[00:00:00] Speaker 01: Our next case is HMTX Industries et al. [00:00:05] Speaker 01: versus the United States Office of the U.S. [00:00:09] Speaker 01: Trade Representative, 2023, 1891. [00:00:31] Speaker 01: as well. [00:00:38] Speaker 04: May it please the court, Pratik Shah, for plaintiff appellants. [00:00:41] Speaker 04: The substantive dispute in this case boils down to whether Section 307's limited, quote, modification authority hands USTR a blank check to raise tariffs by virtually any amount for virtually any reason. [00:00:55] Speaker 04: The unprecedented list three and four actions rapidly. [00:00:57] Speaker 03: I mean, I think you over-read this a little bit and don't do yourself a good service when you say virtually any amount for virtually any reason. [00:01:05] Speaker 03: There are admittedly general [00:01:08] Speaker 03: but specific standards in all parts of A, B, and C. I know A's not in play here, B and C are. [00:01:17] Speaker 03: And I think you take most offense to C, which just says is no longer appropriate, but that's a standard. [00:01:27] Speaker 03: Okay, sure, Your Honor. [00:01:28] Speaker 04: Let me start maybe just to make it more concrete with the term modification, right, because that cuts across [00:01:34] Speaker 04: all three of the provisions A, B, and C. So the term modification does not permit transforming the limited $50 billion dollar tariff action into a $370 billion because as both the U.S. [00:01:50] Speaker 04: Supreme Court and now this court have [00:01:52] Speaker 04: have reinforced opinions that were issued after the CIT's decisions, modify, and this is coming straight from the Supreme Court, which this court adopted in solar energy, connotes a moderate, minor, or incremental change, not massive radical escalations in tariffs, on the order of 50 to up to 500 billion, a tenfold escalation. [00:02:17] Speaker 04: That's coming straight from [00:02:19] Speaker 04: The Supreme Court in this court is so limited. [00:02:22] Speaker 03: And whether an expansion is moderate or not. [00:02:25] Speaker 03: I mean, this seems to be something that this kind of the amount seems to be something that lies largely in the discretion of USTR. [00:02:33] Speaker 03: Let me ask you a hypothetical. [00:02:35] Speaker 03: If they'd done this investigation and determined in the first instance that $300 billion was the right amount, you wouldn't be challenging that, right? [00:02:43] Speaker 04: No, Your Honor, because they would have had to do, in the course of the investigation and in the course of the report, [00:02:49] Speaker 04: that 300 billion was the right amount based upon the harms. [00:02:53] Speaker 04: And here, based upon the harm, what do you mean? [00:02:58] Speaker 04: Based upon the investigative practices. [00:03:00] Speaker 03: Right, because that suggested that you were saying there was some kind of requirement in the statute that there would be correlation between the monetary harm to the economy and the monetary harm of the tariffs. [00:03:13] Speaker 03: That's not true. [00:03:14] Speaker 03: That's not true, and I'm not saying that there's a proportionality. [00:03:17] Speaker 03: Every tariff at once [00:03:18] Speaker 03: to address the offending action? [00:03:22] Speaker 04: I'm not disputing that. [00:03:23] Speaker 04: What I'm disputing is once they pick a number, a baseline tariff action, as they did based upon the report, the investigation, exercising all their judgment and discretion, we're not challenging the list one and two tariff actions that were at $50 billion. [00:03:38] Speaker 04: What they can't do after going through this panoply of procedures in 301, [00:03:42] Speaker 04: 302, 303, and 304 to come to that number, they can't then just turn to the modification provision, which is supposed to be for adjustments, that had to be moderate, modest. [00:03:54] Speaker 03: You put that parenthetical in, but that parenthetical is not in the statute. [00:03:57] Speaker 03: Which parenthetical? [00:03:58] Speaker 03: Which is supposed to be for adjustment. [00:03:59] Speaker 04: Well, but what is in the statute is modify. [00:04:02] Speaker 03: And here's, just to be concrete. [00:04:04] Speaker 03: Why, if the conclusion is, [00:04:06] Speaker 03: This was our original action. [00:04:09] Speaker 03: It was entirely insufficient to cause China to correct its bad conduct. [00:04:18] Speaker 03: And in order to address that bad conduct and attempt to entice them to do it, we're going to increase it from 50 to 300 billion. [00:04:25] Speaker 04: Well, the reason why is when you're doing that sort of massive escalation, and I think any trade lawyer [00:04:31] Speaker 04: any layperson, and hopefully the judge would agree, that is a massive escalation from $50 billion to $300 or $500 billion. [00:04:38] Speaker 04: The reason why is Congress had good reason. [00:04:43] Speaker 04: If you're going to do that, that's not a modification. [00:04:45] Speaker 04: That is something that you can do that, Judge Hughes, but then go through the procedures in 301. [00:04:52] Speaker 03: Do an investigation. [00:04:54] Speaker 03: OK, I get it. [00:04:56] Speaker 03: That's a good argument. [00:04:57] Speaker 03: The opposite argument is Congress, in enacting these statutes, wanted to encourage the president and the trade rep to give them more flexibility and more power to deal with these trade issues. [00:05:10] Speaker 03: And one of them was giving them this kind of authority and giving them the ability to modify it. [00:05:16] Speaker 03: You gotta let me finish. [00:05:17] Speaker 03: Sure, sure. [00:05:17] Speaker 03: I didn't interrupt