In re Section 301 Cases

• Docket Number: Slip Op. 23-35,Court No. 21-00052-3JP
• Decision Date: 17 March 2023
• Parties: IN RE SECTION 301 CASES
• Court: U.S. Court of International Trade

628 F.Supp.3d 1235

IN RE SECTION 301 CASES

Slip Op. 23-35
Court No. 21-00052-3JP

United States Court of International Trade

March 17, 2023

628 F.Supp.3d 1238

Pratik Shah, Akin Gump Strauss Hauer & Feld LLP, of Washington, DC, argued for Plaintiffs HMTX Industries LLC, et al. With him on the brief were Matthew R. Nicely, James E. Tysse, Devin S. Sikes, Daniel M. Witkowski, and Sarah B. W. Kirwin.

Elizabeth A. Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Defendants United States, et al. With her on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General, Patricia M. McCarthy, Director, L. Misha Preheim, Assistant Director, Justin R. Miller, Attorney-In-Charge, International Trade Field Office, Sosun Bae, Senior Trial Counsel, and Jamie L. Shookman, Trial Attorney. Of Counsel on the brief were Megan Grimball, Associate General Counsel, Philip Butler, Associate General Counsel, and Edward Marcus, Assistant General Counsel, Office of General Counsel, Office of the U.S. Trade Representative, of Washington, DC, and Paula Smith, Assistant Chief Counsel, Edward Maurer, Deputy Assistant Chief Counsel, and Valerie Sorensen-Clark, Attorney, Office of the Assistant

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Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection, of New York, NY.

Alexander W. Koff, Venable LLP, of Baltimore, MD, argued for Amici Curiae VeriFone, Inc., et al. With him on the brief were Ashleigh J. F. Lynn and Nicholas M. DePalma, Venable LLP, of Tysons Corner, VA.

Joseph R. Palmore and Adam L. Sorensen, Morrison & Foerster LLP, of Washington, DC, for Amici Curiae Retail Litigation Center, et al.

Before: Mark A. Barnett, Chief Judge, Claire R. Kelly and Jennifer Choe-Groves, Judges

OPINION AND ORDER

Barnett, Chief Judge:

Plaintiffs HMTX Industries LLC, Halstead New England Corporation, Metroflor Corporation, and Jasco Products Company LLC commenced the first of approximately 3,600 cases¹ ("the Section 301 Cases") contesting the imposition of a third and fourth round of tariffs by the Office of the United States Trade Representative ("USTR" or "the Trade Representative") pursuant to section 307 of the Trade Act of 1974 ("the Trade Act"), 19 U.S.C. § 2417 (2018).² See generally Am. Compl., HMTX Indus. LLC v. United States, No. 20-cv-177 (CIT Sept. 21, 2020), ECF No. 12 ("20-177 Am. Compl."). USTR imposed the contested duties, referred to herein as "List 3" and "List 4A," in September 2018 and August 2019, respectively. See Notice of Modification of Section 301 Action: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 47,974 (Sept. 21, 2018) ("Final List 3"); Notice of Modification of Section 301 Action: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 43,304 (Aug. 20, 2019) ("Final List 4").³

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Plaintiffs alleged that USTR exceeded its statutory authority and violated the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(2), when it promulgated List 3 and List 4A. 20-177 Am. Compl. ¶¶ 63-75.

In In Re Section 301 Cases, 46 CIT —, 570 F. Supp. 3d 1306 (2022), the court rejected Defendants' ("the Government") argument that Plaintiffs' claims were non-justiciable and addressed Plaintiffs' substantive and procedural challenges.⁴ Although the court sustained USTR's statutory authority to impose the tariffs pursuant to section 307(a)(1)(b) of the Trade Act, id. at 1323-35, the court remanded the matter for USTR to comply with the APA requirement for a reasoned response to comments submitted during the List 3 and List 4A rulemaking proceedings. Id. at 1335-45.⁵

This matter is now before the court following USTR's filing of its remand redetermination. See Further Explanation of the Final List 3 and Final List 4 Modifications in the Section 301 Action: China's Acts, Policies, and Practices Related to Tech. Transfer, Intell. Prop., and Innovation, Pursuant to Ct. Remand Order ("Remand Results"), ECF No. 467. In the Remand Results, USTR (1) identified the documents underlying its response to comments; (2) provided additional explanation supporting the removal or retention of certain tariff subheadings from List 3 and List 4A; (3) addressed comments concerning the level of duties to be imposed and the aggregate level of trade subject to the duties; and (4) addressed comments concerning potential harm to the domestic economy, the legality and efficacy of the tariffs, and suggested alternative measures. See id. at 23-89.

