Arguments ‘Plausible’ That Section 301 Tariffs Are Unlawful, Say Judges

Tuesday's U.S. Court of International Trade opinion granting Section 301 plaintiffs HMTX Industries and Jasco Products a preliminary injunction freezing the liquidation of unliquidated Chinese imports with Lists 3 or 4A tariff exposure (see 2107060080) gave the public its first tangible peek into the court's possible thinking about the merits of the importers' unprecedented legal challenge to the Chinese duties.

Lawyers we canvassed agreed much of the ruling's language was friendly to the plaintiffs' case that the Office of the U.S. Trade Representative overstepped its Trade Act authority when it imposed and later hiked the Lists 3 and 4A tariffs on Chinese goods in retaliation for China’s countermeasures. They cautioned that many months of briefing, amicus filings and oral argument lie ahead until the litigation is resolved before the CIT, and that an appeal to the Federal Circuit is likely from whichever side loses.

Chief Judge Mark Barnett dissented on grounds that HMTX-Jasco failed to demonstrate irreparable harm because the CIT has broad authority to order refunds or reliquidations. Barnett was silent on whether HMTX-Jasco met their reduced burden for showing they were likely to succeed on the merits of the case, Judge Claire Kelly, writing for herself and Judge Jennifer Choe-Groves in the majority opinion, said the plaintiffs “have demonstrated a fair chance of success” that their interpretation of the Trade Act prevents USTR from increasing a Section 301 action “in response to retaliatory, but superficially unrelated, tariffs.”

Plaintiffs’ “proffered interpretation” of the statute “undeniably raises a serious and substantial question as it would limit the President’s ability to increase a Section 301 action only when there is a change in the conduct giving rise to the Section 301 action,” not when a country retaliates, said Kelly. If HMTX-Jasco are correct, USTR’s “modification” of the Section 301 action by imposing and later hiking the Lists 3 and 4A tariffs on Chinese goods “falls outside the scope of delegated authority,” she said. Their interpretation is “a plausible literal reading of the statute raising a serious and substantial question,” she said.

That shouldn’t “diminish” the government’s “compelling argument” that increasing the tariffs was necessary to support the effectiveness of the initial Section 301 action in curbing China’s allegedly unfair trade practices, said Kelly: “However, at this stage of the proceedings without full briefing, Defendants’ position is not so clearly correct as to prevent Plaintiffs from preserving the status quo pending the resolution of the merits of the parties’ claims.” That justified letting the injunction go forward, she said.

HMTX-Jasco also assert plausible claims USTR violated the Administrative Procedure Act by running sloppy Lists 3 and 4A rulemakings, said Kelly. The government responded that the tariffs were an action of President Donald Trump, who wasn't subject to the APA, but “neither party adequately addresses the question of whether the court should consider List 3 and List 4A the products of Presidential action or USTR action,” she said. On the back-and- forth disagreements about the APA propriety of the Lists 3 and 4A notice and comment periods, she said, “neither party offers dispositive evidence or argumentation on the adequacy of the comment period, so the court concludes that Plaintiffs raise a serious question that warrants meaningful review.”

The court set a July 13 deadline for DOJ to “meet and confer” with the 15-member plaintiffs' steering committee to establish a "repository" for identifying unliquidated imports that now will be barred from liquidation. It scheduled a status conference for July 15 at 11 a.m. on Webex to review the outcome of the meeting.