 25 percent ad valorem in May or June of 2019, based on the date of export. Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 84 Fed. Reg. 20,459 (May 9, 2019); Implementing Modification to Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 84 Fed. Reg. 21,892 (May 15, 2019); Additional Implementing Modification to Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 84 Fed. Reg. 26,930 (June 10, 2019).
After the List 3 duties increased to 25 percent, the USTR established an exclusion process pursuant to which importers could request exclusion of their products from List 3 duties. Procedures for Requests to Exclude Particular Products From the September 2018 Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 84 Fed. Reg. 29,576 (June 24, 2019). Plaintiffs obtained exclusions for certain of their imports, effective September 24, 2018, through August 7, 2020. See, e.g. , Notice of Product Exclusions: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 84 Fed. Reg. 61,674, 61,675–76. (Nov. 13, 2019); 20-177 Am. Compl. ¶¶ 49–50.
On May 17, 2019, the USTR announced its intent, at the direction of the President, to modify again the section 301 action by imposing additional duties of up to 25 percent ad valorem on products from China covered by 3,805 additional tariff subheadings, referred to as “List 4.” Request for Comments Concerning Proposed Modification of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 84 Fed. Reg. 22,564 (May 17, 2019) (“ List 4 NPRM ”); see also Statement by U.S. Trade Representative Robert Lighthizer on Section 301 Action (May 10, 2019), PR 30. The USTR explained that the United States and China had engaged in sеveral rounds of negotiation regarding issues covered by the section 301 investigation, but that China had “retreated from specific commitments made in previous rounds” and “announced further retaliatory action against U.S. commerce.” List 4 NPRM , 84 Fed. Reg. at 22,564. The USTR proposed modifying the action pursuant to section 307(a)(1)(B) and (C). Id.
On August 20, 2019, the USTR published final notice of the List 4 duties in the amount of 10 percent ad valorem on certain products identified in List 4 NPRM . Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 43,304 (Aug. 20, 2019) (“ Final List 4 ”). Within Final List 4 , the tariff subheadings were segregated into List 4A and List 4B with separate effective dates (September 1, 2019 and December 15, 2019, respectively). Id. at 43,305.
Referencing the language of section 307(a)(1)(B), the USTR explained that “[t]he burden or restriction on United States commerce of the acts, policies, and practices that are the subject of the Section 301 action continues to increase.” Id. at 43,304. The USTR also explained that “China’s unfair acts, policies, and practices include not just its technology transfer and IP polices [ sic ] referenced in the notice of initiation in the investigation, but also China’s subsequent defensive actions taken to maintain those unfair acts, policies, and practices.” (referencing China’s retaliatory imposition of “tariffs on approximately $110 billion worth of U.S. goods” and other “non-tariff measures”).
In reference to section 307(a)(1)(C), the USTR stated that “China’s response has shown that the current action no longer is appropriate.” Id. The USTR noted China’s retreat from certain negotiated commitments, retaliatory actions, and currency devaluation. Id. at 43,305.
Lastly, the USTR stated that it had considered “the public comments” it had received “and the testimony from the seven-day public hearing, as well as the advice of the interagency Section 301 committee and appropriate advisory committees.” Id. In response to that information, the USTR removed “[c]ertain tariff subheadings” from the final List 4 duties “based on health, safety, national security, and other factors,” and staggered the effective dates for the List 4A and List 4B duties. Thereafter, the USTR provided notice of its intent to increase the additional duty rate applicable to List 4A and List 4B from 10 percent ad valorem to 15 percent ad valorem . Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 84 Fed. Reg. 45,821 (Aug. 30, 2019).
On December 18, 2019, the USTR indefinitely suspended the additional duties of 15 percent ad valorem on List 4B, but not List 4A, “[i]n light of progress in the negotiations with China.” Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 84 Fed. Reg. 69,447, 69,447 (Dec. 18, 2019).
On January 22, 2020, the USTR halved the additional duty on products covered by List 4A from 15 percent ad valorem to 7.5 percent ad valorem . Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 85 Fed. Reg. 3741 (Jan. 22, 2020).
III. Procedural History
On September 10, 2020, Plaintiffs commenced an action challenging the section 301 duties imposed pursuant to List 3 and List 4A. Summons, Compl., HMTX Indus. LLC v. United States , Court No. 20-cv-00177 (CIT Sept. 10, 2020), ECF Nos. 1, 2. Count one alleges that the USTR exceeded its authority pursuant to section 307 of the Trade Act when it imposed the duties and seeks a declaratory judgment to that effect. 20-177 Am. Compl. ¶¶ 63–70. Count two alleges violations of the Administrative Procedure Act (“APA”). ¶¶ 71–75. Specifically, Plaintiffs allege that USTR exceeded its authority “in promulgating List 3 and List 4A,” id. ¶ 73, and “promulgated List 3 and List 4A in an arbitrary and capricious manner,” id. ¶ 75.
On February 5, 2021, Plaintiffs’ action, among others, was assigned to this panel. See, e.g. , Order, HMTX Indus. LLC v. United States , Court No. 20-cv-00177 (CIT Feb. 5, 2021), ECF No. 43. On February 10, 2021, the panel designated a “master case” under the name “ In Re Section 301 Cases” to function as the primary vehicle by which the court would manage the litigation of the Section 301 Cases. Std. Procedural Order No. 21-01 (Feb. 10, 2021), ECF No. 1. After receiving input from the Parties, on March 31, 2021, the court designated Plaintiffs’ case as “the sample case for purposes of the court’s initial consideration and resolution of Plaintiffs’ claims.” Std. Procedural Order 21-04 (Mar. 31, 2021), ECF No. 267. The court stayed all other Section 301 Cases and appointed a Plaintiffs’ Steering Committee to aid the court’s adoption of case management procedures and coordinate the preparation of consolidated briefs and court submissions. ; see also Std. Procedural Order 21-02 (Feb. 16, 2021), ECF No. 82 (explaining the duties of the steering committee). On April 12, 2021, the Parties filed a Joint Status Report with a proposed briefing schedule governing disposition of the merits of the sample case. Joint Status Report (Apr. 12, 2021), ECF No. 274. The following day, the court entered a Scheduling Order. See Scheduling Order (Apr. 13, 2021), ECF No. 275.
On June 1, 2021, the Government filed its opening motion. Defs.’ Mot. On August 2, 2021, Plaintiffs filed their cross-motion and response to the Government’s motion. Pls.’ Cross-Mot. & Resp. On August 9, 2021, several interested parties that are plaintiffs in actions that were stayed behind this sample action filed an amicus brief on whether any potential relief is limited to an importer of record. Amicus Br. of Interested Parties (“Interested Parties’ Br.”), ECF No. 362. On August 31, 2021, the court granted two additional motions for leave to file an amicus brief. Order (Aug. 31, 2021), ECF No. 396; Order (Aug. 31, 2021), ECF No. 397; see also Proposed Br. of Amici Curiae Retail Litigation Center, Inc., et al . (“RLC’s Br.”), ECF No. 373-2; Br. of Proposed Amici Curiae Ecolab Inc., et al . in Supp. of the Cross-Mot. for J. on the Agency R. Submitted by Pls.’ HMTX Indus. LLC et al . (“Ecolab’s Br.”), ECF No. 374. On October 1, 2021, the Government filed its joint response to Plaintiffs’ cross-motion and the amicus briefs and a reply in support of its opening motion. Defs.’ Reply in Supp. of Their Mot. to Dismiss, Resp. to Pls.’ Cross-Mot. for J. on the Agency R., and Resp. to Amicus Curiae Supporting Brs. (“Defs.’ Resp. & Reply”), ECF No. 412. On November 15, 2021, Plaintiffs filed their reply. Pls.’ Reply in Supp. of Their Cross-Mot. for J. on the Agency R. (“Pls’ Reply”), ECF No. 425. The court heard oral argument on February 1, 2021. Docket Entry, ECF No. 440.
Following oral argument, on February 15, 2022, the Government filed a partial consent motion to correct the administrative record. Defs.’ Mot. Correct R. On February 16, 2022, Plaintiffs filed their response. Pls.’ Opp’n Correct R.
