The massive Section 301 litigation that has inundated the U.S. Court of International Trade since the first cases were filed 16 months ago enters a critical new phase Feb. 1 when oral argument is scheduled for 10 a.m. EST before the three-judge panel of Mark Barnett, Claire Kelly and Jennifer Choe-Groves. Virtually all the thousands of complaints seek to vacate the lists 3 and 4A tariffs on Chinese imports and get the duties paid refunded with interest on grounds that the Office of the U.S. Trade Representative overstepped its tariff-wielding authority under the 1974 Trade Act and violated protections in the 1946 Administrative Procedure Act (APA) against sloppy federal agency rulemakings.
Section 301 tariffs
Section 301 Tariffs are levied under the Trade Act of 1974 which grants the Office of the United States Trade Representative (USTR) authority to investigate and take action to protect U.S. rights from trade agreements and respond to foreign trade practices. Section 301 of the Trade Act of 1974 provides statutory means allowing the United States to impose sanctions on foreign countries violating U.S. trade agreements or engaging in acts that are “unjustifiable” or “unreasonable” and burdensome to U.S. commerce. Prior to 1995, the U.S. frequently used Section 301 to eliminate trade barriers and pressure other countries to open markets to U.S. goods.
The founding of the World Trade Organization in 1995 created an enforceable dispute settlement mechanism, reducing U.S. use of Section 301. The Trump administration began using Section 301 in 2018 to unilaterally enforce tariffs on countries and industries it deemed unfair to U.S. industries. The Trump administration adopted the policy shift to close what it deemed a persistent "trade gap" between the U.S. and foreign governments that it said disadvantaged U.S. firms. Additionally, it pointed to alleged weaknesses in the WTO trade dispute settlement process to justify many of its tariff actions -- particularly against China. The administration also cited failures in previous trade agreements to enhance foreign market access for U.S. firms and workers.
The Trump Administration launched a Section 301 investigation into Chinese trade policies in August 2017. Following the investigation, President Trump ordered the USTR to take five tariff actions between 2018 and 2019. Subsequent rounds of Section 301 actions against China have continued since. The Office of the U.S. Trade Representative administers Section 301 tariffs, and has also created an exclusion process for importers to seek exemptions from the tariffs.
The government stands by its arguments that the lists 3 and 4A Section 301 tariffs on Chinese goods are “presidential actions” that are “unreviewable” by the court, the Department of Justice said in a late filing on Oct. 1 at the Court of International Trade (In Re Section 301 Cases, CIT #21-00052).
The Justice Department, in a major Section 301 litigation policy reversal, said Aug. 31 it agreed to stipulate that refunds will be available on liquidated customs entries from China with lists 3 and 4A tariff exposure if importers prevail in the massive volume of cases inundating the Court of International Trade to vacate the tariffs. Akin Gump lawyers for sample case plaintiffs HMTX Industries and Jasco Products responded on Aug. 31 that they're "pleased" with the government's stipulation as something the plaintiffs have advocated for months, but not with DOJ's "bewildering" proposal that importers would still be required to file spreadsheet submissions in a CBP repository.
Section 301 sample case plaintiffs HMTX Industries and Jasco Products “persuasively argue” that the Office of the U.S. Trade Representative “clearly exceeded its authority” under the 1974 Trade Act when it imposed the “massive” lists 3 and 4A tariffs on “virtually all imports” from China “without connecting them to the underlying investigation of China’s trade practices,” said the Consumer Technology Association, the National Retail Federation and five other trade groups Aug. 9 in an amicus brief in docket 1:21-cv-52 at the U.S. Court of International Trade.
The Aug. 9 deadline has arrived for Section 301 plaintiffs and the government to deliver to the Court of International Trade a joint status report on how the sides are progressing to resolve their disagreements over proposed rules to create a CBP repository for importers to request suspended liquidation of customs entries from China with lists 3 and 4A tariff exposure. The court’s July 6 preliminary injunction order freezing the status of unliquidated entries instructed CBP to have the repository up and running by July 20, but two postponements amid all the disagreements have pushed the deadline back by a month. Chief Judge Mark Barnett used the court’s status conference Aug. 2 to urge the sides to seek the “middle ground” (see 2108020029).
The Court of International Trade postponed for two weeks an Aug. 6 deadline for CBP to create the repository through which Section 301 importers can seek to freeze liquidations of customs entries from China with lists 3 and 4A tariff exposure under the court's July 6 preliminary injunction (PI) order. Judge Claire Kelly told a status conference Aug. 2 that the court also is postponing for two weeks the Aug. 6 deadline for plaintiffs and the government to propose modifications to the PI order.
Importers seeking suspended liquidations of customs entries from China with Section 301 lists 3 and 4A tariff exposure under the July 6 preliminary injunction (PI) order of the Court of International Trade would need to file their requests in a “repository” to be set up in CBP's ACE database and back them up with emails to their appropriate CBP Center of Excellence and Expertise (CEE), say draft DOJ instructions filed with the court Friday in docket 1:21-cv-52. “We have conferred with plaintiffs and understand that they will respond separately with their responses to these draft instructions,” DOJ attorneys said. Akin Gump lawyers for sample case plaintiffs HMTX Industries and Jasco Products didn’t immediately comment. Lawyers on the plaintiffs' steering committee may repeat many of the same objections they raised at a July 23 status conference that the government, in complying with the PI order to suspend liquidations, is putting too much onus on importers for CBP's processing of their liquidation-suspension requests.
The government rejected the proposal from Section 301 plaintiffs at a U.S. Court of International Trade status conference July 23 that would have entitled importers to refunds from reliquidated customs entries from China with lists 3 and 4A tariff exposure if they prevail on the merits at the end of the litigation.
All customs entries from China with Section 301 lists 3 and 4A tariff exposure not yet liquidated as of the U.S. Court of International Trade's July 6 preliminary injunction (PI) order freezing liquidations would liquidate "in the ordinary course" and be refunded to the plaintiff importers at the end of the litigation if they win, Akin Gump lawyers proposed July 20 for sample case plaintiffs HMTX Industries and Jasco Products. Akin Gump seized on the proposal after DOJ lawyers at a status conference July 15 opened the door a crack to the possibility they would support a refund stipulation after months of refusing to do so.
Opposing sides in the Section 301 litigation sparred heatedly in the closing minutes of oral argument June 17 (see 2106170061) about the role the plaintiffs’ steering committee should play should the Court of International Trade grant the motion of sample-case plaintiffs HMTX and Jasco for a preliminary injunction to freeze the liquidations of unliquidated customs entries from China with lists 3 and 4A tariff exposure.