On September 10, 2020, HMTX Industries LLC and two of its subsidiaries (“complainants”) filed a complaint at the U.S. Court of International Trade (“CIT”) alleging an unlawful escalation of the ongoing trade war with China through the imposition of a third round of tariffs on imports covered under List/Tranche 3. Arguing that the Trade Act of 1974 did not confer authority on the Office of the U.S. Trade Representative (USTR) “to litigate a vast trade war for however long, and by whatever means, they choose”, the complaint states that the USTR had a limited time to determine any actions to take and that the “arbitrary manner” in which the List 3 tariff actions were implemented violates the Administrative Procedure Act (APA). The complainants seek to set aside these unlawful actions and obtain a refund of any duties paid on imports of List 3 products from China.

The complaint acknowledges that Section 301 of the Trade Act of 1974 authorizes the USTR to investigate a foreign country’s trade practices and that the USTR may take “appropriate” action, such as imposing tariffs on imports from the country that administered the unfair practice, if “unreasonable or discriminatory” practices are present. The complainants argue, however, that Section 304 of the Trade Act of 1974 requires the USTR to determine what action to take, if any, within 12 months after the initiation of the investigation and that the USTR failed to issue additional tariffs for Chinese products on List 3 (or subsequently List 4) within this 12-month window. The complaint further argues that Section 307 of the Trade Act of 1974 “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.” Nevertheless, in the months following the conclusion of the Section 301 investigation and the initial implementation of List 1 and 2 tariff actions, the complaint states, the USTR “wildly expanded the scope of the tariffs imposed under Section 301 of the Trade Act to cover imports worth more than $500 billion—ten times the amount it had deemed ‘commensurate’ with the findings of USTR’s original investigation.” The complaint argues that Section 307 only allows the USTR to “delay, taper, or terminate—not ratchet up—the actions it has already taken.”

In support of their allegations that the USTR was arbitrary and capricious in its implementation of List 3 tariffs under the APA, the complainants claim that the USTR failed to: (1) provide sufficient opportunity for public comment; (2) consider relevant factors when making its decision; and (3) connect the record facts to the choices it made. According to the complaint, “despite receiving over 6,000 comments, USTR said absolutely nothing about how those comments shaped its final promulgation of List 3” and USTR’s “preordained decision-making preordained decision-making resulted in the unlawful imposition of tariffs on imports covered by List 3 whose value equals $200 billion.”

The complainants request that the CIT: (i) declare the USTR’s actions resulting in tariffs on List 3 products are unauthorized by, and contrary to, the Trade Act of 1974; (ii) declare the USTR arbitrarily and unlawfully promulgated List 3 in violation of the APA; (iii) vacate the China Section 301 List 3 rulemaking; (iv) order a refund, with interest, on any duties paid by the complainants; and, (v) permanently enjoin USTR from applying List 3 and collecting any duties pursuant to List 3. The case is captioned HMTX Industries LLC, Halstead New England Corporation, and Metroflor Corporation vs. United States of America; Office of the United States Trade Representative; Robert E. Lighthizer, U.S. Trade Representative; U.S. Customs & Border Protection; Mark A. Morgan, U.S. Customs & Border Protection Acting Commissioner; Court No. 20-00177.