J URISDICTION AND S TANDARD OF R EVIEW
The court has jurisdiction pursuant to 28 U.S.C. § 1581(i)(1)(B) (2018 & Supp. II 2020), which grants the court “exclusive jurisdiction of any civil action commenced against the United States . . . that arises out of any law of the United States providing for . . . tariffs, duties, fees, or other taxes on the importation of merchandise for reasons other than the raising of revenue.”
The court may properly dismiss a claim pursuant to USCIT Rule 12(b)(6) when
the plaintiff’s factual allegations, assumed to be true, fail to raise a legally cognizable
claim.
See Bell Atl. Corp. v. Twombly
,
D ISCUSSION
The court first considers the Government’s motion to dismiss Plaintiffs’ claims based on non-justiciability. As discussed below, because the court finds that the claims are reviewable, the court turns next to the cross-motions concerning the USTR’s authority pursuant to section 307 of the Trade Act and alleged procedural violations. Lastly, the court considers the Government’s partial consent motion to correct the administrative record.
I. Reviewability of Plaintiffs’ Claims
1. Whether List 3 and List 4A Constitute Unreviewable Presidential Action a. Parties’ Contentions
The Government contends that Plaintiffs seek to challenge presidential—as
opposed to agency—action because at each step in the modification process, “the
USTR acted at ‘the specific direction . . . of the President.’” Defs.’ Mot. at 22 (quoting
19 U.S.C. § 2417(a)(1)). When the President “exercise[s] his discretion to direct action”
pursuant to section 307(a)(1), the Government contends, “the action constitutes
presidential action.” Defs.’ Resp. & Reply at 5. Thus, the Government contends,
Plaintiffs’ claims arising out of the APA must fail “because the President is not an
‘agency’ within the meaning of the APA.” Defs.’ Mot. at 22 (citing,
inter alia
,
Franklin v.
Massachusetts
,
Plaintiffs contend that the promulgation of List 3 and List 4A constitute final
agency action because sections 301 and 307 of the Trade Act authorize the USTR—not
the President—to act, and relevant
Federal Register
notices reflect the USTR’s
determination to take the specified actions. Pls.’ Cross-Mot. & Resp. at 47 (citing
Final
List 3
,
b. List 3 and List 4A Implicate Agency Actions That Are Judicially Reviewable
While “[a]gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review,” 5 U.S.C. § 704, presidential action is non-reviewable under the APA, Franklin , 505 U.S. at 800–01. The Government’s arguments for dismissal raise the question whether agency action taken in accordance with presidential direction pursuant to section 307 constitutes non-reviewable presidential action.
For purposes of this case, the answer to that question is “no.”
Franklin
held that
the APA did not apply to a challenge to reapportionment because the President, not the
Secretary of Commerce, sent the final apportionment to Congress and thus took the
final step “affecting the States.”
Here, the Government extends
Franklin
beyond its holding when it argues, in
effect, that
antecedent
presidential direction lacking any direct effect on relevant parties
renders List 3 and List 4A non-reviewable presidential actions. The Government cites
no authority to support such a broad reading. Indeed, in an analogous context, courts
review agency action taken to implement Presidential proclamations and Executive
orders—each of which are forms of presidential direction—pursuant to the APA.
See,
e.g.
,
Sherley v. Sebelius
,
of the [reapportionment] process” in reaching its decision.
under the APA had plaintiffs brought such a claim);
Tate v. Pompeo
, 513 F. Supp. 3d
132 (D.D.C. 2021) (reviewing agency action taken to implement a Presidential
proclamation). Thus, although “actions involving discretionary authority delegated by
Congress to the President” may be non-reviewable under the APA, such cases are
distinct from those “involving authority delegated by Congress to an agency.”
See
Detroit Int’l Bridge Co. v. Gov’t of Can.
,
This case concerns the latter circumstance. Congress delegated to the USTR
authority over modifications to section 301 actions.
See
19 U.S.C. § 2417(a)(1); H.R. R EP . N O . 100-576 at 551 (recognizing the USTR’s authority to decide and implement
section 301 actions and noting that “[t]he President would not retain separate authority
to take action”). Consistent with the statute, the USTR engaged in a rulemaking
process, the results of which—List 3 and List 4A—“directly affect[ed] the parties.”
Franklin
,
The court thus concludes that Plaintiffs’ claims are not non-reviewable pursuant to the APA by virtue of the President’s involvement. Accordingly, the court denies the Government’s motion to dismiss Plaintiffs’ claims on this basis.
2. Political Question Doctrine
a. Parties’ Contentions
The Government contends that Plaintiffs’ claims are non-justiciable pursuant to
the political question doctrine because they implicate the President’s discretionary
determinations that modification of the original section 301 action was merited. Defs.’
Mot. at 25. Specifically, the Government contends, Plaintiffs seek to challenge the
President’s determinations (1) that the original action “was ‘no longer appropriate’” and
“whether new tariffs [are] ‘appropriate’”; and (2) that China’s retaliatory conduct
“increased the burden on the United States economy.”
Id.
at 26–27 (citations omitted).
According to the Government, the “highly discretionary nature of what is ‘appropriate’”
under the circumstances means that “the statute lacks a ‘judicially discoverable and
manageable standard[].’” at 27 (quoting
Baker v. Carr
,
Plaintiffs contend that their claims implicate matters of statutory interpretation
and compliance with the APA, both of which present judicially manageable standards.
Pls.’ Cross-Mot. & Resp. at 50–51. Thus, Plaintiffs contend, their claims neither
“challenge discretionary determinations committed to the Executive Branch,”
id.
at 51,
nor seek judicial pronouncements on trade policy,
id.
at 52. Plaintiffs rely on
Almond
Brothers
to contend that the court may resolve arguments regarding statutory
interpretation while declining to address discretionary USTR determinations. (citing
Almond Bros.
,
b. Plaintiffs’ Claims Do Not Implicate a Non-Justiciable Political Question
A controversy may involve a political question when there is: a textually demonstrable constitutional commitment of the issue to a coordinate political department; or a lack of judicially discoverable and manageable standards for resolving it; or the impossibility of deciding without an initial policy determination of a kind clearly for nonjudicial discretion; or the impossibility of a court’s undertaking independent resolution without expressing lack of the respect due coordinate branches of government; or an unusual need for unquestioning adherence to a political decision already made; or the potentiality of embarrassment from multifarious pronouncements by various departments on one question.
Baker
,
The “decision that a question is nonjusticiable is not one courts should make
lightly.”
El-Shifa Pharm. Indus. Co. v. United States
,
Plaintiffs allege,
inter alia
, that the USTR exceeded the authority provided by
section 307(a)(1)(B) and (C) of the Trade Act when it promulgated List 3 and List 4A.
20-177 Am. Compl. ¶¶ 68–70, 73. It is clear from the court’s discussion,
infra
, that such
claims require the court to engage in the “familiar judicial exercise” of statutory
interpretation in order to ascertain whether the factual predicate for the modifications fell
within the purview of subsection (B), and whether subsection (C) is limited to reductions
in, or termination of, trade actions.
See Zivotofsky
,
The court is not questioning the USTR’s determination that China’s subsequent defensive conduct increased the burden on U.S. commerce, Defs.’ Mot. at 27–28, indeed, Plaintiffs concede that it did, Pls.’ Cross-Mot. & Resp. at 31. Instead, the issue before the court is whether that conduct increased the burden on U.S. commerce in a legally relevant way . That inquiry requires the court to interpret the meaning of the statutory terms, “the acts, policies, and practices[] that are the subject of such action,” in relation to this modification action. 19 U.S.C. § 2417(a)(1)(B). Likewise, the court is not reviewing the USTR’s discretionary decisions regarding the appropriateness of certain actions pursuant to subsection (C). See Defs.’ Mot. at 26.
For these reasons, the Government’s reliance on
Almond Brothers
is misplaced.
Resolution of that case turned on the appellate court’s application of the APA’s narrow
exception to judicial review for “agency action [that] is committed to agency discretion
by law,” 5 U.S.C. § 701(a)(2), to the plaintiff’s challenges to the terms of an agreement
the USTR entered into with Canada,
see Almond Bros.
,
The Government’s motion does not discuss the political question doctrine in
relation to Plaintiffs’ claims concerning the USTR’s compliance with the procedural
requirements set forth in the APA.