you. [00:05:19] Speaker 03: It starts being on this side. [00:05:20] Speaker 03: Yes. [00:05:20] Speaker 03: But they gave them the ability to modify. [00:05:24] Speaker 03: Why do you think if Congress would have said, okay, if your first action is insufficient and you find it's insufficient, you have to start all over again to address the same problem rather than just upping the ante as they did here? [00:05:39] Speaker 03: This would, what they did seems like [00:05:42] Speaker 03: Maybe not always the normal diplomatic way of doing things, but impossible diplomatic way of doing negotiations. [00:05:50] Speaker 03: And why do you think Congress wouldn't have one of them to have that ability and not have it hamstrung by the [00:05:57] Speaker 03: requirement to restart a new investigation every time it wanted to increase it by a certain amount. [00:06:05] Speaker 04: Sure. [00:06:05] Speaker 04: So we're not saying that they can't ever do that. [00:06:09] Speaker 04: Congress gave them an avenue to do that if they follow the requirements of subsection B and find that the burden is increased. [00:06:17] Speaker 04: But there's good, and you asked me why would Congress hamstrung them, there's good reason why Congress went [00:06:24] Speaker 04: would say that you can't take a relatively modest trade action, $50 billion, and then shoot it up to $300 billion or $500 billion or any amount. [00:06:34] Speaker 03: Do you have anything in the legislative history to support that? [00:06:35] Speaker 04: Yes, I do, Your Honor. [00:06:37] Speaker 04: In fact, in the 1988 amendments, they transferred the authority from the President to the USTR [00:06:44] Speaker 04: And they set very specific modifications, A, B, and C, and they use the term modify. [00:06:50] Speaker 04: And here's what this court said, and I think this is critical, in the solar energy decision from just last year, which took another modification provision, but from the Trade Act, uses the word modification. [00:07:01] Speaker 04: Here's what this court said at page 901 of its decision. [00:07:06] Speaker 04: It says, quote, the trade court seems to have been persuaded to adopt the contrary view due at least in part to its concern that the government's interpretation of modification risks permitting absurd results, e.g., a 1% initial tariff [00:07:23] Speaker 04: followed by a 50% modified tariff with no cost benefit analysis of the 50% rate, and might allow the modification exception to swallow the rule. [00:07:34] Speaker 04: We do not share this view on any reading. [00:07:38] Speaker 04: A modification must be a relatively minor adjustment. [00:07:43] Speaker 04: Expansion of a 1% duty to a 50% duty is obviously not a minor change. [00:07:50] Speaker 04: So this court took the exact argument [00:07:52] Speaker 04: Which provision did that apply to? [00:07:56] Speaker 04: This applied to the modification provision, which is the exact same language in 2254. [00:08:01] Speaker 04: That uses the exact same modification term there. [00:08:07] Speaker 04: Now, in that case, it was the president who had the modification authority instead of USTR. [00:08:12] Speaker 04: But it was the same. [00:08:12] Speaker 04: The president sets an initial safeguard duty in that solar energy case. [00:08:18] Speaker 04: and then has the ability to modify it. [00:08:22] Speaker 04: It's the same language. [00:08:24] Speaker 04: And the government doesn't dispute this in its reply brief. [00:08:27] Speaker 04: Solar energy came out after our opening brief. [00:08:30] Speaker 03: The government... I'm sorry, I just got to 2254. [00:08:34] Speaker 03: What are you pointing me to? [00:08:36] Speaker 04: So 2254 gives the power to reduce, modify, or terminate a safeguard. [00:08:42] Speaker 03: Action? [00:08:43] Speaker 04: Yeah. [00:08:44] Speaker 04: And so 2254B? [00:08:47] Speaker 04: Yeah, I think it's B1. [00:08:51] Speaker 04: Find the language. [00:08:52] Speaker 04: Yes, it uses the same term, the modification. [00:08:55] Speaker 04: And what the court at 901 was addressing is the challenger said, hey, wait a minute. [00:09:01] Speaker 04: This modification provision gives giving too much power to the president. [00:09:05] Speaker 04: He could do an initial tariff action. [00:09:07] Speaker 04: like under 301, right, for 1%, and then he could say in his judgment, because it wasn't effective and it's harming the domestic industry. [00:09:17] Speaker 03: I get what you're arguing, but obviously this is all textual and the language in that provision has a lot more conditions on it than the language we're talking about at BNC. [00:09:28] Speaker 04: Well, Your Honor, what this Court is construing was just the term modify. [00:09:32] Speaker 04: I agree with you. [00:09:33] Speaker 04: A, B, and C has other limitations. [00:09:35] Speaker 03: It can't come true, modify out of context. [00:09:37] Speaker 03: But the problem I'm having with your argument is not so much that. [00:09:40] Speaker 03: It says, who is to decide what's a modification and what's such a dramatic expansion that it's not a modification? [00:09:49] Speaker 04: Well, you know from the Supreme Court that it's the Court that has to decide that, ultimately, whether something is a modification. [00:09:55] Speaker 04: In the Biden student loans case, [00:09:57] Speaker 04: It was, hey, is this? [00:09:59] Speaker 03: I get it. [00:10:00] Speaker 03: And I don't really want to talk about that case. [00:10:02] Speaker 03: I understand why you're relying on it. [00:10:03] Speaker 03: Sure. [00:10:03] Speaker 03: Let me put that aside. [00:10:05] Speaker 03: I don't think that kind of stuff, that