2018 CTA Comments Possibly Preview Akin Gump's Section 301 Arguments
Akin Gump said there’s no legal precedent for its Sept. 10 complaint before the U.S. Court of International Trade in which HMTX Industries and Jasco Products allege the Office of the U.S. Trade Representative overstepped its authority under the 1974 Trade Act to impose the Lists 3 and 4A Section 301 tariffs on Chinese imports (see 2009110041). The suit, plus the other roughly 3,500 nearly identical complaints filed at the CIT, seek to vacate the Lists 3 and 4A rulemakings and get the duties refunded. DOJ is expected to oppose Akin Gump's motion for a three-judge panel to manage the litigation when responses are due Oct. 21 (see 2010010043)
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Extensive case law is at the root of Akin Gump’s secondary argument -- that USTR ran afoul of the 1946 Administrative Procedure Act by running sloppy and nontransparent tariff rulemakings. The Lists 3 and 4A actions were “arbitrary and capricious” under the APA, said the complaint, because USTR “failed to provide sufficient opportunity for comment,” and ignored “relevant factors” when making its decisions.
USTR also failed to “connect the record facts to the choices it made,” said Akin Gump. Despite receiving about 10,000 comments in the two rulemakings -- the vast majority opposing the tariffs -- USTR said “absolutely nothing about how those comments shaped its final promulgation of List 3 and List 4A,” it said. “USTR’s preordained decision-making bears no resemblance to the standards that the APA demands.” USTR has been silent on the litigation. Our August 2018 Freedom of Information Act request turned up no records explaining how and why USTR removed finished TVs from China from the List 1 tariffs (see 1808310001). USTR tariffed TVs at 15% on List 4A about a year later.
The tariff rulemakings typified USTR's “unreasoned decisionmaking” that’s “impermissible” under the APA, argued CTA's September 2018 List 3 comments that draw strong parallels to the HMTX-Jasco litigation. “USTR has provided only narrow and confusing guidance on its decision-making process throughout the commenting period," said CTA then. "To date, USTR has not made public how it weighs public comment.” The firm didn't comment Tuesday on whether one may read CTA's comments as a preview of arguments Akin Gump will make before the CIT in the HMTX-Jasco action.
If the rulemaking’s outcome “is not to be a fait accompli, USTR must seriously and carefully consider the many thousands of stakeholder views expressed in the comments, not rush to impose tariffs as soon as the comment period is over,” said CTA then. List 3 took effect less than three weeks later. CTA used Akin Gump to help draft the comments, the association told us two years ago (see 1809070032). It was where CTA first floated the idea of challenging the tariffs in court, The complaint Akin Gump drafted for CTA that the association never followed through on (see 1810290019) is seen as a template for the HMTX-Jasco litigation.
The September 2018 CTA comments cited four examples of APA case law -- but none for the alleged Trade Act violations -- defining when and why courts had found agencies to have acted without the reasoned decision-making the statute requires. In a January 2014 decision, the U.S. Appeals Court for the D.C. Circuit found for Massachusetts Institute of Technology startup Lilliputian Systems in its challenge of a Department of Transportation ban on butane-based portable fuel cells in checked airline baggage. The agency failed to respond to relevant and significant public comment as the APA requires, said the court, mirroring the claims Akin Gump raises in HMTX-Jasco.
Lilliputian successfully argued that the prohibition was arbitrary and capricious because DOT failed to provide any explanation of its risk assessment methodology, said the court. The agency “also failed to explain why it prohibited butane fuel cell cartridges when it permits other, less stringently tested items containing butane in checked baggage,” it said.
The APA gained recent fame with the Supreme Court’s June 18 decision blocking the Trump administration from ending the Deferred Action for Childhood Arrivals program. The Department of Homeland Security failed to comply with “the procedural requirement that it provide a reasoned explanation for its action” when it rescinded DACA, said the court. That, plus the failure of DHS to consider all the "conspicuous" DACA issues before it, rendered the rescission arbitrary and capricious under the APA, it said.
In amending the HMTX complaint to enroll CTA member Jasco as an additional plaintiff, Akin Gump picked a client with unusually heavy tariff exposure. The complaint says Jasco imports goods from China under 78 Harmonized Tariff Schedule subheadings on Lists 1-3 with 25% tariff exposure, plus 13 more HTS categories on List 4A currently at 7.5%. Jasco was granted tariff exclusions on goods in three List 3 subheadings retroactive to Sept. 24, 2018, but the exemptions expired Aug. 7, said the complaint.
Moving production outside China is “easy to say, but difficult to do,” Jasco CEO Jason Trice told a List 4 hearing in June 2019. “Jasco spent decades cultivating over 40 high-quality manufacturing partners in China. There are not factories anywhere in the world with both the technical capabilities and the available capacity.” China never did anything that "disrupted Jasco's business," but Jasco can't "say the same about its own government," said Trice in opposing the List 4 tariffs.