Litigation against USTR section 301 — List 3 & 4a (“Trump”) Tariffs

Last updated: August 15, 2023:

Importers who have paid USTR section 301 tariffs (List 3 and 4a) may hold an opportunity to seek refunds via litigation. This is due to the fact that other importers are already in litigation on this issue of whether those section 301 tariffs were properly implemented by the Trump administration.

What are the legal issues:?

Plaintiff HMTX (and thousands of other importers) had filed litigation claiming that President Trump exceeded the Congressional delegation of authority provided in Section 301 of the Trade Act when he ordered the imposition of List 3 and 4a tariffs in the context of a "trade war” with China. Plaintiffs claims include the argument that Congress never authorized Section 301 tariffs to be used as a tool for effecting "trade wars," but rather that the statute required that Section 301 tariffs be tailored to specific harms investigated by the USTR (in this instance, the alleged violations in Section 301 had related to IPR and trade secret theft). Plaintiffs additionally argued that the USTR violated the Administrative Procedure Act (APA) when it failed to provide meaningful due process to interested commenters in advance of levying these tariffs.

In defense, the government attorneys argued that (1) the President’s decisions on political questions and foreign affairs are not subject to judicial review, (2) the decision to impose the additional 301 tariffs in response to China’s retaliatory tariffs was linked to the original Section 301 tariffs, and (3) that the APA had not been violated by a lack of meaningful comments by the Administration.

Has there been a District Court decision?

Yes, there have been two decisions. On Friday, April 1, 2022, after approximately 18 months of active litigation and extensive briefing/argument, the Court of International Trade published a decision in the Section 301 litigation in response to cross-motions for judgment. (See, HMTX Industries LLC, et al., also known as, IN RE SECTION 301 CASES.) The decision addressed two of the litigation issues, remanding back to the government to provide more information to support the basis of the government’s imposition of the tariffs. Thereafter, on May 16, 2023, the CIT issued a second opinion finding that the government’s rationale for the imposition of the tariffs satisfied the terms of the tariff act.

What Did the District Court Decide?

The decision first addressed the overarching issue of whether the nature of the controversy constituted a “political question” and/or a “foreign affairs” issue that might exempt the President’s decisions from judicial review. On this issue, the Court decided in favor of the Plaintiffs finding that the legality of the Section 301 tariffs is a legitimate legal issue on which the courts can issue a decision. Second, the Court addressed the issue of whether the USTR's actions in imposing Lists 3 and 4A tariffs amounted to an allowable modification within the scope of Section 301. The court ruled in favor of the government by deciding that the U.S. tariff response to China’s retaliatory tariffs did relate back to the original U.S. 301 investigation. The court rationalized that it was “plain on its face” that the circumstances under which the List 3 and 4a tariffs were interrelated with the underlying problems posed by intellectual property and trade secret theft as a consequence of China’s tariff reaction.  Writing for the panel, Judge Mark A. Barnett stated, "[t]he USTR’s initial determination was statutorily required to be designed to lead to the elimination of the unfair acts, policies, and practices, but without any requirement for the action to be focused on the same or similar industries.  Thus, by directly offsetting the duties on the $50 billion in trade with its own duties on $50 billion in trade from the United States, China directly connected its retaliation to the U.S. action and to its own acts, policies and practices that the U.S. action was designed to eliminate."  The Court concluded that the USTR properly exercised its statutory authority when it promulgated List 3 and List 4A tariffs.

Finally, third, the Court ruled in favor of Plaintiffs in concluding that the USTR violated the Administrative Procedures Act (APA). The Court found that the USTR failed to sufficiently respond to comments from importers who were urging the agency to take a different course of action. “The USTR could have explained its rationale with respect [to] the comments in light of the specific presidential directives it was given,” Judge Barnett wrote. “What the USTR could not do was fail to provide a response to the comments it solicited when providing the rationale for its final determinations.” Judge Barnett added that while the USTR properly explained why it felt further action against China was necessary, “those statements fail to apprise the court how the USTR came to its decision to act and the manner in which it chose to act.”  In light of this procedural failing, the Court remanded the matter back to USTR, with orders that the agency further explain the basis of its decisions, and/or to potentially reconsider them.  The CIT panel cautioned that the USTR should only further explain the justifications it had already given for the imposition of tariffs, and not provide entirely new rationalizations. 

The panel decision stressed that in crafting a remedy, the panel was mindful that the Section 301 tariffs were implemented to exert pressure on China, and that the U.S. is in ongoing negotiations with the PRC within that dynamic. “[The tariffs] are part of a continuum of actions taken in conjunction with ongoing negotiations with China,” Judge Barnett said. “Vacating the determinations would disrupt a complex and evolving process that was designed by Congress to allow for ongoing negotiations. For now, the court declines to try to unscramble this egg.”

Is an Appeal Pending?

Yes, the litigation is ongoing in the Court of Appeals for the Federal Circuit (CAFC).

Is it too late to take action to claim refunds?

Not necessarily. Swift action may, however, be required depending on when your entry was liquidated. There are several theories as to when the cause of action “accrues” and the Court of International Trade has yet to decide on when the date of “accrual’ of a litigation claim might fall on for purposes of the jurisdictional statute in the pending litigation. (See, 19 U.S.C. 1581(a), sec. 1581(i) and sec. 3626). If you hold questions on this issue, it is best to engage with an experienced customs law firm as soon as possible.

Can I simply wait to take action later?

No. Contrary to some assumptions, there is no “class action” pending that might someday disgorge refunds to everyone. Rather, any importers that wish to seek tariff refunds are each required to file their individual claims protecting their individual legal rights via participation in this litigation. These filings are therefore time-sensitive. Importers seeking representation should please contact the firm directly via email.

Curated News on Section 301 Issues:

August 15, 2023: CAFC: Extends the time for DOJ’s response brief from August 28, 2023 to October 27, 2023.

July 17, 2023: CAFC: Plaintiff’s opening brief.

May 16, 2023: CAFC: Appeal docketed

March 17, 2023: CIT decision (adverse to plaintiffs).

April 1, 2022: CIT: First decision from the Court remands matter for further explanation from Commerce.

July 15, 2021: Status conference hears issues of parties attempting as government attempts to comply with order but proposes onerous filing requirement on importers - no resolution reached.

July 6, 2021: 301 litigation: CIT Opinion grants plaintiffs request for an injunction on liquidation - subject to procedures to be agreed on.

March 12, 2021: DOJ files generalized answer in section 301 litigation.

February 10, 2021: CIT: Section 301 litigation: Mass case assignments to 3 judge panel, followed by the issuance of Procedural Order.

(Under the order, a “master ” or test case has been created and the government will have until March 12, 2021 to submit a generic answer to all cases.)

September 21, 2020: CIT: DOJ files a motion for case management procedures similar to old HMT litigation, including the selection of a “test case” and a stay of all other cases involved.

September 21, 2020: Over 3,500 lawsuits filed to piggy-back on pending litigation against section 301 tariffs.

September 18, 2020: Trade litigants rush to file claims.

September 14. 2020: J&N advises clients of the opportunity to file lawsuits claiming section 301 refunds.

September 10, 2020: Lead plaintiff files lawsuit alleging the Trump Administration exceeded its statutory authority to implement section 301 tariffs.