See
Defs.’ Mot. at 25–30; 20-177 Am. Compl.
¶¶ 74–75. In its reply brief, the Government asserts that, “[i]f a case presents an
unreviewable political question, then
no
review of those claims is available under the
APA.” Defs.’ Resp. & Reply at 10 (citing
Heckler v. Chaney
,
Simply put, the policy-laden questions to which the USTR directed its discretionary authority are not before the court. See Defs.’ Mot. at 29 (arguing that “plaintiffs invite competing policies and statements regarding United States trade policy from the Judicial Branch”). Matters of statutory interpretation and compliance with procedural requirements are independent questions the court is well-equipped to answer. Thus, the court is not risking “the potentiality of embarrassment from multifarious pronouncements by various departments on one question.” Baker , 369 U.S. at 217. Accordingly, the court denies the Government’s motion to dismiss Plaintiffs’ claims based on purported non-justiciability and now turns to the merits of those claims.
II. Whether the USTR Exceeded its Modification Authority Pursuant to
Section 307 of the Trade Act
1. Standard of Review
a. Parties’ Contentions
The Government contends that, even if the contested actions are those of the
USTR, a heightened standard of review applies, namely, whether there has been “a
clear misconstruction of the governing statute, a significant procedural violation, or
action outside delegated authority.” Defs.’ Mot. at 30–31 (quoting
Gilda II
, 622 F.3d at
1363). The Government asserts that the USTR conducts “‘[a]ll functions . . . under the
direction of the President,’”
id.
at 30, meaning that the court must “afford[] substantial
deference to decisions of the [USTR] implicating the discretionary authority of the
President in matters of foreign relations,”
id.
(quoting
Gilda II
,
Plaintiffs contend that the court “is the final authority on issues of statutory
construction,” Pls.’ Cross-Mot. & Resp. at 39 (quoting
Gilda II
,
b. Analysis
In cases arising under the court’s jurisdiction pursuant to 28 U.S.C. § 1581(i), the
court applies the standard of review set forth in the APA. 28 U.S.C. § 2640(e). The
“court must ‘decide all relevant questions of law, interpret constitutional and statutory
provisions,’ and ‘hold unlawful and set aside agency action, findings, and conclusions
found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.’”
Gilda II
,
While the Government seeks to distinguish
Gilda II
based on the underlying
statute at issue,
see
Defs.’ Resp. & Reply at 6, that distinction is inapposite here.
Gilda II
recognizes that although the “court affords substantial deference to decisions of
the Trade Representative implicating the
discretionary authority
of the President in
matters of foreign relations,”
id.
(citing
Maple Leaf Fish Co. v. United States
, 762 F.2d
86, 89 (Fed. Cir. 1985) (emphasis added), “[t]he judiciary is the final authority on issues
of statutory construction and must reject administrative constructions which are contrary
to clear congressional intent,”
id.
(quoting
Chevron
,
Here, resolving Plaintiffs’ substantive claims requires the court first to interpret
the relevant statutory provisions; thus, the court “must first carefully investigate the
matter to determine whether Congress’s purpose and intent on the question at issue is
judicially ascertainable.”
Timex V.I., Inc. v. United States
,
Because the court finds that the statute is unambiguous, the court need not and does not address what, if any, deference the USTR’s interpretation of the statute would be given if the statute was ambiguous.
2. The USTR’s Authority Pursuant to Section 307(a)(1)(B) a. Parties’ Contentions
The Government contends that “China’s subsequent actions”—retaliatory tariffs and other measures such as currency devaluation—“were not separate and distinct from their unfair trade practices investigated under section 301” but “were directly related” to the investigation and intended to permit and defend the continuation of the investigated practices. Defs.’ Mot. at 32. The Government further contends that Plaintiffs’ interpretation of the statute would prevent the President and the USTR from “respond[ing] to a trading partner’s refusal to eliminate its unfair trade practices” and retaliatory actions. at 33. Such an interpretation, the Government contends, is inconsistent with both the USTR’s authority to take “all ‘appropriate and feasible action’ within the power of the President” to eliminate the unfair practices pursuant to section id. at 1324 (citation omitted), before concluding that Congress’ intent was plain with respect to the operative term. These cases thus lend support for the distinction between review of discretionary decisions and statutory interpretation recognized in Gilda II . Indeed, the Government contends that China’s defensive actions permitted the USTR
to modify the section 301 action under both subsections (B) and (C). Defs.’ Mot. at 33. The Government asserts, and Plaintiffs agree, that each subsection—(B) and (C)— constitutes “an independent basis for action” and failure as to one is not a basis to overturn the action. Defs.’ Mot. at 36 n.6; Oral Arg. 1:55:10–1:55:30 (colloquy with Plaintiffs during which they agreed that each statutory basis provides independent authority for the modifications).
301(b)(2), id. , and legislative history surrounding the 1988 amendments to section 301 indicating congressional desire for vigorous action in response to unfair trade practices, id. at 37–38.
Drawing a temporal line in the sand, Plaintiffs contend that the phrase “the subject of such action” in subsection (B) cannot encompass China’s defensive actions “because those actions had not yet transpired when the investigation was initiated or when USTR determined that remedial action was ‘appropriate.’” Pls.’ Cross-Mot. & Resp. at 31. Thus, Plaintiffs contend, “[t]he increased burden cannot come from other subsequent ‘defensive’ actions.” Id. at 32; cf. Ecolab’s Br. at 8–12 (advancing similar arguments). Plaintiffs contend that any congressional intent to permit the USTR “to prosecute a limitless trade war” would have been stated in clearer terms, “not through the tailored language of Section 307(a)(1)(B).” Pls.’ Cross-Mot. & Resp. at 31–32. Plaintiffs also contend that the existence of explicit retaliation authority pursuant to section 306(b)(2) disfavors interpreting subsection (B) to allow the USTR to retaliate against a trading partner’s actions under the guise of modification. See id. at 32–33.
The Government counters that the USTR “mаde the required finding that the
burden on U.S. commerce had increased as a result of China’s unfair trade practices,
and
its ‘subsequent defensive actions taken to maintain’ those practices.” Defs.’ Resp.
& Reply at 14 (citing
Final List 3
,
In their Reply, Plaintiffs contend that the Government’s assertions of an increased burden on U.S. commerce from the investigated practices are conclusory and unavailing. Pls.’ Reply at 7–8. Plaintiffs contend that the Government’s “true argument” for reliance on subsection (B) remains China’s subsequent defensive conduct that is distinct from the “the four discrete categories of intellectual property and technology transfer conduct that USTR actually investigated.” at 8. Plaintiffs further contend that the Government’s reliance on the USTR Report constitutes a post hoc rationalization for the USTR’s action. Id. at 10. Lastly, Plaintiffs contend that the Government’s dismissal of the relevance of section 306 misses the point. Id. at 10 n.3. Plaintiffs argue that the existence of “section 306 shows that Congress understood how to authorize ‘retaliation’ explicitly against another country’s response to trade proceedings or actions where it wanted to.”
b. In Promulgating List 3 and List 4A, the USTR Properly Exercised Its Authority Pursuant to Section 307(a)(1)(B) The court begins with the language of the statute. The statute permits the USTR to “modify or terminate any action , subject to the specific direction, if any, of the President with respect to such action, that is being taken under section 2411 of this title if—. . . the burden or restriction on United States commerce . . . of the acts, policies, and practices , that are the subject of such action has increased or decreased.” 19 U.S.C. § 2417(a)(1)(B) (emphasis added). This case requires the court first to interpret the meaning of the phrase, “the subject of such action,” because the Parties disagree about whether retaliatory actions taken by China can be the source of burden from the acts, policies, and practices that were the subject of the original action.
Plaintiffs contend that the relevant phrase refers to the subject of the original
investigation. Pls.’ Cross-Mot. & Resp. at 32; Pls.’ Reply at 7–9. The plain meaning of
the terms supports that interpretation. Black’s Law Dictionary defines “subject,” when
used as a noun, as “[t]he matter of concern over which something is created; something
about which thought or the constructive faculty is employed,” for example, “the subject
of the statute.” Black’s Law Dictionary at 1465 (8th Ed. 2004);
cf.