Plaintiffs and Amici⁶ filed comments opposing the Remand Results and seeking vacatur of List 3 and List 4A. See Pls.' Cmts. on the [USTR's Remand Results] ("Pls.' Cmts."), ECF No. 474; Pls.' Reply Regarding the Remand Determination ("Pls.' Reply Cmts."), ECF No. 482; Br. of Amici Curiae Retail Litig. Ctr., Inc., Nat'l Retail Fed'n, Am. Apparel and Footwear Assoc., Consumer Tech. Assoc., Footwear Distributors and Retailers of Am., Juvenile Prods. Mfrs. Assoc., and Toy Assoc. ("RLC's Br."), ECF No. 472; Br. of Amici Curiae Verifone, Drone Nerds, and Specialized in Supp. of Pls.' Cmts. on the [Remand Results] ("Verifone's Br."), ECF No. 471-2. The Government filed responsive comments in support of the Remand Results. See Defs.' Resp. to Cmts. on the [Remand Results] ("Defs.' Resp. Cmts."), ECF No. 479. The Government also filed its second motion to correct the record. Defs.' Second Mot. to Correct the R. ("2nd Mot. Correct R."), ECF Nos. 466, 466-1. The court heard oral argument on February 7, 2023. Docket Entry, ECF No. 488.

For the following reasons, the court sustains Final List 3 and Final List 4 as amended by the Remand Results and grants the Government's second motion to correct the record.

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JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction pursuant to 28 U.S.C. § 1581(i)(1)(B) (2018 & Supp. II 2020), which grants the court "exclusive jurisdiction of any civil action commenced against the United States . . . that arises out of any law of the United States providing for . . . tariffs, duties, fees, or other taxes on the importation of merchandise for reasons other than the raising of revenue."

The APA directs the court to "hold unlawful and set aside agency action, findings, and conclusions found to be--(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; [or] . . . (C) in excess of statutory . . . authority; [or] . . . (E) unsupported by substantial evidence." 5 U.S.C. § 706(2).

DISCUSSION

Plaintiffs and Amici challenge the Remand Results on two grounds. They first assert that USTR's Remand Results constitute impermissible post hoc reasoning pursuant to Department of Homeland Security v. Regents of the University of California, — U.S. —, 140 S. Ct. 1891, 207 L.Ed.2d 353 (2020). Next, to the extent that USTR's Remand Results survive Regents, Plaintiffs challenge the substantive adequacy of USTR's response to certain comments. Following disposition of these issues, the court addresses the Government's second motion to correct the record.

I. The Rule Against Post Hoc Rationalization

A. Parties' Contentions

Plaintiffs contend that USTR contravened the court's remand order by undertaking a new review and analysis of the comments. Pls.' Cmts. at 9-10. Plaintiffs argue that, instead, judicial precedent limits USTR to elaborating on a "prior response to comments" located somewhere in the administrative record. Id. at 10; see also id. at 13-14 (arguing that USTR failed to demonstrate consideration of comments contemporaneous with the issuance of Final List 3 and Final List 4 upon which it now seeks to elaborate). Having failed to do so, Plaintiffs assert that vacatur is merited. Pls.' Reply Cmts. at 2-4.

The Government contends that Plaintiffs' view of the permissible limits of the remand finds no support in Regents or subsequent cases remanding actions for an agency to respond to comments. Defs.' Resp. Cmts. at 10; see also id. at 11-12 (citing Bloomberg L.P. v. SEC, 45 F.4th 462, 477 (D.C. Cir. 2022); Env't Health Trust v. FCC, 9 F.4th 893, 909, 914 (D.C. Cir. 2021)). The Government further contends that taking Plaintiffs' argument to its logical conclusion would require any agency that fails to address significant comments to undertake a new agency action on remand. Id. at 11. Instead, the Government maintains that USTR's Remand Results constitute permissible elaboration on the underlying justifications for the actions taken, namely, "the President's direction and [the Trade Representative's] predictive judgment that the tariffs were 'appropriate' within the meaning of the statute." Id. at 12; see also id. at 20.

B. USTR's Response to Comments is Not Impermissibly Post Hoc

The APA requires agencies conducting notice and comment rulemaking to "incorporate in the rules adopted a concise general statement of their basis and purpose." 5 U.S.C. § 553(c). "The basis and purpose statement is inextricably intertwined with the receipt of comments." Action on Smoking & Health v. Civ. Aeronautics Bd., 699 F.2d 1209, 1216 (D.C. Cir. 1983) (footnote citation omitted). An agency "must respond in a reasoned manner to those [comments] that raise significant problems." City of Waukesha v. EPA, 320 F.3d 228, 257 (D.C. Cir. 2003) (quotations and citation omitted). "Significant comments

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are those 'which, if true, raise points relevant to the agency's decision and which, if adopted, would require a change in an agency's proposed rule.' " City of Portland v. EPA, 507 F.3d 706, 715 (D.C. Cir. 2007) (quoting Home Box Office, Inc. v. FCC, 567 F.2d 9, 35 n.58 (D.C. Cir. 1977)).

The court previously found that "USTR's statements of basis and purpose . . . indicate why the USTR deemed China's ongoing and retaliatory conduct actionable," namely, "China's unfair practices" and "the...