‘Predicted Harms Ensued’ From China Tariffs: CTA/NRF Amicus Brief

Section 301 sample case plaintiffs HMTX Industries and Jasco Products “persuasively argue” that the Office of the U.S. Trade Representative “clearly exceeded its authority” under the 1974 Trade Act when it imposed the “massive” Lists 3 and 4A tariffs on “virtually all imports” from China not previously dutied, “without connecting them to the underlying investigation of China’s trade practices,” said CTA, the National Retail Federation and five other trade groups Monday in an amicus brief (in Pacer) in docket 1:21-cv-52 at the U.S. Court of International Trade.

The associations also argue USTR violated the Administrative Procedure Act “by failing to give adequate opportunity for, or consideration of, public comments,” they said. Also signing were the Retail Litigation Center, the American Apparel & Footwear Association, Footwear Distributors & Retailers of America, the Juvenile Products Manufacturers Association and the Toy Association. HMTX and Jasco urged the court to declare the tariffs unlawful and to order any duties paid to be refunded with interest.

USTR is guilty of “willful procedural failures” that had “negative consequences across the supply chain,” said the associations. “Thousands of stakeholders attempted to engage with the USTR in 2018 and 2019 to explain how its proposed actions would negatively affect American businesses and consumers,” they said. The groups and their members filed nearly 10,000 comments against “compressed public-comment deadlines” that left them little time to expose the proposed tariffs’ “far-reaching consequences,” they said.

Commenters had warned that the negative effects of the Lists 3 and 4A tariffs “would be widespread,” with the ripple effect felt in every sector of the U.S. economy, said the associations. They also voiced the concern that the tariffs “would hurt domestic manufacturers because component parts are subject to tariffs,” they said. Even domestic U.S. producers of “raw goods” would be hurt “because they supply materials to Chinese companies that reprocess the materials and export the finished products for sale to U.S. consumers,” they said.

Despite the large volume of stakeholder input, “the overwhelming majority of which opposed the tariffs, USTR refused to respond to any of the identified concerns,” said the trade groups. “These stark defects violated USTR’s statutory obligations to provide opportunity for meaningful public comment and engage in reasoned decision-making.” USTR didn’t comment Tuesday. The government has until Oct. 1 to respond.

USTR provided no rationale or justification for the “truncated” notice-and-comment process and short deadlines in the Lists 3 and 4A tariff rulemakings, said the associations. “For these reasons, USTR’s abbreviated process for soliciting comments on Lists 3 and 4 violated both the APA’s and Trade Act’s meaningful comment requirements.”

The outcome of the rulemakings was “preordained ,” said the associations. “Tariffs were implemented almost immediately without any indication that USTR actually considered the huge number of comments and pieces of testimony it received.” In the roughly two weeks USTR “gave itself” to impose List 3, for example, “it would have been physically impossible to actually consider the massive volume of stakeholder input,” said the groups. “The requirement for agencies to provide adequate notice and opportunity for public comment is not some empty formality.”

The associations allege USTR’s failure to follow mandated procedures “produced bad public policy.” Their members and others “identified the immense harm the proposed tariffs would cause to the U.S. economy,” they said. “USTR ignored those comments, stayed on its predetermined course, and the predicted harms ensued.”

The Lists 3 and 4A tariffs “cost U.S. companies some $46 billion in 2018 and 2019 alone,” argued the associations. Recent independent studies “confirmed that American consumers, not Chinese firms, paid the price” for the tariffs. “Even current federal officials acknowledge the significant harm caused by these tariffs,” they said, citing comments recently attributed to Treasury Secretary Janet Yellen that the China tariffs are taxes on U.S. consumers that were wrongfully implemented.

It’s “precisely those harms, caused by USTR’s flawed process and rush to judgment, that support plaintiffs’ claims in this case,” said the association. “The Trade Act and APA required USTR to establish a reasonable process for soliciting public comment and to meaningfully address them. The agency’s failure to satisfy these basic requirements of reasoned decision-making requires that its decisions be set aside.”

Monday's brief was CTA's first foray into the nearly year-old Section 301 litigation it indirectly helped craft three years ago when it hired Akin Gump to draft a complaint challenging USTR authority to impose the List 3 tariffs. Though CTA ultimately never took the government to court, Akin Gump used essentially the same complaint when it brought suit on behalf of HMTX and Jasco on Sept. 10 (see 2009110041). HMTX-Jasco became the template for about 3,800 complaints that followed. Morrison & Foerster filed Monday's brief on behalf of CTA, NRF and the other five trade groups.