non-delegation stuff is going to be applicable to the problem we're having here. [00:10:10] Speaker 03: Let me ask you this. [00:10:11] Speaker 03: If they had went from 50 to 100, [00:10:14] Speaker 03: Would that have been a modification? [00:10:15] Speaker 04: Your Honor, that's a closer call. [00:10:17] Speaker 03: I don't know. [00:10:17] Speaker 04: I think that's getting close to it. [00:10:19] Speaker 03: If they went from 50 to 100 and it worked, could they have gone then to 150? [00:10:22] Speaker 03: No, I think when you're talking about 3, 4, 5, you're asking me to decide what's a modification and what's not. [00:10:31] Speaker 04: Well, yes, that's the statutory term. [00:10:34] Speaker 04: I'm asking you to construe the statute. [00:10:36] Speaker 04: And this court in solar energy, I just read you the hypothetical. [00:10:39] Speaker 04: They said, specifically, this is from a binding precedent of this court last year. [00:10:44] Speaker 04: It said, hey, I want it. [00:10:47] Speaker 04: Dicta, you are construing the exact same term in the Trade Act in a hypothetical that's on point that says, hey, if they want to do a dual modification from 1% to 50%, they say, obviously. [00:11:00] Speaker 04: This court said, obviously, you can't do that under a modification. [00:11:04] Speaker 03: Again, what if, obviously, they actually explained why that was an appropriate modification and wasn't a change? [00:11:12] Speaker 04: It's not about appropriate. [00:11:14] Speaker 04: It could be the most appropriate thing in the world, right? [00:11:16] Speaker 04: There's all sorts of findings that it has to be 50% to protect the industry. [00:11:22] Speaker 04: That's what the argument was assuming that. [00:11:24] Speaker 03: So we're getting into a lot of stuff that's kind of higher level based. [00:11:29] Speaker 03: I want to get you back to the specific statutes here. [00:11:32] Speaker 03: You don't have much time left, but I would like you to focus [00:11:36] Speaker 03: quickly on B and Y, because I think your best argument is on the strict textual interpretation of B. But then I want you to address, because the CIT didn't get there, but why, even if B doesn't work, and setting aside this modified discussion we're having, why [00:11:57] Speaker 04: Okay, so setting aside modify, then the subsection B, under subsection B, section 307B, the capital B, authorizes a tariff increase only when the burden to the U.S. [00:12:10] Speaker 04: economy from the aux policies or practices that were the subject of the 301 investigation has increased. [00:12:18] Speaker 04: But instead of finding an increased burden from those investigated practices, USTR relied [00:12:25] Speaker 04: predominantly on China's retaliatory tariffs, currency manipulation, and other policies. [00:12:31] Speaker 04: But the plain text of B, if you want to focus on subsection B, forecloses reliance on those subsequent actions, none of which were the subject of the 301 investigation. [00:12:43] Speaker 04: Instead, it has to be of the acts, policies, and practices that are the subject of the action. [00:12:48] Speaker 04: The investigation was predicated on. [00:12:51] Speaker 03: And let me just interrupt you, because I understand where you're going with this. [00:12:54] Speaker 03: It seems to me that the CIT looked at this and said, yes, it's a plausible reading, but another plausible reading of acts, policies, and stuff is not limited to just the specific ones, but the overall problem that China is stealing our IP. [00:13:08] Speaker 03: Let's just phrase it like that. [00:13:09] Speaker 03: I don't know. [00:13:10] Speaker 03: Whatever you want to say, maybe I shouldn't be saying that. [00:13:12] Speaker 03: China has practices that desperately impact our IP. [00:13:16] Speaker 03: Right. [00:13:16] Speaker 03: And if that is the problem, and we investigate that and say, we're going to impose this to try to get you to correct it, and they respond with retaliatory tariffs, isn't that increasing our burden to respond and resolve that problem? [00:13:32] Speaker 04: It is increasing the burden. [00:13:33] Speaker 04: Nobody disputes that the retaliatory... I think that's what the CIT said, right? [00:13:38] Speaker 03: Right, right. [00:13:38] Speaker 04: What they said is it's connected to, right? [00:13:40] Speaker 04: They said it's connected to, linked to, it's a subsequent defensive measure designed to maintain the acts, policies, and practices that were investigated. [00:13:49] Speaker 04: The problem is the statute doesn't... [00:13:51] Speaker 04: As Congress knows how to write statutes, I'd say related to it. [00:13:54] Speaker 02: Let me jump in here. [00:13:56] Speaker 02: I'd like to get one question in, and that is this. [00:13:58] Speaker 02: If we get past your argument on modified, and we look at B and C, and if I agree with you that under B, there's no increase, how under C, if we put in a $50 billion tariff, and in response, China puts in a $50 billion retaliatory tariff, how is it that we can't rightfully say that [00:14:20] Speaker 02: Our original tariff is no longer appropriate, and we can bump ours up. [00:14:25] Speaker 02: How come C doesn't get you there? [00:14:27] Speaker 04: So I think there's good reason the CIT didn't rely on C. And I think there's three textual signals as to why you can't rely on it. [00:14:37] Speaker 02: I don't know how they do things here, but when [00:14:39] Speaker 02: judges talk while you're stopped talking in that court. [00:14:42] Speaker 02: So let's don't talk over each other. [00:14:44] Speaker 04: OK, sorry. [00:14:44] Speaker 04: I apologize. [00:14:46] Speaker 04: I think there are three textual signals that I would point to as to why you couldn't use C. One is the symmetry with 301B. [00:14:53] Speaker 04: 301B empowers USTR to impose the tariff if it finds the policy is discriminatory. [00:15:02] Speaker 04: And two, the action by the United States is appropriate. [00:15:06] Speaker 04: That's the threshold condition for it to impose a tariff. [00:15:10] Speaker 04: So then when C says it can take further action when it is no longer appropriate, to me that stands in contrast to when it can impose it when it's appropriate. [00:15:27] Speaker 02: of reversing their conduct, they hit us with 50. [00:15:31] Speaker 02: And can't you take from that? [00:15:32] Speaker 02: Well, our 50 is not working. [00:15:34] Speaker 02: It's no longer appropriate. [00:15:35] Speaker 02: It's not achieving our intended result. [00:15:37] Speaker 02: Therefore, we need to escalate. [00:15:39] Speaker 02: Right. [00:15:39] Speaker 04: So if it's not persuasive that appropriate allows you to do it, if it's no longer appropriate, that should only allow you to go down and unwind. [00:15:49] Speaker 04: The second signal I would point to is it would render subsection B superfluous. [00:15:53] Speaker 04: Subsection B says, [00:15:55] Speaker 04: You can increase the tariffs if you find an increased burden from the investigated practices. [00:16:02] Speaker 04: He says increased or decreased. [00:16:03] Speaker 04: Increased or decreased, correct. [00:16:06] Speaker 04: But if under C, you can just increase it because you find it no longer appropriate, which the government argued in the CIT was not a judicially manageable standard. [00:16:16] Speaker 04: That is, there's no way for courts to review that. [00:16:18] Speaker 04: Within those circumstances where the government would actually have to do the hard work under B to show the increased findings in order to increase the burden, it would render it superfluous in discretionary action cases. [00:16:30] Speaker 04: They would always act under C because they could just say it's no longer appropriate. [00:16:35] Speaker 04: The third textual signal I will give you is subsection C, in our view, is in parallel to subsection A. So how 307 works, which is on page 8 of the addendum, if you want it handy, is subsection A, which applies to mandatory trade actions. [00:16:55] Speaker 04: Everyone here agrees, the government and we agree, that that only allows USTR to go down in the tariff action. [00:17:03] Speaker 04: B, of course, allows for both mandatory and discretionary actions to go up or down if you make the requisite finding. [00:17:11] Speaker 04: C is the parallel subsection to A, and the legislative history, which is quoted in our brief, kind of bears that out. [00:17:18] Speaker 02: Any authority that says C can only bring it down. [00:17:21] Speaker 04: This is the first case that done it and what I would say in the history, yes, the answer is no. [00:17:29] Speaker 04: What I will say is in the history of the Trade Act, the government has never used subsection C to increase a tariff. [00:17:38] Speaker 04: Every time they've used it, there have been five times in the history, and we lay this all out in our brief, they've always said no longer appropriate is we're going to decrease or terminate or pause the action. [00:17:52] Speaker 01: So we have... Council, you have consumed your time. [00:17:56] Speaker 01: I will give you some rebuttal time. [00:17:58] Speaker 01: In the meantime, let's hear from the government. [00:18:00] Speaker 01: Thank you, Your Honor. [00:18:14] Speaker 00: I'll start with SEIA, which does interpret modify also in the context of the Trade Act of 1974. [00:18:21] Speaker 02: If I could interrupt you first, does C only mean go down? [00:18:26] Speaker 00: No, it does not. [00:18:27] Speaker 00: And we know that for a few reasons. [00:18:28] Speaker 00: One is, the only words we can really interpret for C are modify, which I'll explain more about modify. [00:18:33] Speaker 00: That's a broad, open-ended term, as this court said, in SEIA. [00:18:37] Speaker 00: And then the other words we have in subsection 1C are no longer appropriate. [00:18:42] Speaker 00: So that refers back to 301B, which authorizes all appropriate and feasible action to eliminate the unfair practice. [00:18:51] Speaker 00: And there's a memorandum explaining that, for example, at appendix page 5923. [00:19:00] Speaker 00: When it's saying no longer appropriate, it's exactly what the court's questions indicated that the first action, and it was what happened here, the first action was the president directed and the trade representative used predictive judgment to say 50 billion. [00:19:15] Speaker 00: We think 50 billion will be sufficient to obtain the elimination of these practices. [00:19:21] Speaker 00: It wasn't. [00:19:22] Speaker 00: China did not eliminate the practices. [00:19:24] Speaker 00: They instead doubled. [00:19:25] Speaker 00: doubled down and imposed a 50 billion defensive measures to defend those same practices. [00:19:32] Speaker 00: And so clearly the predictive judgment turned out to not be correct. [00:19:36] Speaker 00: So it was no longer appropriate. [00:19:38] Speaker 00: Different action was appropriate. [00:19:52] Speaker 00: Yes, so, and this is also explained in the record, for example, at the... [00:20:01] Speaker 02: Is it the number of bad acts? [00:20:03] Speaker 02: Is it the scope of the bad acts, even if the number is less? [00:20:06] Speaker 02: Is it the monetary impact? [00:20:08] Speaker 02: What is increase? [00:20:09] Speaker 00: It's the increase in the burden on U.S. [00:20:11] Speaker 