Congress Never Voted for This: HMTX, the Modification Power, and the New Trade Agreement Machine

By Prof. Barry Appleton | Appleton’s CLAUSE & EFFECT Substack| 18 June 2026 ·

On June 15, 2026, the Supreme Court declined, without comment, to hear HMTX Industries LLC v. United States. Two words on an order list. No opinion. No explanation. The Court simply stepped aside.

That step matters more than almost any tariff decision this year.

The case asked whether Section 307 of the Trade Act of 1974 gives the executive essentially unlimited power to expand the scope of a Section 301 tariff action.1 The Federal Circuit said yes. The administration’s own Solicitor General, D. John Sauer, told the Court to leave that ruling alone. 2 The Court obliged.

The consequences reach beyond the $370 billion in Chinese goods at the center of the HMTX litigation. They reach into the USMCA-CUSMA Joint Review, now underway, and into the constitutional process by which the United States country makes trade agreements.

The HMTX litigation arose from the first Trump administration’s use of Section 307 of the Trade Act to expand its China tariff action from $50 billion in covered goods to approximately $370 billion. That was a tenfold increase achieved through executive action alone, without new congressional authority.

Section 307 authorizes USTR to “modify or terminate” any action taken under Section 301 where the burden on U.S. commerce has increased or decreased significantly, or where the action is no longer appropriate.3 The question HMTX put to the Court was whether that authority is “essentially unlimited.”4

The Federal Circuit held that the tenfold expansion fell within Section 307’s scope because Congress had used the word “modify” in an expansive sense.5 The administration took the same position. In its brief opposing certiorari, the Solicitor General framed the question as whether the modifications were “too large to fall within” the modification authority and answered that they were not.6

The difference between “modify” and “transform” is the difference between adjusting an investigation and using it as a predicate for a new and broader instrument. The Federal Circuit declined to draw that line. The Supreme Court declined to review it.

Georgetown’s Marc Busch, writing before the denial, warned that Section 301 risked evolving into something Congress never authorized: “a permanent delegation of open-ended trade war power to the president.” 7 The Court stepped back, and that concern is now the operative reality.

In my June 6, 7, and 8 Appleton’s Clause & Effect posts, I described how the current administration is using Section 301 investigations as the predicate for a new class of bilateral instrument it calls Agreements on Reciprocal Trade, or ARTs. My new paper on SSRN, “Settled Out of Congress,” sets out the legal architecture in full. 8

The Author’s three-part series on the Agreement for Reciprocal Trade (ART) mechanism, Section 301, and its constitutional implications appeared in this Substack column on June 6, 7, and 8, 2026, at barryappleton.substack.com. The underlying law review manuscript, “Settled Out of Congress,” is available at papers.ssrn.com/sol3/papers.cfm?abstract_id=6908418.

The ART is not a treaty. It does not go to the Senate for ratification. It does not require Fast Track authority, congressional implementing legislation, or a vote. It is an executive instrument: issued by USTR, signed by a foreign government, binding until the next administration revokes it, and implemented as a modification of an existing Section 301 action under Section 307. In essence, if drafted properly, an ART that is a “settlement” of a Section 301 action need not go to Congress for a vote.

USMCA had existing Trade Promotion Authority from the Obama administration. But with a Section 301 settlement, you do not require TPA, as Congress has already provided pre-approval.

Before HMTX, challenging an ART’s scope had legal traction. Section 307’s modification authority arguably bound the settlement to the subject matter of the original investigation. After HMTX, the Federal Circuit’s broad reading of Section 307 is settled law at the circuit level. A settlement covering far more than the original investigation identified is exactly what the Federal Circuit just held is permissible.

The ART is not a treaty. It does not go to the Senate. Congress never votes. After HMTX, no court is going to stop it.

The process runs as follows.

• Step one: initiate. The Trade Act gives the executive broad discretion to self-initiate a Section 301 investigation into any foreign practice that “burdens or restricts” U.S. commerce. The forced labor investigation, covering sixty economies in a single proceeding, is the current instance. Investigations into structural overcapacity, digital services, and supply chain practices run on the same template.

• Step two: negotiate. Once an investigation is open, the subject economy must respond. The settlement can include market access commitments, investment rules, data governance requirements, intellectual property standards, or, as in the current case, forced labor enforcement mechanisms. Whatever the parties negotiate becomes the ART.

• Step three: modify. Under Section 307, USTR implements the settlement as a modification of the Section 301 action. The modification is effective upon USTR action. The subject economy’s government may need domestic legislation to implement its side. The American government needs nothing. No vote. No debate. No congressional record.

This is not a hypothetical. The first ART, with the United Kingdom, was announced in 2025. Similar instruments followed with Japan and South Korea. These agreements are already in the landscape of North American and global trade governance. HMTX means there is no longer a viable judicial challenge to the mechanism.

