On September 25, 2025, a three-judge panel at the U.S. Court of Appeals for the Federal Circuit (CAFC) upheld the decision of the Court of International Trade (CIT) sustaining the China Section 301 tariffs. This decision followed oral argument at the CAFC on January 8, 2025, in the test case for the China Section 301 tariff refund litigation (HMTX Industries LLC, et al. v. United States et al.). Much of the discussion at oral argument focused on whether the addition of the List 3 and List 4A tariffs at a later date qualified under the language of the Trade Act of 1974 at Section 307 as a “modification” of the initial action arising from the Section 301 investigation, report and decision or whether these later actions and these additional tariffs were more than a “modification”.
Plaintiffs-Appellants filed the first of more than 3,500 cases at the CIT alleging that the List 3 and 4A tariffs were issued without statutory authority and in violation of the requirements of the Administrative Procedure Act (APA) for notice and comment rulemaking. In its decision, the CIT agreed with the Government Defendants-Appellees that the modifications were consistent with USTR’s authority under Section 307(a)(1)(B) of the Trade Act of 1974, allowing the Office of the U.S. Trade Representative (USTR) to modify an action where the burden or restriction imposed by the investigated conduct “has increased or decreased.” Following a remand order instructing the USTR to further explain how it considered significant public comments submitted in response to the proposed modifications due to requirements under the APA, the USTR produced a remand redetermination providing further details, which the CIT affirmed and resulted in the CIT sustaining the USTR’s List 3 and List 4A tariff actions.
Scope of the USTR’s Authority
The main issue before the CAFC was one of statutory interpretation: whether Section 307 authorized the USTR to modify its original Section 301 trade action by imposing tariffs on List 3 and List 4A products. In the underlying case before the CIT, and during oral argument before the CAFC, a key line of argument focused on the definition of “modification” as applied under the provisions of Section 307 of the Trade Act of 1974. Appellants’ main argument on this point was that nothing in Section 307 permits the USTR List 3 and 4A tariff actions and that the relied-upon language is designed for “modification” of an existing Section 301 tariff action. Appellees argued that the U.S. government’s imposition of tariffs on Chinese goods was a justified response to China’s unfair trade practices, and that these actions were legally sound under Section 307 of the Trade Act of 1974.
Although the CIT sustained these modified tariff actions by relying upon the USTR’s authority under Section 307(a)(1)(B) (i.e., the burden or restriction on U.S. commerce or of the acts, policies, and practices that are the subject of the Section 301 action has increased or decreased), the CAFC panel affirmed the USTR’s modified actions on alternate grounds, stating that Section 307(a)(1)(C) (i.e., such action is being taken under [provisions of Section 301] and is no longer appropriate) independently authorized the Lists 3 and 4A tariff actions.” The CAFC panel stated, “we need not and do not reach the question of whether the modified actions on appeal are within the scope of USTR’s authority under Section 307(a)(1)(B).”
The CAFC decision dissects in detail the meaning of “modify” as this term is used in Section 307 of the Trade Act of 1974. The CAFC made two observations regarding the meaning of “modify” in Section 307: (i) the word “is indifferent to degrees of change and contains no inherent limitations” and (ii) the word “is indifferent to the direction of change and encompasses both escalations and de-escalations in trade actions.” Stating that “[t]his understanding is confirmed by the structure of the statute,” the CAFC determined that Section 307(a)(1)(B), separately from Section 307(a)(1)(C), provides for modified action in view of increased or decreased burdens or restrictions on U.S. commerce. Appellants had argued that Section 307(a)(1)(C) only provides authority to reduce or terminate a Section 301 action. Referencing other case law, the CAFC panel held that the statute “favor[s] the government’s broader view, as the statute simply does not contain the narrowing limitation the [Appellants] read into it.” The panel concluded that the “USTR acted properly when it invoked Section 307(a)(1)(C) to promulgate the Lists 3 and 4A tariffs.”
Applicability of Major Questions Doctrine
The CAFC next considered whether the USTR’s challenged modifications implicate the major questions doctrine under which agencies have only those powers given to them by Congress, and the major questions doctrine prevents agencies from claiming “[e]xtraordinary grants of regulatory authority” based on “vague” or “modest words” where there may be “reason to hesitate before concluding that Congress meant to confer such authority.” Finding that many of the cases cited by the Appellants involved agencies attempting to modify “the very nature of their regulatory authority,” the CAFC found that while the USTR’s implementation of Lists 3 and 4A tariffs may “be a new use of USTR’s regulatory authority,” this did not involve a transformation of such authority. The CAFC thus found that:
USTR has modified its own unchallenged and statutorily permissible original action in this case, not the underlying Trade Act of 1974. As we have established, the statute permits USTR to impose and modify tariffs in response to unfair foreign trade practices, and Congress afforded USTR substantial discretion in determining what trade actions are appropriate. Such “clear congressional authorization” for the challenged action means that this cannot be a major questions case.
Adherence to APA Requirements
Finally, the CAFC dismissed the Appellants’ argument that the USTR violated the APA’s rule-making requirements by failing to consider and adequately respond to significant public comments expressing concern about the Lists 3 and 4A tariffs. The APA requires agencies proceeding with notice and comment rulemaking to publish a notice of the proposed rule in the Federal Register, justify the rule by reference to legal authority, describe the rule itself, and allow interested parties to submit comments. Section 307 of the Trade Act of 1974 additionally requires the USTR to “provide opportunity for the presentation of views by other interested persons affected by the proposed modification” regarding “effects of the modification . . . and whether any modification . . . of the action is appropriate.”
While affirming the CIT’s ruling that the APA’s foreign-affairs exemption was not applicable, the CAFC still concluded that the additional detail the USTR provided on remand cured the original deficiencies in the USTR’s notice-and-comment procedures. Noting that “[t]he standard that an agency’s response to comments must meet ‘is not particularly demanding,’” the CAFC agreed with the CIT that the USTR’s remand redetermination successfully “responded to significant concerns within the context of China’s actionable conduct” and complied with the CIT’s remand order.
Possible Next Steps
The CAFC’s decision is seen as fairly definitive and supportive of the CIT’s rulings on these matters, see Thompson Hine Updates of March 20, 2023 and April 6, 2022. The Appellants have not yet indicated whether they will file a Petition for Rehearing En Banc (seeking a rehearing heard by the chief judge of the CAFC and ten additional judges) or whether they will request the U.S. Supreme Court to review the case.