00: commerce. [00:20:12] Speaker 00: And the parties agree that there was... Right. [00:20:15] Speaker 00: Well, the parties agree there was an increase. [00:20:17] Speaker 00: I think the disagreement is, were the defensive measures subject, the subject of the acts, policies, and practices? [00:20:24] Speaker 00: I think the key word here is... [00:20:25] Speaker 00: The key words are acts, policies, and practices. [00:20:29] Speaker 00: Practices is not a one-time thing. [00:20:31] Speaker 00: The whole issue here is, as explained in the investigation, these technology transfer practices were ongoing for a long period of time, years and years and years, and the practices are ongoing. [00:20:42] Speaker 00: They were investigated in the 301 investigation. [00:20:49] Speaker 02: It's not an increase. [00:20:51] Speaker 00: Right. [00:20:52] Speaker 00: So the point is, the subject is the practices. [00:20:55] Speaker 00: And the retaliatory action that was China's defensive action of the 50 billion, that retaliation was part and parcel of the acts, policies, and practices that were investigated. [00:21:08] Speaker 00: The Court of International Trade correctly recognized that the defensive measures inherently, because they're defending the wrongful, unfair practices, they're inherently part and parcel of them. [00:21:19] Speaker 00: But even beyond that, in the... [00:21:24] Speaker 00: In the investigation itself, for example, Appendix Page 1573, the initial investigation recognized that the retaliation had always been part and parcel of the technology transfer regime, because China would discourage companies from speaking out or opposing the technology transfer practices precisely because of the retaliatory measures. [00:21:48] Speaker 00: And that retaliation at Appendix Page 1573, the Trade Representative [00:21:54] Speaker 00: found had allowed these practices to persist for decades. [00:21:57] Speaker 00: So the fact that China, after the trade representative, subject to the president's direction, took this action, this one too, the fact that China retaliated, that was part and parcel, again, of the unfair technology transfer. [00:22:12] Speaker 02: I just want to see how it's increased. [00:22:15] Speaker 00: Right. [00:22:16] Speaker 00: And so I've been talking about subject, and that's really where the dispute is. [00:22:19] Speaker 00: The reason there's an increase in the burden on US commerce is because now not only are US companies reckoning with the technology transfer, the wrongful action there, which the president said represents a grave threat to the long-term health and prosperity of the American economy at appendix page 6159. [00:22:36] Speaker 00: Not only is there that, now they're also reckoning with having to have higher tariffs on their exports to China. [00:22:44] Speaker 00: So that's the increased burden. [00:22:45] Speaker 00: And it's all happening part and parcel of the original technology transfer actions. [00:22:51] Speaker 03: And your view is that the increase in burden doesn't have to be specifically on the sector of the economy relating to these four IP subcategories, but it's that the practices that enforce those restrictions and are harmful [00:23:16] Speaker 03: that and that altogether leads to an increase in the burden. [00:23:20] Speaker 03: That's right. [00:23:21] Speaker 03: I get the argument that's the way the trade court looked at it. [00:23:24] Speaker 03: It's not the cleanest textual reading of this. [00:23:28] Speaker 00: Well, I think it is, and it's inherently a factual question, because the- Well, I mean, back up. [00:23:34] Speaker 03: If we say actually, except your friend's argument, that the increase in the burden that the USTR has to show is not just generally on the economy, but there's been an increase on the burden to the economy from these Chinese unfair practices, [00:23:54] Speaker 03: regarding IP, that's different than what's shown here, isn't it? [00:23:59] Speaker 03: Apart from some very general statements, you didn't say, look, because of this action, they have stolen more, or they've done more hacking, they've forced more technology transfer. [00:24:15] Speaker 03: You didn't do any of that kind of stuff. [00:24:16] Speaker 03: You didn't try to specifically tie the increase in burden to the four or some categories. [00:24:29] Speaker 02: The practices. [00:24:36] Speaker 00: And the practices are ongoing and the defensive measures are part and parcel of those practices. [00:24:44] Speaker 00: That is the issue. [00:24:45] Speaker 00: And it is a factual question. [00:24:47] Speaker 00: And it does depend. [00:24:48] Speaker 03: Let me try to ask my question over time. [00:24:50] Speaker 03: You're trying to have practices be broader than the specific identified four subparts. [00:24:56] Speaker 03: It is practices are the overall [00:24:59] Speaker 03: thing identified in the... It's clear throughout that the USTR and the president is worried about not just those four specific things, but what China is doing with regard to RIP, and that the practices to do that, China undertakes a lot of things to keep those practices in place, and that by retaliating, they're making an even greater burden to get China to respond to that. [00:25:25] Speaker 03: That's the way I read what the trade court did. [00:25:27] Speaker 03: I think that's what you're arguing. [00:25:29] Speaker 03: But I think you would agree, or I would hope you would agree that if you had to show that the increase in the burden on the US economy came specifically from an increase in activity under those four things, that retaliation is not part of those four