Subject (noun), The
Oxford English Dictionary, Vol. XVII at 29 (2nd Ed. 1989) (“A thing affording matter for
action of a specified kind; a ground motive or cause.”). The phrase “such action,” when
read in context, refers to the “action” referenced in the introductory clause of section
307(a)(1).
See
19 U.S.C. § 2417(a)(1)(B);
cf. Solar Energy Indus. Ass’n v. United
States
, Slip Op. 21-154,
Interpreting the meaning of the phrase does not, however, end the inquiry. Instead, the Parties dispute what was the subject of the action and whether China’s defensive conduct, occurring subsequent to the original investigation, can properly be considered the basis for an increase in the harm stemming from the subject of the action. See, e.g. , Pls.’ Cross-Mot. & Resp. at 32; Defs.’ Resp. & Reply at 15–16. Plaintiffs argue that the subject of the action must be limited to “the investigated intellectual property practices themselves.” Pls.’ Cross-Mot. & Resp. at 25 (emphasis omitted); see also Pls.’ Reply at 8 (distinguishing China’s retaliation from the conduct “that USTR actually investigated”). The Government argues that China’s retaliatory conduct was “not separate and distinct from” the investigated acts and was instead “directly related” to the acts, policies, and practices that were the subject of the investigation. Defs.’ Mot. at 32; Defs.’ Resp. & Reply at 15.
Upon review of the record of the agency’s proceedings and the arguments of the
Parties, the court finds that the link between the subject of the original section 301
action and China’s retaliation is plain on its face. The USTR’s initial determination was
statutorily required to be designed to lead to the elimination of the unfair acts, policies,
and practices, but without any requirement for the action to be focused on the same or
similar industries.
See
19 U.S.C. § 2411(b)(2). Thus, by imposing duties on $50 billion
in trade, the USTR intended to disrupt the trade flow into the United States in such
amount necessary to lead to the elimination of China’s unfair practices. By directly
offsetting the duties on the $50 billion in trade with its own duties on $50 billion in trade
from the United States, China directly connected its retaliation to the U.S. action and to
its own acts, policies, and practices that the U.S. action was designed to eliminate.
See
Final List 3
,
Plaintiffs’ arguments that China’s retaliatory conduct cannot be part of “the subject of” the action because that conduct post-dates the initial investigation and determination are not persuasive. Pls.’ Cross-Mot. & Resp. at 31; see also Pls.’ Reply at 8 (“As a temporal and logical matter, the ‘subject of’ the section 301 action does not encompass all ‘subsequent defensive measures’ China might take in retaliation for U.S. tariffs.”). Modifications are based on activity increasing (or decreasing) the burden on U.S. commerce after the initial determination. 19 U.S.C. § 2417(a)(1)(B). Plaintiffs’ argument thus turns on whether the USTR found that China’s retaliatory conduct caused an increased burden on U.S. commerce from the acts, policies, and practices that constituted the subject of the action. Because, as discussed below, the court concludes that it did, Plaintiffs’ timing-based argument must fail.
In determining whether the USTR reasonably considered China’s retaliatory
actions to be within the purview of the “subject of the action,” the court “may not supply
a reasoned basis for the agency’s action that the agency itself has not given.”
Motor
Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.
,
Beyond the clear connection between the defensive, retaliatory actions and the
acts, policies, and practices they seek to defend, List 3 and List 4A reference the
USTR’s prior determinations concerning the investigation and subsequent actions.
See
Final List 3
,
In addition to summarizing the specific acts, policies, and practices related to technology transfer, intellectual property, and innovation under investigation, the USTR Report provided the historical context in which those actions arose. The Report explained that “[c]oncerns about a wide range of unfair practices of the Chinese government . . . related to [those matters] are longstanding.” USTR Report at 4. The Report noted that the investigation covered the Chinese government’s use of “a variety of tools, including opaque and discretionary administrative approval processes, joint venture requirements, foreign equity limitations, procurements, and other mechanisms to regulate or intervene in U.S. companies’ operations in China, in order to require or pressure the transfer of technologies and intellectual property to Chinese companies.” Id. at 5 (emphasis added). Indeed, as noted by the Government, China’s “top-down national strategy” for acquiring technology “requires the mobilization and participation of all sectors of [Chinese] society.” Id. at 11.
In addition to these concerns, the Report specifically explained the reluctance among U.S. companies to “complain about China’s unfair trade practices” because of concerns about “Chinese retaliation.” Id. at 9. “Other mechanisms” used to regulate U.S. companies’ operations in China thus included the lack of “effective recourse” for U.S. companies wanting to report “informal pressures for fear of retaliation and the potential loss of business opportunities.” at 21. According to the USTR, “concerns about retaliation have enabled China’s technology transfer regime to persist for more than a decade.” ; see also id. at 21 n.106.
The foregoing discussion of retaliation in the USTR Report provides context and explanation regarding the reasons why individual companies were unable and unwilling to pursue their own complaints against the underlying Chinese practices. This recognition of the challenges faced by individual companies led the USTR, consistent with the direction of the President, to initiate the section 301 action in order to protect U.S. companies without them filing their own petitions and incurring the consequences of targeted retaliation. See id. at 10. Thus, even if the retaliatory actions by China were not otherwise clearly related to the acts, policies, and practices that China sought to defend from the USTR’s section 301 action, the USTR Report provides a basis for regarding China’s retaliatory actions as within the sсope of the acts, policies, and practices that were the subject of the original action.
The USTR’s rationale for List 3 and List 4A reflects this understanding of the
agency’s authority pursuant to subsection (B). As the USTR explained, China’s
retaliation against the initial imposition constitutes conduct that is related to the specified
unfair trade policies because it is intended to “maintain those policies.”
Final List 3
, 83
Fed. Reg. at 47,974;
see also Final List 4
,
For these reasons, the court finds that the USTR exercised its authority consistent with section 307(a)(1)(B) when it promulgated List 3 and List 4A. Because subsections (B) and (C) each provided an independent basis for the determinations, the court need not and does not reach the Parties’ arguments concerning the USTR’s authority to issue the determinations pursuant to section 307(a)(1)(C).
III. Procedural Claims Pursuant to the APA
The court first addresses the Government’s arguments that the promulgation of List 3 and List 4A is exempt from the APA’s procedural requirements and, finding those arguments non-meritorious, next addresses Plaintiffs’ APA claims.
1. Foreign Affairs Exemption
a. Parties’ Contentions
The Government contends that the promulgation of List 3 and List 4A falls under
the foreign affairs exception to the APA because they “were part of the negotiation of an
international trade agreement” and “relate[d] to the President’s ‘overall political agenda
concerning relations with another country.’” Defs.’ Mot. at 42–43 (quoting
Am. Ass’n of
Exps. & Imps. v. United States
,
Plaintiffs contend that the promulgation of List 3 and List 4A does not fall under the foreign affairs exception because “the public rulemaking” process “would [not] ‘provoke definitively undesirable international consequences.’” Pls.’ Cross-Mot. & Resp. at 61–62.
b. The Foreign Affairs Exemption Does Not Apply
The APA exempts a rulemaking from notice and comment procedures when the
agency action involves a “foreign affairs function of the United States.” 5 U.S.C.
§ 553(a)(1) (stating that section 553 applies, “except to the extent that” a foreign affairs
function “is involved”). In other words, the foreign affairs exemption is intended to
allow an agency to “
dispense with
[the] notice-and-comment procedures” set forth in
section 553.
E.B. v. U.S. Dep’t of State
,
When invoked, the exemption “will be construed narrowly and granted
reluctantly,” and “only to the extent that the excepted subject matter is clearly and
directly involved in a foreign affairs function.”
Mast Indus., Inc. v. Regan
,
In this case, the USTR did not invoke the foreign affairs exemption to relieve the
agency from any rulemaking procedures that may apply in addition to the requirements
of section 307.
[22]
See Final List 3
,
While the statute does not explicitly require an agency to invoke the foreign
affairs exemption in a final rule, the USTR’s failure to make such an invocation
combined with the manner in which the USTR conducted these processes suggests that
the USTR did not intend to invoke the exemption and, at best, provides the court with an
unclear record as to whether the USTR in fact intended to invoke the exemption.
Cf.,
e.g.
,
Mast
,
Moreover, courts have recognized that the foreign affairs exemption does not
apply simply because a rule relates to ongoing negotiations.
