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Dusted-Off CTA Complaint

Lawsuit Asks Court to Vacate List 3 Tariff Rulemaking, Refund Duties

The Office of the U.S. Trade Representative overstepped its Trade Act authority when it imposed the List 3 Section 301 tariffs on Chinese goods, alleged vinyl flooring importer HMTX Industries and subsidiaries Halstead and Metroflor in a complaint (in Pacer) Thursday in the Court of International Trade in New York. USTR also violated the Administrative Procedures Act (APA) for lack of transparency in the tariff deliberations process, said the complaint. It asks the court to vacate the List 3 rulemaking, raising broad implications for importers with similar tariff exposure.

The complaint essentially is the one CTA never filed to halt List 3. The tile importer is represented by Akin Gump, which CTA hired two years ago to draft a complaint challenging USTR’s authority to impose List 3 (see 1810290019), using legal arguments identical to those in the HMTX court papers. CTA shopped the complaint around to other trade groups for financial and legal backing but ultimately didn't take the administration to court.

HMTX’s action concerns USTR’s “prosecution of an unprecedented, unbounded, and unlimited trade war impacting over $500 billion in imports” from China, said the complaint. It focuses on USTR’s “unlawful escalation of that trade war through the imposition” of List 3, it said. The statute “did not confer authority” on USTR “to litigate a vast trade war for however long, and by whatever means” it chooses, it said.

The Trade Act’s Section 304 “required USTR to determine what action to take, if any, within 12 months” after initiating its Section 301 investigation into China’s allegedly unfair trade practices, said the complaint. “But USTR failed to issue List 3 (or subsequent List 4) within that window.” It’s not entitled to “fall back” on its Section 307 modification authority “to salvage List 3,” it said. Section 307 bars USTR from expanding the imposition of tariffs to other imports from China “for reasons untethered to the unfair intellectual property policies and practices it originally investigated,” it said. Yet that’s “exactly” what USTR did in promulgating List 3 duties in “response to China’s retaliatory duties and other unrelated issues,” it said.

The “arbitrary and capricious” manner in which USTR imposed List 3 violated APA by failing to give “sufficient opportunity for comment,” and requiring interested parties “to submit affirmative and rebuttal comments on the same day,” said the complaint. It also breached the APA by failing to connect facts in the record “to the choices it made,” it said. “Despite receiving over 6,000 comments, USTR said absolutely nothing about how those comments shaped its final promulgation of List 3. USTR’s preordained decision-making bears no resemblance to the standards that the APA demands.” The complaint asked the court to vacate the List 3 rulemaking and order the tariffs refunded with interest. USTR didn’t comment Friday.

CTA, in addition to hiring Akin Gump to draft a complaint, used the firm to write its Sept. 6, 2018, comments opposing List 3 in which it first floated the idea publicly of a possible court challenge. The statute doesn't permit the administration to use its original Section 301 investigation as a pretense to engage in an open-ended trade war, said CTA then. It alleged USTR violated statutory deadlines and exceeded its powers to modify the tariffs when it ordered them hiked to 25%. List 3 was the administration’s response to Chinese retaliatory actions that post-dates the appropriate action the USTR took under the original Section 301 investigation, said Akin Gump's crafted CTA argument. There’s no precedent for that in the history of the Trade Act, it said.

USTR's List 3 procedures for "gathering public input and the substance of its tariff decisions are arbitrary and capricious and contrary to law," said CTA's September 2018 comments, without referencing APA violations by name. USTR also failed to "provide reasoned rationales" for the choices it made, "leaving parties without substantial official guidance" on agency deliberations, it said, again mirroring language in the HMTX complaint.