USTR Notice Gives Tech Groups Little Time to Weigh Court Action to Block Tariffs

That the Section 301 tariffs on $200 billion worth of Chinese imports take effect Sept. 24 gives potential litigants little time to weigh a court challenge blocking the duties if they are going to act before they become effective (see 1809170051). The extremely quick turnaround time, published in a notice that U.S. Trade Representative Robert Lighthizer released late on Sept. 17, bore out worries that the Trump administration would release its order imposing the tariffs soon after the comments period expired Sept. 6.

The Consumer Technology Association, reacting to the notice, ratcheted up its legal rhetoric from 10 days earlier when it had said only that it was “skeptical” the tariffs could survive a court challenge (see 1809070025). The new tariffs "run afoul of the carefully tailored provisions” of the 1974 Trade Act, “which require any action to be within the scope of the Section 301 investigation," CTA President Gary Shapiro said Sept. 17.

Congress didn't give the administration "a blank check to pursue a trade war" when it crafted the law, Shapiro said. In recent days, Shapiro began calling the tariffs “retaliatory” in keeping with CTA’s argument that Lighthizer is exceeding his Trade Act authority to take “appropriate” action against China. CTA argues there’s no precedent in the law’s 44-year history for a USTR to use a Section 301 investigation as justification for retaliating against another country. Though CTA concedes the law gives the USTR authority to modify tariff actions already imposed, it argues there are limits to that authority, and that Lighthizer exceeded them when he proposed raising the tariffs to 25 percent from 10 percent. Lighthizer announced Monday that the duties that take effect Sept. 24 at 10 percent will rise to 25 percent on Jan. 1.

CTA did credit the administration for having spared smartwatches, fitness trackers, Bluetooth equipment and other connected consumer devices from the new tariffs list. But “we are especially concerned” that printed circuit assemblies, routers and networking equipment remain on the list, Shapiro said. Duties on those products “will stifle our global leadership in 5G, create an internet tax on businesses and cause uncertainty for companies,“ he said.

JLab Audio, which markets Bluetooth headphones and earbuds through big-box retailers (see 1807310050), was among Monday’s big winners when the tariffs list came out. “I'm thrilled that our comments were heard and that adjustments were made,” CEO Win Cramer emailed on Sept. 18. Cramer testified Aug. 21 before a public hearing that tariffs on products comprising 80 percent of JLab’s business would have been “catastrophic” for the company. With JLab now in the clear, Cramer, when asked if he nevertheless favors CTA going to court to block the remaining tariffs, said: “I generally support any action that helps keep taxes off of consumers.”

Some tech startups that testified against the tariffs weren’t as lucky, including Cao Gadgets, which develops wireless sensor tags for a variety of Internet of Things (IoT) uses and markets them through its own online store. Owner Mike Cao argued for removing the 8531.90.15, 8531.90.30 and 8534.00.00 tariff lines because he worried about the impact tariffs on components he imports from China under those tariff codes would have on his small business. All three classifications were kept intact on the final list. Brilliant Home Technology also argued unsuccessfully for the removal of the 8504.40.95, 8512.30.00, 8525.80.50 and 8537.10.91 tariff lines on components it sources from China for the smart-home control device.

Element Electronics, which bills itself as the only company assembling liquid crystal display (LCD) TVs in the U.S., emerged a big winner when the USTR deleted LCD panels and motherboards under the 9013.80.90 and 8529.90.13 headings from the final tariff list. Element argued in public hearings last month that tariffs on those components sourced from China would doom the remaining 126 jobs at the company’s assembly plant in Winnsboro, South Carolina. Element didn’t immediately comment.

Tech groups uniformly blasted the tariffs as counterproductive to the administration’s stated goal of winning concessions from China. The decision to impose the tariffs was “reckless and will create lasting harm to communities across the country,” Information Technology Industry Council CEO Dean Garfield said. The Telecommunications Industry Association fears the tariffs will cause hundreds of millions of dollars in “financial damage” to the U.S. telecom equipment industry, said Cinnamon Rogers, senior vice president-government affairs. The tariffs will “undermine the American adoption of strategic technologies including 5G, exacting long-term economic costs and hurting U.S. strategic competitiveness,” she said. “Taxing the network equipment used to deliver these services and devices will handicap America amid a global race for technology leadership.”

The tech products targeted for tariffs are “critical to strategic economic and national security priorities” for the U.S., including its “global leadership” in artificial intelligence, 5G and IoT, said Elizabeth Hyman, Computing Technology Industry Association executive vice president-public advocacy. “This irresponsible and ineffective trade war will only punish American consumers and companies while doing little to actually change China’s trade practices.”

The Computer and Communications Industry Association is “disappointed” that the administration “seems to continue to misunderstand the complexities and reality of global trade,” CEO Ed Black said. “There are many legitimate trade concerns US companies have in the global marketplace, but tariffs are unwieldy and often counterproductive to address those problems. We’d like to see the administration be a collaborative leader with like-minded countries to improve the global trading system.”

The U.S. “cannot afford further escalation” of the trade war with China, “especially with the holiday shopping season right around the corner,” National Retail Federation CEO Matthew Shay said. “The mere talk of tariffs on all remaining Chinese imports is of serious concern to retailers since tariffs of that magnitude would touch every aspect of American life. Achieving better trade deals is an important priority, but there is nothing better about it when American families are forced to pay higher prices for everyday purchases.”