Your source for CE industry intelligence
Tariff Exclusion Suits Loom

Likely More Complaints to Come in Massive Section 301 Litigation, Says Expert

More than 3,500 Section 301 complaints have inundated the U.S. Court of International Trade challenging the lawfulness of the Lists 3 and 4A tariffs on Chinese imports, “and there’s likely more to come,” trade expert John Brew of Crowell & Moring told a Sports & Fitness Industry Association webinar Tuesday.

The “potential benefit of windfall” if the thousands of importer plaintiffs prevail would be the refund of all tariffs paid, said Brew. The complaints all argue that the Office of the U.S. Trade Representative overstepped its 1974 Trade Act authority when it imposed the Lists 3 and 4A tariffs and violated the Administrative Procedure Act by running tariff rulemakings that lacked transparency. The suits seek to have the rulemakings vacated. A court order would direct Customs and Border Protection to “refund all the duties, because USTR’s request to Customs to collect those duties was unlawful in the first instance,” he said.

Importers still have time to challenge the validity of the List 4A tariffs, because the two-year statute of limitations on those doesn’t expire at least until Sept. 1, said Brew. He also expects many to file suit challenging the “wrongful denial” of their exclusion requests as arbitrary and capricious under the APA, he said. Still others will argue President Donald Trump's USTR unlawfully granted them “truncated” exclusions that were in effect for less than a year or that further violated the APA through unexplained exclusion “extension denials,” he said.

Brew estimates the Section 301 litigation will take “at least a couple of years,” he said. He gives the CIT about a year to finish adjudicating the cases, “and then at least another year for an appeal,” he said. “It could go all the way to the Supreme Court, which would take even longer for resolution.”

There were “a number of reasons” USTR denied the vast majority of the exclusion requests it received, including filing irregularities, domestic opposition and failure to show harm from the tariffs, said Brew. “The most common reason, though, from my perspective, was there was no good reason,” he said. “There were very subjective determinations” that were “very inconsistent and confusing,” he said.

Brew and his team are “hopeful” that the Biden administration will install “a revived and invigorated exclusion process” for the Section 301 tariffs on China. They hope that will allow "more transparency, more harmony in how decisions are made and why decisions are made,” he said.

USTR in the previous administration rejected all but about a third of the Lists 1 and 2 exclusion requests filed, said Brew. The agency granted only about 5%-6% of the tens of thousands of exemptions applied for on Lists 3 and 4, he said. “That’s in large part because of the administration’s desire to push the Chinese to the negotiating table.” The administration ultimately succeeded in landing a phase one trade deal with Beijing, but the pact was “not sufficient enough” in curbing all Chinese trade misbehavior, as documented in USTR’s Section 301 investigative report, he said.

Katherine Tai, President Joe Biden’s nominee to become the next USTR, built a reputation as being tough on China’s intellectual property abuses when she was lead House Ways and Means trade counsel, said Brew. Her confirmation hearings in “a few weeks” likely will provide the first tangible insight into how the new administration will address the existing Section 301 tariffs on China and the possible imposition of duties on Vietnam, he said.