U.S. Court of International Trade Decision Could Call into Question the Validity of Section 301 Exclusion Request Denials by U.S. Trade Representative

A recent decision of the United States Court of International Trade could call into question the legitimacy of Commerce Department decisions denying exemptions from the Section 232 “national security” tariffs on imported steel and aluminum.

Before the U.S. Court of International Trade in JSW (Steel) USA, Inc. v. United States, Slip Op. 20-111, Court No. 19-00133 (August 5, 2020) was a challenge by a steel importer to the Department of Commerce’s denial of the company’s twelve (12) Section 232 exclusion requests. The Court applied the traditional administrative test of “arbitrary and capricious” to evaluate Commerce’s determinations to deny the exclusion request.

“Under the arbitrary and capricious standard, courts consider whether the agency ‘entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or [the decision] is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.’”, wrote Judge Claire Kelly.  Id. at 12. The Court said “[r]emand of all twelve exclusion requests is warranted because Commerce’s denials are devoid of explanation and frustrate judicial review.” Id. at 18. “The court cannot be certain what record evidence, if any, Commerce relied upon when both the BIS decision memoranda … [do] not explain what information the [agency] considered, how it was weighed, or why the evidence compelled denial.” Id.

Problems, similar to those identified by the Court in the denial of the 232 exclusion request, exist in the U.S. Trade Representative’s denial of Section 301 exclusion requests. The denials are supposed to consider the “Made in China 2025 Program” and whether the Section 301 tariffs cause “sever economic harm” to the importer or other domestic interests as grounds for granting an exclusion. However, USTR’s negative determination decisions do not explain how the agency arrived at the determination that a subject product is part of the Chinese government’s economic programs or that a requestor has not experienced severe economic harm because of the 301 tariffs.  Indeed, since USTR has never defined the concept of “severe economic harm”, there is no yardstick by which to measure its decisions.

The USTR’s Section 301 determinations dos “not explain what information the [agency] considered, how it was weighed, or why the evidence compelled denial.” A challenge filed in the CIT to such exclusion denials would no doubt result in a remand to USTR for reconsideration and explanation – much as the Court has required of the Commerce Department in the JSW Steel case.

If you have questions regarding denial of Section 232 of 301 exclusion requests, feel free to contact a Neville Peterson LLP professional to discuss your concerns.