On February 7, 2023, the three-judge panel of the U.S. Court of International Trade (CIT) heard oral arguments on the USTR’s remand explanation and the plaintiff group’s reply comments.  The hearing addressed the CIT’s earlier finding that the U.S. Trade Representative (USTR) failed to respond adequately to comments it received during the rulemaking process when it proposed China Section 301 tariffs on List 3 and List 4A products but did not adhere to Administrative Procedure Act (APA) requirements.   Specifically, the CIT stated in its remand order that, while a detailed comment-by-comment response “is not the standard required by the APA,” the USTR “was required to address comments regarding any duties to be imposed, the aggregate level of trade subject to the proposed duties, and the products covered by the modifications, all in light of Section 301’s statutory purpose to eliminate the burden on U.S. commerce from China’s unfair acts, policies, and practices.”

In his opening argument, the plaintiff group’s counsel acknowledged that the USTR did a “great job” on addressing in its remand explanation the public comments submitted on specific Harmonized Tariff Schedule (HTS) subheadings, spending most of its 90-page explanation on this issue.  The plaintiff group, he said, is not challenging this part of the remand explanation.  For the other two categories raised in the CIT’s remand order (i.e., any alternative courses of action other than the imposition of duties and the aggregate level of the trade action), however, he argued, the USTR’s remand explanation offered little other than post hoc reasoning unsupported by any record evidence and flimsy claims that it followed the “specific direction of the president” and exercised its discretion.  In the USTR’s remand explanation, the plaintiff group’s counsel stated that the USTR offered no analysis of specific objections raised by commentors, such as concerns that the imposition of the tariffs would lead to a spike in inflation, employee layoffs, or major supply chain issues.  While acting at the “specific direction of the president” is a significant factor, the plaintiff group’s counsel argued that the USTR has to exercise some judgment as to whether the ultimate action is “appropriate”.  The USTR has to consider and weigh comments and any potential consequences; “whatever the president says, goes” is not appropriate.  The term “appropriate” is different than “any means necessary”, and the trade action cannot do significantly more harm than good.  Even with a directive from the president, he explained, the USTR still had minimal APA obligations to fulfill.

The USTR’s claim that it may rely on “reasoned decision making” does not mean, according to the plaintiff group’s counsel, that the agency did not have to consider and address reasonable alternative actions.  The record provided by the USTR, he said, is absent any contemporaneous documentation and discussion of the potential harms raised by commentors and consideration of any alternative actions.  Instead, the final section of the remand explanation, is “purely conclusory and post hoc argument”.  In arguing that the USTR failed to adequately address two of the three  issues covered by the CIT’s remand order, the plaintiff group’s counsel repeatedly highlighted that the USTR’s remand explanation failed to prove that the agency’s responses and explanations to interested parties’ comments during the underlying Section 301 process were adequate enough to satisfy USTR’s burden under the APA.   When the CIT asked him for the appropriate action to be taken at this stage of the litigation, the plaintiff group’s counsel stated that unless the government defendants “announce today” they have located additional documents, they have “put their best foot forward” after all of the briefing in this litigation and there was “no use in further remanding”.  The plaintiff group’s counsel argued that this is not an unwillingness by the USTR to provide responses and additional record evidence; it is an “inability to do so”.  The APA is designed on record-based decision making; such records and evidence have to be provided and considered at the time the agency makes the decision; and such records do not exist.

During their oral argument, the government defendants’ counsel argued that the remand explanation was sufficient and should be sustained.  Referencing various legal precedent, she argued that the “decision maker is presumed to have considered all alternatives” and that, in this instance, all Section 301 Committee members were present at all public hearings where concerns were raised as to the aggregate level of the trade action, the potential harm to U.S. industries and the economy, and alternative courses of action.  She noted that the vast majority of submitted public comments (97%) concerned specific HTS subheadings and were not about these broader issues.  The government defendants’ counsel argued that USTR had “no obligation to respond in the manner that plaintiffs seek”:  The USTR engaged in “reasonable decision making”,  comments regarding the overall effect on the U.S. economy were adequately addressed in the discussions of the individual tariff subheadings remand explanation, and “this is sufficient.”  When asked about reasonable alternatives, the government defendants’ counsel indicated that the Trump administration wanted to negotiate with China, that Section 301 is a statute about tariffs and that the USTR “struck the best balance it could” under Section 301, which addresses the implementation of tariffs or a negotiated agreement.  The government defendants’ counsel argued that the USTR did explain how its action was appropriate and pointed out that “the statute does not state that USTR has to explain why” an action is appropriate or inappropriate.   When asked by a judge if these tariffs should be vacated, the government defendants’ counsel argued that this would be inappropriate and that, if necessary, the USTR has shown a willingness to respond further and will continue to do so.  She stated that it is not unusual for CIT actions to go through several remands and that, if deemed necessary, any remaining deficiencies could be addressed on remand, particularly in light of the consequences.

Amici counsel argued very briefly that the USTR indicated it had “limited flexibility” due to the president’s specific directive but that consideration of the details of a particular action “remain with USTR” and, as the plaintiff group’s counsel argued, the USTR has not offered a sufficient explanation.  Regarding whether individual HTS subheadings remained on a list or were removed, amici counsel noted that it had a product that was removed from List 3 but then placed on List 4 with no explanation.

The CIT should decide within the next six months whether there will be another remand, a vacatur or an affirmation.  Regardless of the ruling, the losing side is expected to appeal the final CIT decision to the U.S. Court of Appeals for the Federal Circuit.

For additional details on the CIT’s remand order, see Update of April 6, 2022.  For additional information on the content of the USTR’s remand explanation, see Update of August 2, 2022.  SeeUpdate of September 15, 2022 for details on the plaintiff group’s comments in response to the USTR’s remand explanation.