things. [00:25:47] Speaker 00: So we're making two arguments, and you've accurately described the first one. [00:25:52] Speaker 00: That is, by defending the practices through the retaliatory measures, they are inherently part and parcel. [00:25:59] Speaker 00: The second one is what the Court of International Trade explained in its second line, which is actually the four issues themselves are broad. [00:26:07] Speaker 00: The investigative practices are broad, and that's why it's important, for example, at the appendix page 1573, also appendix page 1561, that's the investigation into the four investigated issues. [00:26:21] Speaker 00: And retaliation is specifically mentioned. [00:26:24] Speaker 00: as one of the tools that was used for technology transfer. [00:26:26] Speaker 00: So technology transfer was achieved through a number of ways, you know, vague licensing regimes. [00:26:32] Speaker 00: There's a lot of different methods by which China achieved the transfer of IP and technology from US companies to Chinese entities. [00:26:40] Speaker 00: And one of them is retaliation, the threat of retaliation. [00:26:43] Speaker 00: So the second line point is, even if the court takes a restrictive statutory view, the factual view is that the investigative practices were brought. [00:26:53] Speaker 00: They were brought in the included retaliation. [00:26:55] Speaker 03: Can I, before you run out of time, or it's going to take a while, can we get back to C, and I have a specific question, but I want your response, which I think you were going to start with on that case and the modify, but the specific question is if [00:27:14] Speaker 03: That view of C, the broad view that it will allow an increase when appropriate, is textually correct. [00:27:23] Speaker 03: Why doesn't that swallow up B? [00:27:26] Speaker 03: And then also, can you address why? [00:27:28] Speaker 03: Because I think that fits in with modify here, too. [00:27:31] Speaker 00: Right. [00:27:32] Speaker 00: So the first, the frontline answer for the superfluity argument is, [00:27:37] Speaker 00: The mandatory actions under B, regardless of whether in this case, for example, or in discretionary cases under Section 307, 1B, and A1C, could overlap. [00:27:54] Speaker 00: Regardless, in the mandatory context, one C would not apply. [00:27:57] Speaker 00: So I think that's enough to say, this is certainly not superfluous. [00:28:00] Speaker 00: The superfluity standard doesn't say, in every single case, the statutory provisions must have different application. [00:28:07] Speaker 00: And so the fact that it's overlapping here isn't a problem. [00:28:11] Speaker 03: So for the mandatory actions, to modify or terminate, you have to comply with either A or B. You can't just do it under C when appropriate. [00:28:20] Speaker 03: That's a discretionary thing only [00:28:23] Speaker 03: And so that ties in with a more discretionary framework when it says no longer appropriate. [00:28:31] Speaker 00: Yes, and that fits in. [00:28:32] Speaker 00: I think what the court was discussing earlier as well with the 301 action under the mandatory authority under 301A is there needs to be a link to the actual compensatory amount of the burden, whereas that's not true under the discretionary authority. [00:28:50] Speaker 00: So the 307B [00:28:53] Speaker 00: A1B authority links up with that. [00:28:57] Speaker 00: So regardless, under the mandatory analysis, that would still apply. [00:29:01] Speaker 00: And then there's just the plain language issue. [00:29:02] Speaker 00: So the overall question in statutory interpretation is the plain language. [00:29:06] Speaker 00: So under A1C, Section 307, we're looking to the plain language. [00:29:11] Speaker 00: The plain language we have is the discretionary term appropriate. [00:29:14] Speaker 00: That's a broad delegation. [00:29:15] Speaker 00: It refers back to Section 301B. [00:29:18] Speaker 00: An important point I want to emphasize that our friends on the other side agreed that this action would be appropriate if it had been taken under 301B. [00:29:27] Speaker 00: But the issue is that through the authority and [00:29:29] Speaker 00: obligation in 301B doesn't go away after the one year. [00:29:33] Speaker 00: The one year timeline to issue the initial action was imposed in 1988 to spur action. [00:29:39] Speaker 00: So I think a helpful case here is the Trans-Pacific case. [00:29:42] Speaker 00: There the court said when there's an obligation to act by a date certain, it's two obligations. [00:29:47] Speaker 00: One is the obligation to act, two is the obligation to act by that certain date. [00:29:51] Speaker 00: Even if that date has passed, the first obligation remains. [00:29:54] Speaker 00: So 301B [00:29:55] Speaker 00: That broad authority to take all appropriate and feasible action continues throughout. [00:30:00] Speaker 00: It continues after that one year. [00:30:02] Speaker 00: It continued throughout the modification period. [00:30:04] Speaker 00: And it continues in the four-year review. [00:30:06] Speaker 00: So this is an ongoing obligation. [00:30:08] Speaker 00: And the plaintiff's interpretation of modify is just not consistent with that ongoing obligation. [00:30:14] Speaker 00: It's also not consistent with the court's analysis in SEIA. [00:30:17] Speaker 00: The provision that Plaintiffs pointed to in SEIA is really focused on Section 2254, slowing the rule in Section 2251. [00:30:26] Speaker 00: That's the issue there. [00:30:27] Speaker 00: The interpretation of modify in SEIA is helpful because it talks about the statutory definition in the Trade Act 1974. [00:30:35] Speaker 