November 29, 2020

Volume X, Number 334

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New Court Case Challenges Validity of Section 301 List 3 Tariffs; May Result in Refunds of All Duties Paid

On September 10, 2020, three importers filed a complaint at the U.S. Court of International Trade (CIT), HMTX Industries LLC et al. v. United States, which challenges the procedural steps and authority of the U.S. Trade Representative (USTR) to assess Section 301 duties against so-called “List 3” imports of a wide range of products from China.

As discussed further below, this lawsuit, if successful, would eliminate Section 301 List 3 duties and result in refunds to the plaintiffs. This legal challenge also presents an opportunity for importers potentially to obtain refunds of Section 301 duties deposited on List 3 imports and halt future duties on those imports. However, given the jurisdictional basis for this lawsuit, importers that wish to pursue a similar legal action need to file suit by September 21, 2020 in order to preserve their right to possible relief.

Background

Section 301 of the Trade Act of 1974 authorizes the USTR to impose duties to combat certain “unreasonable” or “discriminatory” trade acts by a foreign government. In the case of the Section 301 tariffs imposed against Chinese origin imports, the USTR initiated the investigation and initially imposed 25%tariffs on certain imports because of the failure of the Government of China to protect intellectual property of U.S. companies when exporting Chinese products to the U.S. market.

Plaintiffs’ Allegations

According to the plaintiffs, while the initial retaliatory tariff actions reflected in the implementation of List 1 and List 2 may have been lawful under Section 301, the USTR’s subsequent rounds of tariff actions (i.e., List 3 and list 4A) against Chinese origin imports overstepped the USTR’s authority and failed to comply with requirements under the Administrative Procedures Act (APA).

The plaintiffs argue that the Section 301 law was not intended as a tool to engage in an “open-ended trade war,” as opposed to an initial response to China’s intellectual property violations. Plaintiffs also argue that while the Section 301 mechanism allows the USTR to “modify or terminate” certain initial actions taken under Section 301, the provision does not allow the government to increase tariffs further after the initial actions are taken.

The lawsuit asks the CIT to vacate the List 3 tariffs, order to refund (with interest) of any List 3 duties paid by the plaintiffs, permanently enjoin the U.S. government from applying List 3 duties against the plaintiffs, and award plaintiffs’ costs and reasonable attorney fees.

Opportunity for Importers That Paid Section 301 List 3 Duties

Other importers that have paid significant duties under List 3 may consider filing a suit making claims substantially identical to the HTMX Industries complaint, with the intention of asking the CIT to consolidate the lawsuit with the lead HTMX Industries action or to be stayed during those proceedings. At this point, we believe the pending case is a long shot, but importers could file a “me-too” lawsuit at a relatively low cost and benefit from the relief in case the plaintiffs in HMTX Industries succeed.

Upcoming Deadline to File

The statute of limitations to file this type of lawsuit (alleged violation of the APA) is two years from the date that the cause of action accrues. The USTR published its Federal Register notice announcing the List 3 duties on September 21, 2018. To preserve the right to duty refunds should the pending HMTX Industries suit be successful, we recommend any complaint be filed by September 21, 2020. (Please note that the HMTX Industriessuit did not ask for refund of duties on List 4A, but that is likely because the List 4A List was filed later, and therefore there is more time to sue under the two-year statute of limitations.)

William R. RuckerJames L. Sawyer and Mollie D. Sitkowski contributed to this article. 

© 2020 Faegre Drinker Biddle & Reath LLP. All Rights Reserved.National Law Review, Volume X, Number 259
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Carolyn Bethea Corporate Attorney Drinker Biddle Law Firm
Associate

Carolyn M. Bethea advises clients at both the administrative and appellate level on a wide variety of customs and international trade matters, particularly involving antidumping and countervailing duty proceedings, safeguard proceedings, and export compliance.

Before joining Drinker Biddle, Carrie was a senior international trade compliance analyst at the U.S. Department of Commerce, International Trade Administration in Washington, D.C., where she administered U.S. trade remedy laws via the conduct of antidumping and countervailing duty...

202-230-5330
Nate Bolin, Drinker Biddle Law Firm, Washington DC, Litigation Law Attorney
Partner

Nate Bolin has significant experience advising clients in compliance, transactional, litigation, policy and regulatory matters involving U.S. export controls, U.S. International Traffic in Arms Regulations (ITAR), economic sanctions, and related areas of national security and international trade law.

In corporate transactions and mergers and acquisitions, Nate regularly advises buyers, sellers and investors on the impact of U.S. export controls, customs laws, trade remedy laws, existing bilateral and multilateral trade...

(202) 230-5888
Richard P Ferrin, International Trade Lawyer, Drinker Biddle
Counsel

Richard P. Ferrin advises clients about international trade regulations, particularly antidumping and countervailing duty proceedings at both the administrative and appellate levels. He advocates for his client in global “safeguards” proceedings and on customs matters involving classification issues and country-of-origin determinations. Richard has represented foreign manufacturers, foreign exporters, and U.S. importers in antidumping and countervailing duty proceedings before the U.S. International Trade Commission, and in judicial review of...

202-230-5803
Nicholas Guzman, Drinker Biddle Law Firm, Chicago, Trade Law Attorney
Associate

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...

202-230-5436
Douglass Heffner, International trade lawyer, Drinker Biddle
Partner

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.

202-230-5802
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