Late last month, the Federal Circuit issued its opinion in HMTX Industries LLC v. United States, a trade case we have been following because it attracted four amicus briefs. In this case, the Federal Circuit reviewed a judgment of the Court of International Trade. That court held that certain actions of the U.S. Trade Representative did not exceed statutory authority and satisfied requirements of the Administrative Procedure Act. Judge Hughes authored an opinion for the Federal Circuit affirming the judgment of the Court of International Trade. This is our opinion summary.
Judge Hughes began by providing the relevant background:
From 2017 to 2018, the Office of the United States Trade Representative (USTR) conducted an investigation which found that China was engaged in unreasonable or discriminatory conduct that burdens or restricts U.S. commerce. Following a period for notice and comment, USTR took discretionary action under Section 301 of the Trade Act of 1974 by imposing 25% duties on $50 billion of imports from China. This . . . trade action on List 1 and List 2 . . . is not challenged. After China retaliated against these tariffs, USTR invoked Section 307 to modify its discretionary action and impose 10% duties, later increased to 25%, on an additional $200 billion of Chinese imports that fall under List 3. USTR then imposed 10% duties, later decreased to 7.5%, on approximately $120 billion in Chinese imports that fall under List 4A.
Plaintiffs-Appellants . . . are businesses that import Chinese products subject to the List 3 and List 4A tariffs. They filed a suit at the Court of International Trade alleging that the List 3 and 4A tariffs were issued without statutory authority and in violation of the Administrative Procedure Act’s requirements for notice and comment rulemaking.
The trial court agreed with the Government that the modifications were consistent with USTR’s authority under Section 307(a)(1)(B), which allows USTR to modify an action where the burden or restriction imposed by the investigated conduct ‘has increased or decreased.’ . . . Following a remand order instructing USTR to further explain how it considered significant public comments aired in reponse to the proposed modifications, USTR produced a remand redetermination articulating in greater detail its contemporaneous reasoning for the modified actions. On review, the trial court sustained the List 3 and List 4A tariff actions.
Judge Hughes, after reviewing the history of the Trade Act of 1974 and the case’s factual development, summarized the argument by HMTX Industries that “‘nothing in the Section 307’ permits USTR’s List 3 and 4A tariff actions, and that USTR failed to cure its APA violations on remand.” Judge Hughes disagreed.
After briefly outlining the court’s standard of review, Judge Hughes explained why the court as an initial matter “reject[ed] the Government’s argument that the List 3 and 4A tariffs were the outcome of the President’s discretionary decisions . . . and thus not reviewable under the APA.” According to Judge Hughes, the List 3 and 4A tariffs implicate actions “‘involving authority delegated by Congress to an agency,'” which as a result are “reviewable under the APA.”
Next, the court rejected the argument “that USTR exceeded its statutory authority to ‘modify’ an action under Section 307 when it increased its original $50 billion action into an at least $350 billion action by imposing tariffs on Lists 3 and 4A.” Notably, Judge Hughes indicated that, “[a]lthough the trial court sustained these modified actions by reference to USTR’s authority under Section 307(a)(1)(B),” the panel “affirm[ed] USTR’s modified actions on alternate grounds, with reference only to Section 307(a)(1)(C).”
Judge Hughes noted the panel “conclude[d] USTR acted properly when it invoked Section 307(a)(1)(C) to promulgate the Lists 3 and 4A tariffs.” In the course of explaining its reasoning, court rejected an argument by HMTX Industries that the court’s “construction of Section 307(a)(1)(C) renders Section 307(a)(1)(B) superfluous.”
Judge Hughes then turned to the question of “whether Section 307(a)(1)(C) violates the Constitution.” The panel held that “Section 307(a)(1)(C) plainly provides an intelligible principle for USTR’s authority to modify a discretionary action,” and thus “did not discern any constitutional violation in the statute.” The court further concluded that the List 3 and List 4A tariffs “do not involve a transformation of USTR’s regulatory authority” and that there was “‘clear congressional authorization’ for the challenges action.” Accordingly, Judge Hughes said, “this cannot be a major questions case.”
Next, Judge Hughes addressed whether “USTR violated the APA’s rule-making requirements by failing to consider and adequately respond to significant public comments expressing concern.” He explained the panel “affirm[ed] the trial court’s holding that USTR’s elaboration on remand remedied any such procedural violations.” Judge Hughes emphasized that “vacatur is not always required when an agency has provided inadequate reasoning for its actions.” He explained that, “[s]o long as the agency indicated the factors relevant to its action in the first instance, it is allowed to elaborate on remand.” The panel therefore found that “the trial court’s remand to USTR to elaborate the basis for its action was appropriate.”
Lastly, Judge Hughes considered “whether the additional detail USTR provided on remand cured the original deficiencies in USTR’s notice-and-comment procedures.” He concluded “it did.” He explained that “USTR addressed each category of significant comments the trial court identified as requiring further response . . . using public statements, hearing transcripts, and other documents that provided insight into USTR’s reasoning prior to the issuance of the final Lists 3 and 4A tariffs.” He also noted how it “also provided a more detailed account of how it weighed significant comments against the statutory factors it was required to consider.”
As a result of Judge Hughes’s analysis, the panel affirmed the judgment of the Court of International Trade and sustained the Lists 3 and 4A tariffs.