As we have been reporting, four cases scheduled to be argued in January at the Federal Circuit attracted amicus briefs. One of these cases is HMTX Industries LLC v. United States. In this case, HMTX challenges the Court of International Trade’s decision to uphold a proposed increase in tariffs on goods originating in China. This is our argument preview.
In its opening brief, HMTX argued that the U.S. Trade Representative’s tariffs “on hundreds of billions of dollars of imported Chinese goods are ultra vires and procedurally infirm.” HMTX explained that the USTR’s “discretionary” power permits her to “‘modify or terminate’ a discretionary Section 301(b) action in two circumstances—neither of which [were] present here.” First, it argued, the Court of International Trade improperly upheld her action under Section 307(a)(1)(B) because the action addressed “retaliatory acts by China beyond the specific investigated practices found to justify the original.” Second, HMTX contended, Section 307(a)(1)(C) “authorizes USTR only to terminate or ratchet down a discretionary action when it is ‘no longer appropriate.'” HMTX also claimed the Court of International Trade “erred in giving USTR a do-over” when it initially “failed to consider, let alone respond to, thousands of comments lodging significant objections to the proposed” tariffs. Lastly, HMTX alleged the Court of International Trade wrongly upheld “duties based on a remand determination offering conclusory and post hoc responses that ultimately rested on the President’s say-so rather than consideration of all the relevant statutory factors.”
The United States, in its response brief, described the “initial tariff action [as] inadequate to achieve its goal of eliminating China’s objectionable, technology-related practices” because of a diplomatic landscape that had “shifted swiftly, dramatically, and repeatedly as the two countries engaged in bilateral trade negotiations while taking unilateral trade actions.” In this circumstance, the government argued, HMTX adopted a “narrow and atextual reading of [Section 307] that would have required the President and USTR to start the months-long process under Section 301 to impose a whole new tariff action . . . if the Executive Branch wanted to increase tariff levels to further its continuing efforts to eliminate China’s unfair trade policies.” The United States argued the Federal Circuit should exercise a “limited review of plaintiff’s Trade Act claims, because those claims go to the Presidents—not USTR’s—decisions.” Because “the President directed the USTR” to impose the tariffs, the United States argued, the USTR’s “discretionary decision is unreviewable presidential action.” Additionally, the government argued, “[a] decision to impose tariffs in response to a determination that a foreign country is harming the United States directly” triggers the “foreign affairs function” exception, exempting the USTR from “the APA’s rulemaking requirements.”
In its reply brief, HMTX argued that the USTR is “an agency subject to judicial review under” the standards of the Administrative Procedure Act. This is especially so, HMTX argued, because “the 1988 amendments specifically transferred authority under the statute from the President to USTR.” Next, HTMX contended, the USTR’s statutory constructions were not entitled to deference because “courts regularly ‘review agency action taken to implement Presidential proclamations and executive orders—each of which are forms of presidential discretion—pursuant to the APA.'” Additionally, HMTX argued, the “foreign affairs function” exception did not excuse the USTR’s “obligation to respond to comments” while conducting rulemaking “merely because [the challenged actions] have impact beyond the borders of the United States.” Lastly, HMTX asserted, the USTR’s failure to respond to comments to the imposed tariffs “should have resulted in vacatur” because, it maintained, “the required explanation of the agency’s action is totally absent[] or palpably inadequate.” To date, HMTX argued, “USTR still offers zero contemporaneous evidence that it grappled with substantial comments at the time it developed” the challenged tariffs.
The case attracted four amicus briefs. Each support HMTX and reversal:
- American Kenda Rubber argued that the “clear language of Sec. 301 limits USTR’s use of its authority to ‘modify’ an action to impose additional duties only to instances when the harm caused by the subject practice has increased.” This language did not, Kenda Rubber argued, permit USTR “to double the nation’s duties collected on imported goods” by “increasing the scope of its Sec. 301 action tenfold from ¢50 billion to $500 billion worth of targeted goods.”
- Acushnet argued that, “even after the CIT gave USTR a chance to better explain the Agency’s reasons” for its actions, the USTR failed to address several “core issues”: “(1) why USTR believed that additional Section 301 tariffs were likely to be effective in curing China’s unfair trade practices even though USTR’s prior actions only caused retaliatory action, and (2) why the List 3 and List 4A actions were worth the harm they would cause to U.S. companies.”
- The American Apparel & Footwear Association argued the USTR’s tariff lists failed to satisfy “foundational requirements,” including responding “to ‘significant points’ and consider[ing] ‘all relevant factors’ raised by the public comments” because the USTR’s responses “were unreasoned or non-existent.”
- Administrative law and international trade law professors, as amici, argued that the USTR did not comply with Congress’s “detailed statutory scheme under which USTR may impose additional tariffs or other import restrictions if foreign countries engage in certain trade practices that burden U.S. commerce.”
This case is scheduled to be argued Wednesday, January 8. We will continue to keep track of this case and report on developments.