See, e.g.
,
East Bay
Sanctuary Covenant v. Trump
,
While the court recognizes the circuit split as to whether an agency action must
have “definitely undesirable international consequences” to qualify for the foreign affairs
exemption,
see Mast
,
Accordingly, the court turns to the merits of Plaintiffs’ APA claims.
2. Response to Comments
a. Parties’ Contentions Plaintiffs contend that the USTR failed to respоnd to comments in a reasoned manner using two lines of argument. See Pls.’ Cross-Mot. & Resp. at 59–60; Pls.’ Reply at 25–27. First, Plaintiffs assert that the USTR’s failure to address the “‘overwhelming[]’ opposition” to the imposition of List 3 and List 4A was arbitrary and capricious. Pls.’ Reply at 26 (quoting Defs.’ Resp. & Reply at 38) (alteration in original). Second, Plaintiffs fault the USTR for failing to explain “which comments, and what concerns raised in those comments, caused it to withdraw certain tariff headings and products but not others.” Pls.’ Cross-Mot. & Resp. at 59–60.
Amici Curiae Retail Litigation Center, Inc. and others (collectively, “RLC”) likewise contend that the USTR neither considered, nor took sufficient time to consider, substantial objections to the modifications. RLC’s Br. at 12–15. While framing its arguments in terms of the APA, RLC contends that the USTR’s actions are more troubling given the statutory requirement to provide opportunity for the public to comment. Id. at 13–14 (citing 19 U.S.C. § 2417(a)(2)). RLC argues that the USTR failed to engage meaningfully with comments expressing concerns that the modification actions would harm the U.S. economy, “act[] as a hidden tax for consumers on everyday products,” id. at 14, and disrupt “the supply chains of U.S. retailers, manufacturers, and producers,” id. at 15.
The Government contends that the USTR considered the factors relevant to the statutory determinations pursuant to section 307(a)(1)(B) and (C). Defs.’ Mot. at 46–47, 58–59. The Government further contends that the Federal Register notices associated with List 3 reflect the USTR’s consideration of comments in its determinations to omit certain tariff subheadings, delay the onset of the increase in the level of List 3 duties from 10 percent to 25 percent, and establish an exclusion process. Id. at 58–59. With respect to List 4A, the Government contends that the USTR responded to comments by stating the bases upon which it removed certain tariff subheadings, separating the subheadings into two lists and staggering the effective date of List 4B, and establishing an exclusion process. at 59; see also Defs.’ Resp. & Reply at 41. The Government also contends that policy issues raised by RLC fail to provide a basis to “overturn[] the tariffs.” Defs.’ Resp. & Reply at 42.
b. The USTR Failed to Respond Adequately to Comments
The APA requires agencies conducting notice and comment rulemaking to
“incorporate in the rules adopted a concise general statement of their basis and
purpose.” 5 U.S.C. § 553(c). An agency’s explanation of the basis and purpose for its
action must demonstrаte a “consideration of the relevant factors,”
State Farm
, 463 U.S.
at 43 (citation omitted), and “must offer a rational connection between the facts found
and the choice made,”
id.
at 52 (quotations and citation omitted). The standard that an
agency’s response must meet “is not particularly demanding.”
Nat’l Mining Ass’n v.
Mine Safety & Health Admin.
,
The enabling statute informs the court’s examination of an agency’s basis and
purpose statement and the relevance of comments received by an agency. Agency
action through notice and comment rulemaking must be tethered to the statute.
See,
e.g.
,
State Farm
,
The statute permits the USTR to “modify or terminate any action” that is being
taken pursuant to section 301 “subject to the specific direction, if any, of the President.”
19 U.S.C. § 2417(a)(1). Thus, in accordance with
State Farm
,
The notices of proposed rulemaking (“NPRM(s)”) reflected these considerations.
In
List 3 NPRM
, the USTR explained that the proposed supplemental action accorded
with the President’s direction as reflected in his statement “direct[ing] the United States
Trade Representative to identify $200 billion worth of Chinese goods for additional
tariffs at a rate of 10 percent” that would “go into effect” following completion of “the
legal process.”
with respect to any aspect of the proposed supplemental action, including (cid:120) The specific tariff subheadings to be subject to increased duties, including whether the subheadings listed in the Annex should be retained or removed, or whether subheadings not currently on the list should be added.
(cid:120) The level of the increase, if any , in the rate of duty.
(cid:120) The appropriate
aggregate level
of trade to be covered by
additional duties.
(emphases added);
see also List 3 Cmt. Extension
,
(extending comment period following President’s direction to consider increasing the
tariff rate to 25 percent and specifically seeking comment on “the possible increase in
the rate of additional duty”). In
List 4 NPRM
, the USTR likewise explained that the
proposed supplemental action аccorded with the President’s direction and requested
public comments on “any aspect” of the proposal, including the abovementioned points.
Consistent with the NPRMs, submitted comments raised concerns regarding the legality and efficacy of the tariffs, the potential for damage to the U.S. economy, and whether alternative measures would be more effective. See, e.g. , Pls.’ Cross-Mot. & Resp. at 14–15, 20–21 (citing comments); RLC’s Br. at 14–16 (same); Comments of Nat’l Foreign Trade Council, USTR-2018-0026-1843 (Aug. 22, 2018), PR 1891 (arguing that the tariffs will not be effective and will “create a new status-quo of higher trade barriers”); Comments of U.S. Chamber of Com., USTR-2018-0026-1391 (Aug. 20, 2018), PR 1439; Comments of HP Inc., USTR-2019-0004-1701 (June 17, 2019), PR 7877 (citing section 337 of the Tariff Act of 1930 as an alternative tool for accomplishing the administration’s goals without the economic costs of section 301 tariffs).
Some comments also argued that certain products should be added to or removed from the proposed lists. See, e.g. , Comments of Ams. for Free Trade Coal., USTR-2018-0026-6132 (Sept. 26, 2018), PR 6163 (noting that List 3 needed an exclusion process and that “the criteria for inclusion or removal from the final list were not made public”); Comments of Rheem Mfr’g Co., USTR-2018-0026-3884 (Sept. 5, 2018), PR 3930 (supporting the retention of subheadings for air conditioners on List 3 while urging the USTR to add a subheading covering “parts” under which the indoor and outdoor components of air conditioners enter when shipped separately, even if fully assembled); Comments of Retail Indus. Leaders Ass’n, USTR-2018-0026-5887 (Sept. 6, 2018), PR 5924 (urging the removal of parts used in U.S. manufacturing); Comments of U.S. Steel Corp. USTR-2018-0026-5447 (undated), PR 5492 (arguing for the inclusion of advanced steel products (tin mill plate) as an appropriate response to the cyber-hacking covered by the USTR Report, including of U.S. Steel itself).
Other comments requested no increased duties on imported parts and inputs while supporting the duties on finished goods that compete with domestically manufactured goods. See, e.g. , Comments of Whirlpool Corp., USTR-2018-0026-3867 (Sept. 5, 2018), PR 3913 (requesting the removal of several subheadings for parts that it uses in its U.S. manufacturing operations and the addition of a subheading for completed dishwashers competing with Whirlpool’s products).
The statute, the NPRMs, and the comments responsive to the NPRMs frame this
court’s review of the USTR’s concise statements of basis and purpose. While “[a]n
agency need not respond to every comment,” it must explain how it “resolved any
significant problems raised by the comments.”
Action on Smoking
,
With respect to the “wisdom of the enterprise,” i.e., whether to proceed with any
increase in duties, the USTR explained its decisions by way of reference to China’s
unfair practices and stated that the increase in duties and level of trade affected by the
modifications are consistent with the specific direction of the President.
See Final List
,
The USTR’s statements of basis and purpose thus indicate why the USTR deemed China’s ongoing and retaliatory conduct actionable; however, those statements fail to apprise the court how the USTR came to its decision to act and the manner in which it chose to act, taking account of the opposition and support for the increased duties and the inclusion or exclusion of particular subheadings, the concerns raised about the impact of the duties on the U.S. economy, and the potential availability of alternative courses of action, within the context of the specific direction provided by the President.
