CIT Upholds List 3 and 4 Section 301 Tariffs
On Friday, March 17, the United States Court of International Trade (“CIT”) upheld the List 3 and List 4 tariffs imposed on Chinese imports in litigation brought by more than 3600 importers challenging the United States Trade Representative’s (“USTR”) statutory authority to impose those tariffs.
Acting at the direction of the President, USTR first imposed duties on certain Chinese imports under section 301 of the Trade Act of 1974 (19 U.S.C. § 2411) in 2018. USTR subsequently expanded the imports subject to those duties, ultimately promulgating three additional lists of products subject to additional duties pursuant to section 307 of the Act. Starting in late 2020, the 3,600+ plaintiffs alleged that the USTR’s imposition of duties on the more than 10,000 products on Lists 3 and 4, affecting over $230 billion in trade in 2021, were unlawful.
The Court sustained the Final List 3 and Final List 4 of products subject to the section 301 tariffs following the Court’s earlier decision sustaining the USTR’s statutory authority to impose the tariffs but remanding the matter for the USTR to respond to comments submitted during the List 3 and 4 rulemaking proceedings, as required by the Administrative Procedure Act (“APA”). Plaintiffs and amici curiae filed comments opposing the remand results and seeking vacatur of List 3 and List 4A. The Court heard oral arguments from Plaintiffs, amici curiae,and the U.S. government on February 7, 2023.
The CIT found that the USTR satisfied its requirements under the APA because the USTR (1) identified the documents underlying USTR’s response to comments; (2) provided additional explanation supporting the removal or retention of certain tariff subheadings from Lists 3 and 4A; (3) addressed comments about the level of duties to be imposed and the aggregate level of trade subject to the duties; and (4) addressed comments about potential harm to the domestic economy, the legality and efficacy of the tariffs, and suggested alternative measures.
The CIT rejected Plaintiffs’ request for vacatur of the tariffs, holding that in issuing its remand determination, USTR undertook no new review and analysis of the comments submitted during rulemaking or provide impermissible post hoc rationalization. Rather, the Court held that under Department of Homeland Security v. Regents of the University of California, 140 S. Ct. 1891 (2020) (“Regents”), an agency may provide on remand a fuller explanation of the agency’s reasoning during the original agency action without constituting post hoc rationalization where that explanation provides an “amplified articulation” of a prior conclusory agency rationale. The Court rejected the Plaintiffs’ proffered distinction between an agency’s prior failure to address comments and an agency’s failure to analyze or consider comments. The CIT concluded that because USTR provided such an amplified articulation of the grounds for its action and responded to significant concerns within the context of China’s actionable conduct and the specific direction of the President, providing a fuller explanation of its reasoning during the original agency action, no new notice-and-comment rulemaking is required. The Court concluded that while USTR must explain how it resolved significant issues raised in comments, USTR did not need to respond to every comment submitted or explain every alternate course of action considered.
In addition, the CIT found that USTR demonstrated in its remand its adherence to the specific direction of the President in terms of the level of duty increase and the aggregate level of trade affected by the actions, providing sufficient explanation for the relationship between significant issues raised in the comments and the President’s directives. The CIT also found the statutory language of the Trade Act linking modification of the section 301 actions to the specific direction of the President supported USTR’s interpretation that USTR was constrained by the President’s directions, eliminating the need for additional explanation from USTR.
This opinion preliminarily concludes the ongoing litigation. However, given the potential financial impact, the Plaintiffs will likely appeal to the U.S. Court of Appeals for the Federal Circuit. Although the Administration is undertaking a 4-year review of the impact of the tariffs on U.S. businesses, businesses that import are likely to remain subject to the section 301 tariffs for the foreseeable future and need to devise a trade strategy to ensure correct classification and mitigate associated risks.