The July 1, 2026 opening of the USMCA Joint Review is a statutory duration decision under Article 34.7 of the agreement.9 The three parties decide whether to extend USMCA for another sixteen years. In Washington, it has been framed from the beginning as an opportunity to extract concessions from Canada and Mexico.

Before the denial of certiorari, the administration had two options for extracting substantive concessions from Canada: negotiate within the USMCA Joint Review framework, which requires all three parties and involves congressional and parliamentary approval of any amendments, or accept that it would not happen.

After the certiorari denial, a third option is fully operational and legally bulletproof at the Federal Circuit level. Initiate a Section 301 investigation against Canada on any practice that can be characterized as burdening U.S. commerce. Negotiate a settlement. Implement it as a Section 307 modification. The resulting ART sits beside USMCA, not within it. It has no dispute settlement chapter. It carries no congressional approval. It lasts only until the next administration revokes it.

After HMTX, the executive can negotiate a trade agreement with Canada without a Senate vote, without Fast Track, and without the dispute settlement protections USMCA provides. The ART sits beside USMCA.

Section 301 initiation is led by the Administration. It’s resolution is handled by the Administration. The terms of settlement are negotiated and notified by the Administration. Congress is not involved.

Canada can be offered a choice between tariffs and an ART. In the short term, the ART will appear to be the better option. The asymmetric pressure HMTX has institutionalized makes that choice structural rather than incidental.

The pattern is already visible. Canada (with a large number of other countries) faces a Section 301 forced labor investigation, with a hearing on July 7. It faces ongoing Section 232 measures on steel and aluminum. It faces the prospect of investigations into digital services, critical minerals, and supply chain architecture. Each of these is a potential ART predicate.

The administration’s apparent approach is to use the Joint Review to establish a high-level framework while resolving specific disputes through ARTs negotiated under Section 301 pressure. The Joint Review provides the multilateral face. The ARTs do the substantive work.

The result is a bilateral relationship governed partly by USMCA, the durable and congressionally approved instrument, and partly by a constellation of ARTs that are revocable, executive-only, and without equivalent dispute settlement.

In my series on USMCA outcomes, I described the simple extension of the USMCA, as the hidden worst-case scenario for Canada’s data economy due to the compounding opportunity costs of maintaining continuity without structural change.10 The ART migration makes it worse: an extension that looks like stability while substance moves outside USMCA’s protections one investigation at a time.

Every significant commitment should go into the USMCA, where it carries the protections of Chapter 31, the durability of congressional approval, and the institutional weight of a ratified agreement. An ART that settles a forced labor investigation may look like a win at signing. If it replaces a Chapter 23 amendment, it is a loss in every year that follows.

Section 301 was designed as a targeted enforcement tool. An investigation identifies specific foreign practices. A tariff action addresses those practices. Section 307 allows modification of that action as circumstances change.

The administration’s use of Section 307 as a settlement engine for bilateral trade agreements is something different. The original investigation’s authority is extended to cover commitments that reach well beyond what the investigation found. In the HMTX context, a technology-transfer investigation became the predicate for tariffs on goods across industries with no connection to technology transfer. In the ART context, the same logic authorizes settlements covering data governance, investment rules, and supply chain architecture that no Section 301 investigation ever specifically targeted.

Congress established Fast Track authority and the TPA precisely to ensure that commitments of this scope carry democratic legitimacy.11 The ART mechanism bypasses all of that. A foreign government commits to regulatory alignment. The commitment is implemented as a Section 307 modification. Congress never votes.

This is not merely a Canadian problem. American importers, exporters, and industries that depend on the rules-based trading system have the same stake in whether commitments of this magnitude go through the constitutional process or are modified by executive action. The Supreme Court had an opportunity to say this exceeds what Congress intended. It stepped back. The question falls to Congress and to the parties negotiating in Geneva, Washington, and Ottawa.

Canada has already responded appropriately to the forced labor investigation. Bill C-35, tabled on June 12, 2026, addresses the specific enforcement concern USTR identified: a rebuttable presumption for designated goods, burden of proof on importers, and ninety-day detention authority.12 That response was appropriate.

But Bill C-35 addresses one investigation. The ART mechanism applies to every investigation the administration chooses to initiate. USMCA’s dispute settlement chapter, Chapter 31, applies to all of them.13 Canada’s strategic interest is to keep the substance of this bilateral relationship inside USMCA, where it carries the protections of Chapter 31, the durability of congressional approval, and the institutional weight of a ratified agreement.

The Supreme Court stepped back from the question HMTX posed. That is not a signal that the question no longer matters. It is a signal that the answer has to come from the political process. The USMCA Joint Review is that process. Canada should use it as one.

Prof. Barry Appleton is Co-Director of the Center for International Law at New York Law School, Managing Partner of Appleton and Associates International Lawyers LP, and Interim Director of the Balsillie Legal Advisory Centre at the Balsillie School of International Affairs. He writes Appleton’s Clause and Effect at barryappleton.substack.com.

© 2026 Barry Appleton. All rights reserved.

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