While the USTR pointed to the specific direction of the President in September
2018 in
Final List 3
and the specific direction of the President more generally in
Final
List 4
, and, while the President’s direction is statutorily significant, the USTR’s
invocation of the President’s direction does not obviate the USTR’s obligation to
respond to significant issues raised in the comments.
Cf. Sherley
,
With respect to List 3, the USTR indicated that it chose the products subject to
the tariffs at the direction of the President.
Final List 3
,
With respect to List 4A, the USTR stated that “[c]ertain tariff subheadings
proposed in the [List 4 NPRM] have been removed from the final list of tariff
subheadings subject to additional duties, based on health, safety, national security, and
other factors.”
Final List 4
,
Thus, Final List 3 and Final List 4 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. [31] c. Remedy
During the hearing, Plaintiffs opined that the Government has waived any
request for a remand instead of outright vacatur, a position with which the Government
disagreed. Oral Arg. 2:36:30–2:37:00, 2:38:53–2:43:43, 2:46:42–2:46:59. For their
part, Plaintiffs did not present arguments for vacatur until filing a notice of supplemental
authority and, even then, only summarily discussed vacatur in reference to a prior court
opinion.
See
Pls.’ Suppl. Authority at 2 (discussing
Invenergy Renewables LLC v.
United States
,
The court turns next to the question whether vacatur is merited in the interim
notwithstanding remand to the USTR. In certain circumstances, the court may remand
agency action for further consideration while allowing the action to remain in effect.
See
NOVA
,
While the USTR’s failure to explain its rationale in the context of the comments it received leaves room for doubt as to the legality of its chosen courses of action, as in NOVA , the court weighs heavily the disruptive consequences of (potentially interim) vacatur. Final List 3 and Final List 4 constitute modifications of a prior section 301 action taken to exert leverage on China to cease unfair trade actions burdening U.S. commerce and to do so in a manner that China may no longer attempt to offset that leverage with retaliatory measures of its own. Thus, they are part of a continuum of actions taken in conjunction with ongoing negotiations with China. In addition to impacting the United States’ ability to impose and retain List 3 and List 4A duties, vacating the determinations would disrupt a complex and evolving process that was designed by Congress to allow for ongoing negotiations. For now, the court declines to try to unscramble this egg. Cf. Sugar Cane Growers Co-op. of Fla. v. Veneman , 289 F.3d 89, 97–98 (D.C. Cir. 2002) (declining to vacate unlawful agency action when it was possible for the relevant agency to cure the defect).
At the hearing, Plaintiffs invoked
Dep’t of Homeland Security v. Regents of the
University of California
,
Regents,
like
State Farm,
requires the court to review the USTR’s statements of
basis and purpose to ensure that important policy issues are ventilated and to
understand the USTR’s determinative reasons for its actions.
Regents
also constitutes
a warning to agencies regarding the impermissibility of
post hoc
reasoning as much as it
constrains the court’s review of such reasoning provided pursuant to a remand. 140 S.
Ct. at 1908 (citing
Overton Park
,
Plaintiffs also raise arguments regarding the extent of notice provided with respect to List 3, the deadlines set for the submission of comments and the permissible scope of those comments, and the amount of time the USTR allowed interested parties to testify at the hearings. None of these arguments present additional grounds for remand or vacatur.
a. Notice of the Legal Basis for List 3 Plaintiffs first argue that the USTR failed to provide adequate notice of the legal basis for List 3 because although the NPRM cited to section 307(a)(1)(C) exclusively, the USTR ultimately relied on section 307(a)(1)(B) аnd (C). Pls.’ Cross-Mot. & Resp. at 55–56; Pls.’ Reply at 24–25. The Government argues that the NPRM for List 3 complied with statutory requirements. Defs.’ Resp. & Reply at 35–37.
Section 553(b) requires an agency engaged in rulemaking to publish in the
Federal Register
a “reference to the legal authority under which the rule is proposed”
and “either the terms or substance of the proposed rule or a description of the subjects
and issues involved.” 5 U.S.C. § 553(b)(2)–(3).
[35]
This notice “need not specify every
precise proposal” that an agency “may ultimately adopt,” but must “fairly apprise
interested parties of the issues involved.”
Mid Continent Nails Corp. v. United States
,
The USTR’s failure to cite to section 307(a)(1)(B) in
List 3 NPRM
as an additional
or alternative authority for the modification is not fatal to its rulemaking. The notice is
clear that the USTR proposed to modify the section 301 action by setting increased
duties on additional specified imports from China and requested comments on various
aspects of the proposal.
See List 3 NPRM
,
to comment on such findings, either to support or rebut the notion that China’s unfair practices continued to burden U.S. commerce, and whether such burden continued apace or had increased or decreased relative to the investigation, had notice of the opportunity to do so.
Thus, Plaintiffs argumеnt that the “USTR’s defective notice . . . left a record-
vacuum” rings hollow.
See
Pls.’ Cross-Mot. & Resp. at 56. The USTR “fairly apprise[d]
interested parties of the issues involved,” and the USTR’s reliance on subsection (B) in
addition to subsection (C) in the final rule constituted a “logical outgrowth” of the
proposed rule.
See Mid Continent
,
b. Comment Deadlines and Time to Testify Plaintiffs next argue that the USTR failed to provide meaningful opportunity to comment on List 3 by setting a simultaneous deadline for written and post-hearing rebuttal comments and limiting testimony at the public hearings to five minutes per person. See Pls.’ Cross-Mot. & Resp. at 56–57. Plaintiffs raise similar arguments with respect to List 4A, while noting that, for that proceeding, post-hearing rebuttal comments were due one week after the hearing. See id .; cf. RLC’s Br. at 10–12 (advancing similar arguments). Plaintiffs also argue that, by explicitly limiting rebuttal comments to “rebutting or supplementing testimony at the hearing” in the NPRM for List 4A, the USTR arbitrarily departed from its practice with respect to List 1, List 2, and List 3. Pls.’ Cross-Mot. & Resp. at 57–58 (citation omitted); see also List 4 NPRM , 84 Fed. Reg. at 22,565.
The Government argues that the simultaneous deadlines with respect to List 3
resulted from the USTR providing an extension of time for all comments, Defs.’ Mot. at
52 (citing
List 3 Cmt. Extension
,
Plaintiffs’ arguments lack merit. The APA did not require the USTR to provide
interested parties with an opportunity to submit rebuttal comments.
See
5 U.S.C.
§ 553(c). More importantly, the NPRM for List 3 clearly limited rebuttal comments to
“post-hearing rebuttal comments.”
List 3 NPRM
,
The USTR’s decision to limit oral testimony to five minutes per person also did
not violate the APA, which gives agencies discretion as tо whether a rulemaking will
involve an “opportunity for oral presentation.” 5 U.S.C. § 553(c). Absent a statutory
directive, the amount of time allowed for each person to testify is the type of line-
drawing exercise best left to the USTR.
See, e.g., Vt. Yankee
,
The USTR also did not arbitrarily depart from past practice when it cautioned that
post-hearing rebuttal comments for List 4 “should be limited to rebutting or
supplementing” hearing testimony.
List 4 NPRM
,
Accordingly, the USTR did not have an established practice of allowing replies to
written comments that it departed from with respect to List 4.
See Ranchers–Cattlemen
Action Legal Found. v. United States
,
Courts, recognizing that “[w]ith more time most parties could improve the quality
of their comments,” ask whether there is evidence that a party would provide more
meaningful comments if given more time or opportunity.
Sichuan Changhong Elec. Co.
v. United States
,
Thus, for the reasons discussed above, Plaintiffs’ additional procedural arguments do not provide any further basis to remand or vacate the USTR’s determinations.
IV. The Government’s Motion to Correct the Administrative Record
The Government seeks to correct the administrative record by adding two documents (and provide an accompanying certification): The June 2018 Presidential Statement and a supplemental section 301 report titled U PDATE C ONCERNING C HINA ’ S A CTS , P OLICIES , AND P RACTICES R ELATED TO T ECHNOLOGY T RANSFER , I NTELLECTUAL P ROPERTY , AND I NNOVATION (2018) (“Supplemental 301 Report”). Defs.’ Mot. Correct R. at 1, Ex. B. The Government contends that “[t]he U.S. Trade Representative was aware of the contents of both of these documents and they would have been considered when making the challenged decisions.” at 2–3. [37] Plaintiffs “take no position on the motion with respect to [the June 2018 Presidential Statement]” given the Parties’ and the USTR’s respective references to that document. Pls.’ Opp’n Correct R. at 1. Plaintiffs contend that the court should deny the motion with respect to the Supplemental 301 Report because it post-dates the USTR’s consideration of the List 3 duties, was not cited by the USTR in the contested determinations or by the Parties in their litigation briefs, and the Government failed to demonstrate the USTR’s consideration of the document. Id. at 1–2.
