In September 2020, HMTX Industries LLC, a U.S.- based importer, brought the first of these lawsuits to the CIT. The company, as well as several of its affiliates, challenged the List 3 tariffs, and later amended its complaint to challenge List 4A. Subsequently, approximately 6,000 importers of various goods from China filed similar challenges to the Lists 3 and 4A tariffs as well as List 4B, seeking a refund of duties paid. Collectively, these lawsuits represent the first domestic court challenges to Section 301 tariffs. Not only is this legal challenge unprecedented, but the number of cases is as well. The CIT generally receives a few hundred cases per year; the Section 301 cases, in conjunction with other 2020 filings, increased its caseload by 1,546% from 2019 to 2020.
The CIT has taken several procedural steps reflecting the scope and potentially significant legal implications of these challenges. First, the court assigned all cases to a three-judge panel and created a single “master case” titled In re Section 301 Cases, under which the parties must file all relevant documents. Second, the court decided to manage the disputes by selecting a representative sample of claims, which would be used to assess the legal challenges’ viability and potentially suggest how the court should address the remaining cases. While the test case is considered, all other cases are stayed.
The HMTX case, whose claims served as a model for many subsequent claims, was selected by the CIT to serve as the test case. In their amended complaint, the HMTX plaintiffs contend that (1) the USTR violated procedural requirements for imposing Section 301 tariffs; and (2) the Agency exceeded its statutory authority when imposing the tariffs.
On April 1, 2022, the CIT issued an opinion on the merits. The court first ruled that USTR acted within the authority provided by Section 307 when it imposed additional tariffs under Lists 3 and 4A. Specifically, the court found a “clear connection” between China’s retaliatory actions (i.e., imposition of tariffs on U.S. goods) and USTR’s determination that these retaliatory actions increased the burden on U.S. commerce resulting from China’s unfair acts, policies, and practices such that USTR could rely on Section 307(a)(1)(B) to modify the action.
Although the CIT found that USTR acted within its statutory authority to modify the Section 301 action, it next ruled that USTR violated the Administrative Procedure Act (APA) (5 U.S.C. § 551 et seq.) by failing to respond adequately to public comments in its final action. In particular, the court faulted USTR for failing to explain how USTR arrived at its decision to raise tariffs on particular products despite the numerous public comments contesting the appropriateness of imposing new tariffs and the inclusion or exclusion of particular products. Based on these procedural violations, the court remanded Lists 3 and 4A to USTR for reconsideration or further explanation, but decided to allow the tariffs to remain in place given the “disruptive consequences” of removing them during remand, stating: “For now, the court declines to try to unscramble this egg.”
If USTR chooses to reconsider or provide further explanation, it must submit its decision to the CIT by June 30, 2022. Alternatively, USTR and the plaintiffs may seek to appeal the CIT’s ruling.
Agathon Associates raised questions about the legality of the List 3 tariffs in this September 18, 2018 blog.
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