On March, 11, 2021, the U.S. government, the defendant in the ongoing U.S. Court of International Trade (CIT) China tariff refund litigation filed its master answer and anticipated affirmative defenses in response to the thousands of complaints challenging the legality of the additional duties implemented on certain imports from China pursuant to Section 301 of the Trade Act of 1974.

As directed by the CIT, the U.S. government make clear that this master answer does “not attempt to provide a cross-reference to particular paragraphs or counts of the various complaints” and provides only “generic” responses to “allegations typically included in claims” covered in the Section 301 master case (Court No. 21-cv-00052-3JP). The U.S. government has also reserved the right “to provide additional responses to allegations and claims that are not addressed in this master answer.” The master answer also states that pursuant to the CIT’s instruction, these responses do not constitute an admission that any plaintiff has stated a claim for relief.

In broadly categorizing and addressing the allegations set forth in the Section 301 complaints, the U.S. government generally proffers a response that admits to an allegation to the extent supported by the cited statute, regulation, notice, document and the administrative record, “which are the best evidence of their contents,” but otherwise denies an allegation. In doing so, the master answer states that the tariffs implemented under List 1 ($34 billion trade action) and List 2 ($16 billion trade action) are not at issue in this litigation. Thus, the responses to the factual allegations focus on List 3 ($200 billion trade action) and List 4 ($300 billion trade action).

The master answer addresses four claims that exist in most of the Section 301 cases:

  • The List 3 and List 4A Trade Actions Violated the Trade Act;
  • Defendants Violated the Administrative Procedure Act (APA) in Promulgating List 3 and List 4A;
  • The List 3 and List 4A Trade Actions Violated the U.S. Constitution; and
  • The Promulgation of List 3 and List 4A Violated the General Agreement on Tariffs and Trade.

The U.S. government’s broad response to specific factual claims set forth in the Section 301 complaints is generally that the allegations “are plaintiffs’ characterization of their case and consist of legal argument and conclusions of law to which no response is required.” To the extent a response is required, an answer may admit to the extent supported by a cited statute or the administrative record “which are the best evidence of their contents,” but otherwise denies the stated claims.

Most importantly for this filing, the U.S. government has set forth its anticipated defenses, which consist of:

  1. The U.S. Trade Representative (USTR) was acting at the direction of the president in promulgating List 3 and List 4, and the president is not subject to the Administrative Procedures Act (APA).
  2. Review of the president’s discretionary decisions, and the USTR’s implementation of those decisions, “present a non-justiciable, political question.”
  3. Even if the challenged actions could be considered actions of the USTR, substantial deference is afforded, and the CIT should not intervene because there was (i) no clear misconstruction of a governing statute, (ii) no significant procedural violation, or (iii) no action taken outside of delegated authority.
  4. The USTR possessed the authority under Section 307 of the Trade Act to promulgate List 3 and List 4, because the burden on U.S. commerce continued to increase and previous actions were no longer appropriate or effective in eliminating the unfair trade practices.
  5. Alternatively, if the challenged actions constitute agency action by the USTR, they are exempt from the APA’s informal rulemaking requirements because they qualify for the “foreign affairs function” exception.
  6. Even if the APA’s informal rulemaking requirements apply, the USTR’s actions complied with statutory requirements, and were not arbitrary and capricious, contrary to law, or in excess of statutory authority.

The U.S. government further reserved the right to raise additional defenses “after the test cases have been chosen, including, but not limited to, all defenses related to jurisdiction and/or timeliness.”

For additional information on the CIT’s procedural orders, see our update of February 18, 2021.

Thompson Hine attorneys and trade professionals will continue to monitor and report on significant developments in this litigation.