The court will grant the Government’s motion with respect to the June 2018 Presidential Statement and the accompanying certification but will deny the motion with respect to the Supplemental 301 Report.
For purposes of APA review, the administrative record consists of “all documents
and materials directly or indirectly considered by agency decisionmakers.”
Ammex, Inc.
v. United States
,
The Supplemental 301 Report could not have been directly or indirectly considered by the USTR in reaching its decision to issue Final List 3 because the document did not exist at the time. The Government argues instead, with respect to both List 3 and List 4A, that the “contents” of the Supplemental 301 Report “ would have been considered” by the USTR. Defs.’ Mot. Correct R. at 1–2 (emphasis added). The Government offers no authority for including in the record a document that was not, itself, directly or indirectly considered by the USTR, even if its “contents” were, in some unexplained fashion, considered. On that point, however, the Government makes no showing that the contents of the Supplemental 301 Report were considered by the USTR; the Government merely surmises that they “would have been.”
Thus, the court will grant the Government’s motion with respect to the June 2018 Presidential Statement and the accompanying certification and deny the Government’s motion with respect to the Supplemental 301 Report.
C ONCLUSION AND O RDER
In accordance with the foregoing, it is hereby
ORDERED that the Government’s motion to dismiss (ECF No. 314) is DENIED ; it is further
ORDERED that the Government’s motion for judgment on the agency record (ECF No. 314) and Plaintiffs’ cross-motion for judgment on the agency record (ECF No. 358) are each GRANTED IN PART and DENIED IN PART ; it is further
ORDERED that Final List 3 and Final List 4 are remanded to the USTR for reconsideration or further explanation consistent with this opinion; it is further
ORDERED that the USTR shall file its remand results on or before June 30, 2022; it is further
ORDERED that, within 14 days of the USTR’s filing of the remand results, the Parties shall file a joint status report and proposed schedule for the further disposition of this litigation; and it is further
ORDERED that the Government’s partial consent motion to correct the administrative record (ECF No. 441) is GRANTED IN PART and DENIED IN PART .
/s/ Mark A. Barnett Mark A. Barnett, Chief Judge /s/ Claire R. Kelly Claire R. Kelly, Judge /s/ Jennifer Choe-Groves Jennifer Choe-Groves, Judge Dated: April 1, 2022
New York, New York
Notes
[1] This figure reflects the approximate number of cases аssigned to this panel. As of March 31, 2022, there are approximately 318 unassigned cases raising similar claims that are stayed pursuant to Administrative Order 21-02.
[2] Citations to the United States Code are to the 2018 version, unless otherwise specified.
[3] When the USTR finds that “the rights of the United States under any trade agreement are being denied” or that “an act, policy, or practice of a foreign country--(i) violates, or is inconsistent with, the provisions of, or otherwise denies benefits to the United States under, any trade agreement, or (ii) is unjustifiable and burdens or restricts United States commerce,” the USTR “shall take action,” 19 U.S.C. § 2411(a)(1), unless an exception exists pursuant to section 301(a)(2), id. § 2411(a)(2).
[4] The administrative record associated with the contested List 3 and List 4A duties is divided into a Public Administrative Record (“PR”), ECF No. 297, and a Confidential Administrative Record (“CR”), ECF No. 298. For record documents available online, the indices contain hyperlinks to their location. See PR; CR. The Government also filed an appendix of record documents provided to the court in advance of oral argument. See [Partial] Index to the Admin. R., ECF Nos. 447, 447-1 (PR 1–12), 447-2 (PR 13–20), 447-3 (PR 21–25), 447-4 (PR 26–36).
[5] On July 6, 2021, a divided panel granted Plaintiffs’ motion for a preliminary injunction
suspending liquidation of unliquidated entries subject to the contested tariffs.
In re
Section 301 Cases
,
[6] On October 18, 2021, the court granted the Government’s motion to correct citation errors in their opening and reply briefs. Order (Oct. 18, 2021), ECF No. 415; see also Defs.’ Consent Mot. to Correct Minor Citation Errors, Ex. B, ECF No. 413-2 (corrected pages).
[7] The opinions of the U.S. Court of Appeals for the D.C. Circuit are not binding on this
court. However, the court finds judicial precedent from the D.C. Circuit instructive in
light of the court’s expertise in the area of administrative law.
See, e.g.
,
Vt. Yankee
Nuclear Power Corp. v. Nat. Res. Def. Council, Inc.
,
[9] The
Detroit International
court declined to review the U.S. Department of State’s
(“USDS”) issuance of a permit to build a bridge across an international boundary
because Congress had vested discretionary authority over bridge approvals in the
President, who had, in turn, delegated certain ministerial responsibilities to USDS by
Executive Order).
[10] When Congress transferred authority over section 301 actions from the President to the USTR in the 1988 amendments to the Trade Act and gave the USTR the authority to modify section 301 actions, Congress gave some indication of its reasons for preserving a role for the President. Addressing the phrase “subject to the direction, if any, of the President,” which did not include the term “specific” as ultimately enacted, the House Ways and Means Committee Report recognized “that the President could provide broad policy direction or endorse the USTR decision,” but that the “details of particular actions would remain with the USTR, including modification and termination of prior retaliatory action.” H.R. R EP . N O . 100-40 at 59 (1987). Additionally, the Committee Report “recognize[d] that if there is a policy issue of major magnitude, the President could direct the USTR to take a different course of action.” Id. at 59–60. However, “[t]he Committee expect[ed] that the interagency committee advisory process prior to the decision by the USTR [would] virtually eliminate the instances in which any specific direction from the President would be appropriate.” at 59–60. Thus, although Congress envisioned the President retaining a role with respect to broad policy direction or directing the USTR to take action relating to issues of extraordinary importance, see id. , Congress generally gave the USTR authority over the detailed decision-making process required by statute, see 19 U.S.C. § 2411, et seq . Of course, what Congress envisioned is not as important as what the statute allows. At least in this case, however, and with respect to List 3, the evidence of record is consistent with the legislative history (the record lacks evidence of presidential direction with respect to List 4A beyond the USTR’s assertions in the relevant notices). While the President offered “broad policy direction,” and specifically directed the USTR regarding the size of the modification, the level of tariffs, and the date of implementation and directed the USTR to take the final action, see June 2018 Presidential Statement; Sept. 2018 Presidential Statement, at the hearing, the Government acknowledged that the record does not contain evidence that the President had final authority in the process of approving the final list of tariff subheadings covered by the determinations, Oral Arg. 7:50–9:40, available at https://www.cit.uscourts.gov/sites/cit/files/020122-21- 00052-3JP.mp3 (time stamp from the recording). Thus, while the USTR’s modification authority is subject to the specific direction of the President, it is still the USTR that is acting for purposes of the APA.
[11] While the Parties dispute the applicability of
Gilda II
, that case is not dispositive of the
issues raised by the Government.
Gilda II
addressed the automatic termination
provision set forth in section 307(c)(1).
[12] The Government identifies 19 U.S.C. § 2171(a) as the source for this quotation, but the phrase is instead found in Reorganization Plan No. 3 of 1979 , 44 Fed. Reg. 69,273, 69,274 (1979) (reorganization of functions relating to international trade, section 1(b)(4)).
[13]
Gilda II
addressed the USTR’s intеrpretation of 19 U.S.C. § 2417(c)(1), the statutory
provision governing automatic termination of retaliatory duties.
[14] The Government’s reliance on
Maple Leaf Fish Co.
,
[16] In that regard, the Government also points to a statement regarding China’s acquisition of hybrid vehicle technology from Toyota. Defs.’ Resp. & Reply at 15 (quoting Mem. from USTR General Counsel Stephen Vaughn to USTR Robert Lighthizer (Sept. 17, 2018) (“Sept. 2018 Vaughn Mem.”) at 6, PR 1).
