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Volume X, Number 298

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Can I Still File a Court Challenge Against the Section 301 List 3 Tariffs?

You may have asked yourself, “can I still file a court challenge against the Section 301 List 3 tariffs?” after learning that over 3,500 importers filed cases at the Court of International Trade (CIT) challenging the so-called “List 3” Section 301 duties assessed on certain Chinese-origin imports. If you have not yet filed a List 3 case at the CIT, read on for information on a theory that may support filing a case at this time.

As we advised in our September 15, 2020 client alert, a lawsuit (HMTX Industries LLC et al. v. United States (Court No. 20-00177)) was filed at the CIT on September 10, 2020 challenging the U.S. Trade Representative’s (USTR) authority to assess Section 301 List 3 duties (a substantive claim under the Trade Act of 1974), as well as the USTR’s procedural steps to implement those duties (a procedural claim under the Administrative Procedures Act (APA)). Thousands of importers have now filed “me-too” lawsuits challenging the List 3 Section 301 duties on the same grounds as HMTX, hoping to benefit if the lead case is successful, but without incurring the large expense of fully litigating their own claims.

Over the course of the past few weeks, there has been some disagreement on the filing deadline for a List 3 challenge at the CIT with some recommending that a “me-too” lawsuit be filed by September 21, 2020 or September 24, 2020. The varying dates stem from different theories regarding when the cause of action “accrues” for purposes of the two-year statute of limitations asserted in the HMTX Industries case. Given the uncertainty surrounding the date of accrual, importers have filed (and continue to file) “me-too” lawsuits based on one of three statute of limitations theories (briefly summarized below):

  • Date of Publication of List 3 in the Federal Register.The vast majority of the “me-too” lawsuits (over 3,300 cases) were filed by September 21, 2020, which was two years after the USTR published List 3 in the Federal Register. This was the most conservative approach for avoiding a statute of limitations defense, as this is arguably the deadline for the APA procedural claim in the HMTX Industries case.

  • Date of Initial Collection of List 3 Duties. Over 100 additional “me-too” suits were filed from September 22 to September 24, 2020, alleging that the cause of action “accrued” on September 24, 2018, the date the government first collected List 3 duties.

  • Continuing Claim Theory. There is also an argument that the cause of action for a substantive challenge to List 3, as opposed to a procedural challenge to its method of promulgation, accrues each time List 3 duties are assessed on an aggrieved importer. Under this “continuing claim theory” an importer may have the opportunity to file a “me-too” lawsuit based on each entry subject to Section 301 List 3 duties. Therefore, a lawsuit filed today may be considered timely for List 3 duties paid within two years prior to the filing of the action. A few cases filed after September 25, 2020 appear to rely on this theory.

Although an importer may be time-barred from asserting a procedural claim under the APA (based on the Date of Publication theory), there is an argument that a “me-too” lawsuit asserting a substantive challenge to List 3 duties may still be timely. While we continue to believe the pending HMTX Industries case is a long shot and the timeliness considerations discussed herein present a further challenge for importers filing after September 21, 2020, the relatively minimal cost of filing suit, coupled with the potentially significant relief at issue, presents a low-risk/high-reward scenario for most importers impacted by Section 301 List 3 duties.

If you are still interested in filing a “me-too” lawsuit to try to preserve your rights to potential List 3 duty refunds, or if you have any questions about this pending litigation (including alternative options for relief, such as intervening in the pending HMTX Industries case or filing administrative protests), please contact one of the Faegre Drinker professionals below.

Note: The information above concerns a challenge to List 3 duties. As discussed in our September 24, 2020 client alert, the HMTX Industries lawsuit was amended to include a request for relief from List 4A duties. Since USTR published List 4A in the Federal Register on August 20, 2019, the two-year statute of limitations for filing a List 4A “me-too” lawsuit arguably does not expire until August 20, 2021 based on the Date of Publication theory.

Co-authored by Mollie D. Sitkowski, Carolyn Marie Bethea, Matthew R. Kinsman & Qiusi Y. Newcom.

© 2020 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume X, Number 274
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William Rucker, Drinker Biddle Law Firm, International Trade and Customs Specialist
Partner

William R. “Randy” Rucker assists clients with all aspects of U.S. Customs law, including the classification and valuation of merchandise, country of origin and marking determinations, quantitative import restraints, duty-preference and savings programs, understanding and receiving the benefits of free trade agreements, compliance audits, enforcement actions and other trade-related matters.

In order to assist clients with their compliance efforts and satisfy "reasonable care" requirements, Randy frequently performs reviews of companies' internal...

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Nicholas Guzman, Drinker Biddle Law Firm, Chicago, Trade Law Attorney
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Nicolas Guzman assists his clients in all aspects of international trade laws and regulations. Nick has experience helping clients with a variety of import issues, including import tariff classification, valuation, country of origin determination and marking issues, and eligibility determinations under various free trade agreements and duty preference programs.

Nick assists clients with establishing import operations, from the development of internal controls through the planning and execution of post-entry audit processes. He also conducts compliance reviews of existing customs practices, including the enhancement of customs procedures and training company personnel on import-related topics.

 

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Douglass Heffner, International trade lawyer, Drinker Biddle
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Douglas J. Heffner litigates customs and international trade matters including antidumping duty, countervailing duty and safeguard cases. He represents foreign companies in Canada, Europe, Japan and Mexico, as well as domestic producers in industries that range from high-tech to heavy industry, to consumer and industrial goods. He also represents trade associations, government agencies and embassies in a broad range of matters.

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Kathleen Murphy, International trade Lawyer, Drinker Biddle
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Kathleen M. Murphy counsels clients on maximizing trade benefits, making informed global procurement decisions and developing domestic and international trade compliance programs. She represents clients in duty-recovery initiatives and customs challenges concerning tariff classification, valuation, Free Trade Agreements and country of origin determinations, among other areas. She guides clients through compliance audits and validations, as well as penalty investigations conducted by U.S. or foreign customs authorities. She also represents clients in...

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James Sawyer, Drinker Biddle Law Firm, Chicago, Trade Law Attorney
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James L. Sawyer counsels clients in all areas of U.S. import laws and regulations, including tariff classification, valuation, origin determination and marking, Free Trade Agreements, and duty preference programs. He chairs the firm’s Customs and International Trade Team and is the Regional Partner in Charge of the firm's Chicago office.

James represents clients in enforcement proceedings and investigations, Focused Assessment audits, and other verification proceedings conducted by U.S. Customs and Border Protection (CBP). He frequently assists clients craft...

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