CIT Remands Section 301 List 3 and 4A to USTR for Explanation
The Court of International Trade issued its first decision on the merits of the claim that the United States collected Section 301 duties on List 3 and List 4A products collected illegally. The decision is available from the Court. In short, the Court affirmed that the President and USTR had legal authority to impose the duties. However, the Court also found that USTR failed to follow the required notice and comment procedures. Thus, the Court ordered that USTR provide a fuller response to the comments it received relating to List 3 and List 4A.
The Court first had to determine whether it has the authority to review the USTR’s action at all. The government argued that the decision to impose the additional duties was immune from judicial review because it is a presidential (rather than agency) action or is a political decision, which is an area left to the President. The Court found that the issues before it do not relate to presidential discretion or policy questions but to whether USTR and the President properly applied the statute. Given that narrow focus, the Court held it can review the actions.
Regarding whether the President had authority to impose the List 3 and List 4A duties, the Court sided with the Government. The Court held that the President had authority to increase the initial Section 301 remedy in response to China’s retaliation because the retaliation was within the broad scope of the USTR’s report identifying China’s unfair trade practices. List 3 and List 4A, therefore, were not new actions that required new authorizations.
The Court then turned to a question of whether the USTR followed the required notice and comment procedures. The background for this is that the Government published Federal Register Notices seeking public comment and held public hearing before imposing the duties on goods covered by List 3 and List 4A. The Notices resulted in thousands of comments, most of which argued against imposing the additional duties, some of which addressed other concerns. Once an agency receives comments, the law requires that it explain how it resolved any significant problems raised in the comments and did so in a manner consistent with the applicable law. On this point, the Court found that USTR failed to explain its actions in light of the comments with detail sufficient to allow the Court to understand why USTR acted as it did.
Having found this procedural error, the issue for the Court was to determine the appropriate consequences. Plaintiffs argued that the USTR’s failure to follow the required procedure means that List 3 and List 4A are void and the duties should be refunded. The Court, however, decided to send the original USTR decisions back to the agency with instructions that USTR provide a better explanation of how it considered and acted in relation to the comments. USTR must submit the response to the Court on or before June 30. When it does that, USTR must elaborate on its prior explanation and may not provide any new rationale for the actions.
If it finds USTR’s further explanation adequately addresses the comments, the Court will likely uphold List 3 and List 4. If the USTR is not able to adequately address the comments, the Court can void the duties. Either result will lead to an appeal to the Federal Circuit.