USTR Got Confidential Private-Sector Tariff Advice, 'Decision Memos' Show

The Office of the U.S. Trade Representative sought confidential advice from “private-sector advisory committees,” believed to be under the Industry Trade Advisory Committee (ITAC) program managed jointly by USTR and the Commerce Department, before imposing the List 3 Section 301 tariffs on Chinese imports, Stephen Vaughn, the agency’s then-general counsel, wrote USTR Robert Lighthizer Sept. 17, 2018. The document was one of about a dozen “decision memos” spanning 488 pages that DOJ filed Thursday in the Section 301 litigation docket (1:21-cv-52) at the U.S. Court of International Trade as an “appendix” to oral argument held there Feb. 1 (see 2202010053).

The advisory committees generally supported the Trump administration’s effort to curb China’s unfair trade practices but expressed concern about “the negative effect the tariff action would have on certain U.S. industries,” Vaughn told his boss, according to the memo. The advisory committees also raised doubts about the effectiveness of the tariffs in changing Beijing’s unwanted behavior, he said: “None of the advice, however, proposes any viable alternatives to increased tariffs as a tool for obtaining the elimination of China’s unfair trade practices.”

The summaries of the confidential advice from the private sector are redacted from all the memos. It's not known which ITAC members consulted with USTR on the tariffs. "The ITAC program is currently undergoing changes," says a message on the program's website. "Please check back again soon for updates."

Amid allegations in the Section 301 litigation that USTR didn’t meet its Administrative Procedure Act obligations to run transparent tariff rulemakings that were responsive to public comments, DOJ lawyer Jamie Shookman attempted in opening argument to cite the decision memos as evidence that the agency gave a “reasoned explanation” for its decisions imposing the tariffs.

Pratik Shah, Akin Gump lawyer for sample-case plaintiffs HMTX Industries and Jasco Products, rejected DOJ's argument that the memos support the government’s case that USTR lived up to its APA requirements. The decision memos were never published in the Federal Register, an important bar for federal agencies meeting their APA obligations, said Shah, under questioning from Judge Claire Kelly. “No one saw those, we didn’t see those, until this litigation started,” he said of the memos. “Those are secret internal memos until you sue.”

A May 7, 2019, memo to Lighthizer from Joseph Barloon, Vaughn’s successor as USTR general counsel, proposed hiking the List 3 tariffs to 25% from 15%, effective three days later. The memo bears Lighthizer’s initials approving the proposal.

Many stakeholders during the List 3 comments period argued against hiking tariffs on goods that were available only from China because they would cause “severe economic harm” to U.S. interests, Barloon told Lighthizer. But removing entire product subheadings from List 3 “would reduce the effectiveness” of the Section 301 action to curb China’s bad trade behavior, he argued.

“Accordingly," wrote Barloon, "we suggest that you determine to establish a product exclusion process in which U.S. stakeholders may request the exclusion of particular products covered in a tariff subheading.” At oral argument, DOJ lawyer Shookman cited that memo's establishment of the List 3 exemptions as proof that USTR was responsive to the public comments it received, most of them opposed to the tariffs.