[17] Courts have long considered dictionary definitions to discern the ordinary meaning of
a term.
See, e.g.
,
Nix v. Hedden
,
[18] Plaintiffs also argue that “[t]he magnitude of the responsive List 3 and List 4A actions . . . underscores their distinct nature.” Pls.’ Reply at 8. According to Plaintiffs, the USTR deemed $50 billion “‘commensurate’ to the harms” resulting from the “investigated practices.” The USTR explained that a $50 billion action was initially “appropriate both in light of the estimated harm to the U.S. economy, and to obtain elimination of China’s harmful acts, policies, and practices.” USTR Determination , 83 Fed. Reg. at 14,907. The USTR is not, however, statutorily required to quantify any increase in burden or otherwise show that the increase in tariffs is commensurate to the increased harm. See 19 U.S.C. § 2417(a)(1)(B); compare id. § 2411(a)(3) (stating that mandatory actions taken pursuant to section 301(a)(1) “shall be devised so as to affect goods or services of the foreign country in an amount that is equivalent in value to the burden or restriction being imposed by that country on United States commerce”), with id. § 2411(b) (governing discretionary actions taken pursuant to section 301(b), which does not contain any such limitation).
[19] For the same reasons, the court rejects Plaintiffs’ argument that the USTR violated the substantive provisions of the APA by failing to point to evidence of an “increased burden” from the investigated practices. See Pls.’ Reply at 23–24.
[20] The Government concedes that, in the event the court finds the promulgation of List 3 and List 4A to сonstitute agency action, the USTR’s actions are subject to informal rulemaking procedures set forth in 5 U.S.C. § 553(b)–(c) unless the court finds that the foreign affairs exception applies. Defs.’ Mot. at 39.
[21] Consistent with its use as an example, meeting the “definitely undesirable
international consequences” standard may be enough to invoke the foreign affairs
exemption but is not necessary.
See Mast
,
[22] The foreign affairs exemption “[does] not relieve an agency from any requirements imposed by law apart from this bill. H.R. R EP . N O . 79-1980 at 257. Section 307(a)(2) and (b) require the USTR to “consult with the petitioner, if any, and with representatives of the domestic industry concerned” and to “provide [an] opportunity for the presentation of views by other interested persons affected by the proposed modification or termination” before publishing “the reasons [for]” any modification in the Federal Register and providing a report to Congress. 19 U.S.C. § 2417(a)(2)–(b). At the hearing, the Government suggested that the only additional requirement found in the APA as compared to section 307 is the requirement for a reasoned explanation, such that applying the foreign affairs exemption would relieve the court from analyzing the sufficiency of the USTR’s response to public comments. Oral Arg. 59:15–1:01:00. In other words, the Government appears to interpret section 307 to provide at least some opportunity for public comment without requiring the USTR to engage with the comments it receives to the extent required by the APA.
[23] Plaintiffs do not allege facial non-compliance with section 553 but, rather, deficiencies with respect to the USTR’s notice-and-comment procedures. See 20-177 Am. Compl. ¶¶ 74–75.
[24] While
Mast
states that “the negotiation of agreements with foreign governments . . .
‘clearly and directly’ involve[d] a ‘foreign affairs function,’” that statement was made in
the context of negotiations under section 204 of the Agricultural Act of 1956, which
expressly granted the President power to issue regulations in conjunction with the
negotiation of international agreements limiting certain imports.
[25] At the hearing, the Government аrgued that responding to each of the thousands of comments would provoke undesirable international consequences but did not explain why or specify the nature of the consequences. Oral Arg. 1:00:30–1:01:00. As discussed below, however, a “comment-by-comment” response is not the standard required by the APA.
[26] The court cites the date of the record document, which is not necessarily the same as the date the USTR associates with the document on the administrative record indices filed with the court.
[27]
Sherley
involved a challenge to the National Institutes of Health’s (“NIH”) issuance of
guidelines concerning embryonic stem-cell (“ESC”) research and its failure to address
comments objecting to ESC research.
[28] Indeed, it would be anomalous to find that Final List 3 and Final List 4A constitute agency actions subject to the APA’s procedural requirements while finding that references invoking the President’s direction, without more, satisfy the APA’s requirement for a concise statement of basis and purpose.
[29] While the USTR stated that it is “maintaining the prior action,” Final List 3 , 86 Fed. Reg. at 47,975, when read in context, that statement appears to mean that it is imposing the additional duties while maintaining the List 1 and List 2 duties already in place. That statement does not clearly indicate to the public or the court that the USTR will establish an exclusion process specific to the List 3 duties.
[30] The Government also argued that the USTR’s rationale for modifying the section 301
action can be ascertained by examination of certain internal memoranda between
USTR General Counsel and USTR Lighthizer.
See
Defs.’ Mot. at 58–59 (citing Mem.
from USTR General Counsel Joseph Barloon to USTR Robert Lighthizer (Aug. 14,
2019) at 1, 5–6, PR 9; Mem. from USTR General Counsel Joseph Barloon to USTR
Robert Lighthizer (May 7, 2019) at 2, PR 8; Mem. from USTR General Counsel Stephen
Vaughn to USTR Robert Lighthizer (Dec. 14, 2018) at 2, PR 6; and Sept. 2018 Vaughn
Mem. at 7–9);
see also
Oral Arg. 2:45:00–2:50:00. The APA requires the USTR to
“incorporate
in the rules adopted
a concise general statement of their basis and
purpose.” 5 U.S.C. § 553(c) (emphasis added). While the statute does not preclude the
court from reviewing an agency’s explanation that is external to the
Federal Register
notice,
see, e.g.
,
Tabor v. Joint Bd. for Enrollment of Actuaries
,
[31] To the extent the USTR decides, on remand, that certain products should have been added to or omitted from the determinations from the beginning, the USTR should also establish and describe a lawful process for implementing that decision.
[32] The Supreme Court declined to address the adequacy of DHS’s explanation that it relied on the Attorney General’s decision that DACA was unlawful because Acting Secretary Duke was statutorily bound by that decision. See Regents , 140 S. Ct. at 1910–11. Instead, the Supreme Court found that Duke failed to address the portion of DACA’s legality (forbearance) that was within Duke’s discretion. See id.
[33] Plaintiffs also argue that the USTR failed to consider factors relevant to the statute when it based List 3 and List 4A on China’s retaliatory conduct. Pls.’ Cross-Mot. & Resp. at 60–61. Because the court finds that China’s conduct was relevant to the USTR’s determinations pursuant to section 307(a)(1)(B), see supra , Plaintiffs’ related procedural argument must fail.
[34] Because the court is remanding Final List 3 and Final List 4 , the court need not further address the issue of remedy in relation to Plaintiffs or Amici Curiae at this time. See generally Interested Parties’ Br. (arguing that non-importer plaintiffs in other cases that bore the cost of the section 301 duties have both constitutional and statutory standing to challenge the USTR’s actions and the court’s authority to provide relief is not limited to importers of record).
[35] Plaintiffs do not specify the precise subsection of section 553(b) they believe the USTR violated. Because the NPRM contained a “reference to the legal authority under which the rule is proposed,” i.e., section 307(a)(1)(C), Plaintiffs appear to argue that the
[36] Because the court finds that Plaintiffs’ arguments lack merit, the court does not reach the Government’s argument that the court should account for the asserted “urgent need for action” when examining the adequacy of the USTR’s procedures. See Defs.’ Mot. at 55; Defs.’ Resp. & Reply at 39–40.
[37] The Government also states that “the USTR considered . . . the facts contained in the [Supplemental 301 Report],” Defs.’ Mot. Correct R. at 3, but that assertion goes further than the declaration attached to the Government’s motion, which asserts that the USTR “was aware of the contents of [the Supplemental 301 Report]” and it “would have been considered” by the USTR. Decl. by Megan Grimball ¶ 6 (Feb. 15, 2022), ECF No. 441- 3.
[38] That the Supplemental 301 Report was published on the USTR’s website in November 2018, see Defs.’ Mot. Correct R. at 2, alone does not demonstrate the USTR’s direct or indirect consideration of the facts contained therein when deciding whether to impose the List 3 or List 4A duties.