China Import Duties Here to Stay? CIT Upholds Section 301 Tariffs

Over 3,600 importers had filed cases in hopes of securing relief from the 25% Lists 3 tariffs and 7.5% List 4A tariffs, which apply to a broad scope of products including food, raw materials, and consumer goods such as apparel, electronics, and lamps.  

Background

The additional Section 301 tariffs on imports from China began in 2018, when the USTR imposed duties on specified Chinese imports under Section 301 of the Tarde Act of 1972 (19 U.S.C. § 2411) identified on List 1 and List 2. As detailed in our previous alerts, the USTR subsequently expanded the list of products subject to Section 301 tariffs by adding products on Lists 3 and 4A.

Litigation began at the CIT in 2020 when over 3,600 companies brought suit challenging USTR’s statutory authority to impose the duties. The CIT previously determined that the USTR acted within its statutory authority when it modified the Section 301 tariffs by adding List 3 and 4A. However, in the previous decision, the CIT found that the USTR had not satisfied the procedural requirements by providing adequate explanations on how it considered the thousands of comments that the agency received during the notice and comment period. This most recent decision was issued after the USTR filed its remand report pursuant to the CIT's previous remand decision.

What Happened?

In April 2022, the CIT sustained the USTR’s authority to impose the additional duties, but remanded the matter for the USTR to respond to comments received during the rulemaking proceedings establishing the product lists, as required by the Administrative Procedure Act (APA). Upon remand, the USTR provided additional explanation for the tariffs on List 3 and List 4A products by:

1. identifying the documents underlying its response to comments;
2. providing additional explanation supporting the removal or retention of certain tariff subheadings from List 3 and List 4A;
3. addressing comments concerning the level of duties to be imposed and the aggregate level of trade subject to the duties; and
4. addressing comments concerning potential harm to the domestic economy, the legality and efficacy of the tariffs, and suggested alternative measures.

Plaintiffs and amici curiae filed comments opposing the Remand Results and sought vacatur of List 3 and 4A with the CIT. They argued that the USTR still failed to meet the requirements of the APA,  asserting that the Remand Results constitute impermissible post hoc reasoning pursuant to Department of Homeland Security v. Regents of the University of California, 140 S. Ct. 1891 (2020).

In its March 17 opinion, the CIT rejected Plaintiffs’ argument, holding that the USTR undertook no new review and analysis of the comments submitted during rulemaking nor post hoc rationalization. Rather, the Court reasoned that the USTR provided a fuller explanation of its rationale. The CIT concluded that the USTR merely needs to address significant issues raised in submitted comments, not every comment or alternate course of action to satisfy the requirements of the APA.

Next Steps

This concludes the litigation process at the CIT, but Plaintiffs have 60 days to appeal the case to the US Court of Appeals for the Federal Circuit. Given the significant financial impact on hundreds of billions of dollars’ worth of goods, Plaintiffs will likely appeal the CIT’s opinion. Businesses that import from China will  remain subject to the Section 301 tariffs as the appeals process unfolds.

The tariffs have had a significant impact on the bottom line for many companies. ArentFox Schiff’s Customs & Import Compliance team regularly assists clients with tariff mitigation and savings strategies, including but not limited to, first sale, legal tariff engineering, production scenarios to change the origin of products, and Section 301 exclusions. For more information, please contact the attorneys listed below or the ArentFox Schiff attorney you regularly work with.