00: That definition is completely inconsistent, again, with what the plaintiffs say modify means. [00:30:39] Speaker 00: They point to Biden and MCI. [00:30:41] Speaker 00: Those are two cases where agencies were modifying statutes. [00:30:44] Speaker 00: So in Biden, for example, [00:30:46] Speaker 00: the court had was the agency was making a basic and fundamental change in the scheme designed by Congress. [00:30:52] Speaker 00: Here, what's happening is the trade representative, subject to the president's direction, is modifying its own prior act. [00:30:59] Speaker 00: So this is not an agency changing something Congress did. [00:31:03] Speaker 00: This is something more like an agency that has the power to act, has the power to reconsider, as the court has said. [00:31:08] Speaker 03: Do you think there comes a point where a court could step in and say, the increase is so dramatic that it's no longer [00:31:16] Speaker 03: a modification but is a completely new action under the guise of a modification. [00:31:22] Speaker 00: No, I don't think so, because the way that modify is used in the Trade Act is different, again, than Biden and MCI. [00:31:28] Speaker 00: And we know that, because the problem in MCI, for example, was the agency eliminated a provision of the Communications Act. [00:31:34] Speaker 00: And the court said, eliminating? [00:31:36] Speaker 00: That's not a modification. [00:31:37] Speaker 03: In this Trade Act 1970- So hypothetically, if they go and do an investigation on this IP stuff, and they impose a relatively low-level amount, and they decide China is not complying, but in [00:31:52] Speaker 03: And maybe they don't say this on the record, but it's very, very clear from what's happening. [00:31:57] Speaker 03: They have another problem with China over some other kind of industry. [00:32:01] Speaker 03: And they modify the penalty in this one to address that entirely different industry and impose a trillion dollars of tariffs on something that has no relations whatsoever to the IP. [00:32:15] Speaker 03: It's not designed to [00:32:17] Speaker 03: gain compliance with their request in the IP sector, but they just use this authority, which is very broad, as you've said, to modify this and add what is essentially a new set of tariffs. [00:32:32] Speaker 03: Is that okay? [00:32:34] Speaker 00: The way to assess whether that's okay is to look back to section three. [00:32:39] Speaker 00: There would still be the modification criteria, but the word modify itself would not be the limitation there. [00:32:45] Speaker 00: The modification criteria, the increase or decrease in burden, are no longer appropriate. [00:32:49] Speaker 00: And then, again, referring back to the underlying action would have to be authorized under section 301B, assuming it's discretionary. [00:32:57] Speaker 00: So that would be the analysis. [00:32:59] Speaker 03: And that is something that you think might be justiciable? [00:33:03] Speaker 03: See, this is my problem is I don't want to open this up to say, okay, you can do this in response to these trade practices with regard to IEP, and then all of a sudden, China and the U.S. [00:33:20] Speaker 03: blow up into huge dispute over Taiwan, and they come in and say, [00:33:26] Speaker 03: we're imposing 100% tariffs or 200% tariffs on every single import from your country and rush you back down from Taiwan. [00:33:36] Speaker 03: So on the justiciability... That's clearly not connected to the original action and it's by any definition not a modification, it's a new action. [00:33:46] Speaker 00: And I think there, part of what the hypothetical is getting to is maybe the increase and decrease burden. [00:33:52] Speaker 03: I don't care if it's under B or C. I think B would be more constraining on you. [00:33:58] Speaker 03: C, as we're talking about it, does not seem to be. [00:34:01] Speaker 03: And I know you have to say this just to show we review both stuff. [00:34:07] Speaker 03: But it is a very hard sell to tell me that there is no way a court could look at, let's just assume they actually stated on the record and said, look, [00:34:17] Speaker 03: We don't care about the IP stuff anymore, but we're going to use the authority that we're given under 24-7-A1C to impose a trillion dollar tariff on your economy because you invaded Taiwan. [00:34:34] Speaker 03: So that seems to me to be, I mean, let's just assume you agree that's inconsistent with the purposes of this statute. [00:34:43] Speaker 03: How do we review that? [00:34:45] Speaker 00: My time's expired, may I answer? [00:34:47] Speaker 03: You can answer the question. [00:34:48] Speaker 00: OK, I appreciate it. [00:34:52] Speaker 00: The way, there's two different issues, potentially, that could arise. [00:34:57] Speaker 00: One is, if it's the president directing the action, what the court has said. [00:35:01] Speaker 03: That's just a similar to USTR, so we don't have to get into that. [00:35:04] Speaker 00: OK, so if it's the USTR, what the court has said, I think, maybe in Gilda 1, is they've made the point that even if findings are reviewed very differentially, particularly in this area of foreign affairs, the finding does have to be made. [00:35:17] Speaker 00: And so I think that's one piece that is important there. [00:35:21] Speaker 00: And the analysis would be different under if it was the president acting, of course, that would impose many different limitations that are a feature, not a bug of the way that the APA system works. [00:35:33] Speaker 00: May I make one concluding thought? [00:35:35] Speaker 01: You may express your concluding thought. [00:35:37] Speaker 00: Yes. [00:35:38] Speaker 00: The last point I'd like to make is the plaintiff's interpretation of modify is inconsistent with the meaning, the definition provided in the Trade Act, which includes completely eliminating and, as the court said in SEIA, has no upward limitation. [00:35:53] Speaker 00: It's open-ended in both directions. [00:35:55] Speaker 00: So we already know that's different than the way that the term was used in Biden and MCI. [00:36:00] Speaker 00: And we'd ask the court to affirm. [00:36:02] Speaker 01: Thank you, Council. [00:36:04] Speaker 01: Mr. Shaw will give you three minutes for a bottle. [00:36:12] Speaker 04: Thank you, Your Honor. [00:36:13] Speaker 04: If I can make three points in my three minutes. [00:36:15] Speaker 04: First, I won't repeat the whole independent modify argument, but I will point out that the government, neither in their brief nor argument today, disputes that a seven-fold increase in tariffs is not a minor or incremental change. [00:36:30] Speaker 04: Forget about [00:36:31] Speaker 04: Biden and MCI under this court's decision in solar energy, a magnitude of change that is not minor or incremental is not a modification. [00:36:42] Speaker 04: That's just in black and white. [00:36:44] Speaker 04: Let me ask you this. [00:36:46] Speaker 02: Respond to opposing counsel's argument that the retaliation [00:36:58] Speaker 02: for an increase, then how is anything other than absolute silence not part and parcel? [00:37:04] Speaker 04: Right, yeah, so I agree. [00:37:07] Speaker 04: B is very specific. [00:37:09] Speaker 04: It has to be the investigative practices, the burden from the investigative practices, not things that are connected to, linked to part and parcel in some broad sense. [00:37:19] Speaker 04: She cited a couple times where the word retaliation appeared in the report, but if you look at those pages, 1561 of the appendix, 1573, it's very specifically talking about individual companies who refuse to turn over their IP, then China might retaliate. [00:37:36] Speaker 04: against that specific company by, for example, denying them a license, that is miles apart, just completely different than country-wide retaliatory tariffs that were never investigated. [00:37:47] Speaker 04: But the Trade Act knows how to talk about retaliatory tariffs. [00:37:51] Speaker 04: You've answered my question. [00:37:51] Speaker 04: Yeah. [00:37:51] Speaker 04: OK. [00:37:51] Speaker 04: Thank you. [00:37:52] Speaker 04: And that was actually going to be my second point. [00:37:56] Speaker 04: B was the sole basis of CIT's decision. [00:37:59] Speaker 04: Under the plain text, that decision fails for the exact reason, Judge Goldstrap, that we've been talking about. [00:38:08] Speaker 04: And so again, modify is an independent argument. [00:38:10] Speaker 04: And there's good reason to think that Congress won. [00:38:14] Speaker 04: And everyone agrees this three and four is an upwards of a $75 billion tax on consumers is what it turns out to. [00:38:22] Speaker 03: Those statistics. [00:38:23] Speaker 03: because you noted correctly that the trade court didn't rely on C. If we determine that C is appropriate legally, is there anything to prevent us from getting to C and saying we may have to send it back to the trade court for factual findings? [00:38:41] Speaker 03: Although I don't know. [00:38:42] Speaker 03: I don't think factual findings. [00:38:43] Speaker 03: I think this court should. [00:38:45] Speaker 03: Let me just ask you that. [00:38:47] Speaker 03: If we agree that C is legally permissible, [00:38:51] Speaker 03: to do an increase. [00:38:53] Speaker 03: I know you disagree with everything I'm about to say. [00:38:55] Speaker 03: Is it legally permissible to do an increase and the increases here are not so big as to not be a modification, then can we affirm on that alternative basis? [00:39:08] Speaker 03: Because they made all those findings. [00:39:09] Speaker 04: I think you can, but let me with my last [00:39:13] Speaker 04: point, if I may just address that, C, the alternate ground, is I think back to your quality, it does swallow up B for all discretionary actions. [00:39:23] Speaker 04: There will never be a discretionary action where USTR ever has to find an increase in burden if it allows them to do it up. [00:39:30] Speaker 04: And the last and I think critical point which we make in our brief is [00:39:34] Speaker 04: If it really is not a judicially manageable standard, as the government has argued, no longer appropriate, that is, a court can't review that. [00:39:42] Speaker 04: They can pick whatever number they think makes it appropriate. [00:39:46] Speaker 04: That runs into canon of constitutional avoidance with respect to the nondelegation doctrine. [00:39:53] Speaker 04: If there's any doubt. [00:39:54] Speaker 04: about it, this court has to find the plausible reading that would avoid that unlimited and unreviewable power to take. [00:40:02] Speaker 04: Judge Hughes, as you said, a $1 million trade action on a discreet thing and ratchet up to a $1 trillion trade action [00:40:12] Speaker 04: on all trade with whatever country the court wants to. [00:40:17] Speaker 04: That runs smack into non-delegation doctrine problems in the Canada. [00:40:21] Speaker 04: You don't have to find a violation. [00:40:23] Speaker 04: You just have to say there's a serious question. [00:40:25] Speaker 04: And so we shouldn't read. [00:40:26] Speaker 04: We should read C like we read A. They can only go down. [00:40:30] Speaker 01: Thank you, counsel. [00:40:31] Speaker 01: Thank you, Your Honor. [00:40:32] Speaker 01: We won't censor the cases submitted.