A lawsuit filed by a company specializing in vinyl flooring against the U.S. Section 301 tariffs on goods from China has led to a slew of other American companies following suit.
Norwalk, Connecticut, U.S.A.-based HMTX Industries and its affiliated companies filed a complaint at the U.S. Court of International Trade (CIT) in September 2020 that challenges the authority of former U.S. Trade Representative (USTR) Robert Lighthizer. The lawsuit focuses specifically on the “unlawful escalation” of the trade war “through the imposition of a third and fourth round of tariffs on products covered by so-called ‘List 3’ and ‘List 4A,’” the lawsuit states.
That initial filing led to the subsequent filing of thousands of additional lawsuits by other companies that were also affected by the Section 301 tariffs. More than 3,700 companies have filed lawsuits so far, including Tesla, Ford Motor Co., Home Depot, and numerous U.S. seafood companies. Since then, the other lawsuits have all been consolidated behind the initial HMTX lawsuit, by order of a three-judge panel consisting of CIT judges Mark A. Barnett, Claire R. Kelly, and Jennifer Choe-Groves.
The lawsuit claims that the Trade Act of 1974 doesn’t confer sufficient authority to the defendants – Lighthizer, U.S. Customs and Border Protection, and former Acting Customs and Border Protection Commissioner Mark A. Morgan – to “litigate a vast trade war for however long, and by whatever means, they choose.”
The trade war between China and the U.S. began on 14 August, 2017, when then-President Donald Trump asked Lighthizer to initiate an investigation pursuant to Section 301 regarding China’s policies regarding intellectual property. Soon after, the USTR initiated the investigation, which ultimately resulted in a report in March 2018. That report later resulted in the Trump administration placing 10 percent tariffs on Chinese goods, which went into effect later that year.
The lawsuit alleges that the escalation of tariffs to 25 percent later on was unlawful, as the further escalation didn’t take place within the 12 months after the initiation of the investigation into China’s unfair practices.
“Section 307 of the Trade Act does not permit USTR to expand the imposition of tariffs to other imports from China for reasons untethered to the unfair intellectual property policies and practices it originally investigated under Section 301 of the Trade Act,” the lawsuit states. “Yet that is exactly what defendants did here when they promulgated the List 3 and List 4A duties in response to China’s retaliatory duties and other unrelated issues.”
The escalation, according to the lawsuit, resulted in USD 500 billion (EUR 409 billion) worth of Chinese imports coming under tariff action by the USTR, an amount that was “ten times the amount it had deemed ‘commensurate’ with the findings of USTR’s original investigation.”
The reasoning behind the escalation, the lawsuit said, has nothing to do with the initial investigation into unfair intellectual practices.
“Defendants did so for reasons untethered to the unfair practices that USTR had investigated, namely China’s tit-for-tat countermeasures and a hodgepodge of grievances related to China’s role on the world stage,” the lawsuit said.
The USTR itself, the lawsuit states, confirmed that it was relying on China’s decision to impose its “retaliatory duties” in response to China’s tariffs.
The later escalation of tariffs was significant for many parts of the seafood industry, as certain seafood items came under the increased 25 percent tariffs via that escalation. Some products that are exported to China for processing and then re-imported to the U.S. came under the tariffs – including frozen cod fillets, frozen salmon fillets, and more.
Alaskan lawmakers urged officials to remove U.S.-caught seafood from the tariff list. Some of those efforts were successful, but other items didn’t escape and still face 25 percent tariffs today.
The lawsuit further alleges that the USTR failed to show its reasoning behind the items it included on List 3 and List 4A.
“Indeed, despite receiving approximately 10,000 comments, USTR said absolutely nothing about how those comments shaped its final promulgation of List 3 and List 4A,” the lawsuit states. “USTR’s preordained decision-making bears no resemblance to the standards that the [Administrative Procedure Act] demands.”
The lawsuit alleges that the USTR’s escalation violated the Trade Act, and thus the duties paid by HMTX Industries – and the thousands of other companies that have since joined the lawsuit – were unlawful. As a result, the U.S. government should, according to the lawsuit, “refund, with interest, any duties paid by plaintiffs pursuant to List 3 and List 4A.”
If successful, the lawsuit would effectively end the tariffs on Chinese goods – tariffs that are still in effect. National Fisheries Institute Vice President for Government Affairs Robert DeHaan has predicted that the administration of U.S. President Joe Biden is unlikely to perform a rollback of those tariffs on its own.
“Wholesale rollback of those tariffs is extremely unlikely, reinstitution of some form of exclusion process – though still unlikely – is comparatively at least the better bet,” he said.
Current U.S. Trade Representative Katherine Tai, meanwhile, has said that the “Phase One” trade deal reached between China and the Trump administration will be assessed in detail to determine whether China is abiding by the terms of the deal, Reuters has reported. Tai also said as early as February that the USTR would perform a top-to-bottom review of U.S.-China trade policy, which would include the Section 301 tariffs.
Part of that Phase One trade deal involved commitments by China to buy a certain amount of U.S. goods – including seafood. Despite that, analysts have said the country has not met those commitments, coming in as much as 44 percent below the baseline the country promised to meet.
Regardless of future action on the tariffs, the lawsuit, if successful, would effectively nullify the tariffs imposed on parts of the seafood industry, and force the U.S. government to compensate for the losses.
Photo courtesy of the U.S. Court of International Trade
