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Chinese Product Tariff Challenge Causes Flurry of Importer Lawsuits

Client Alert
March 26, 2021

A lawsuit filed late in 2020 at the U.S. Court of International Trade (“CIT”) challenging the U.S. Trade Representative’s (USTR) implementation of Section 301 “List 3” and “List 4” duties on products from China, HMTX Industries LLC et al. v. United States (Court No. 20-00177), has resulted in the filing of thousands of additional lawsuits brought by other affected importers. There are now 3,700+ companies added to the list, including Ford, Home Depot, Target, Tesla, and Walgreens, along with many other smaller importers.

BACKGROUND

In 2017, USTR was directed by the President to initiate a targeted investigation pursuant to Section 301(b) of the Trade Act of 1974 regarding China’s laws, policies, practices, and actions related to intellectual property, innovation, and technology. Upon the release of the report, USTR imposed a 25% tariff on a list of 1,333 items with a total trade value of $50B. This was followed by subsequent lists of additional products from China with tariffs ranging from 10% to 25%.The items on List 3 have an annual trade value of $200B and those on List 4 have a trade value of $300B. Items on these lists include furniture, lighting, vehicle parts, machinery, food, clothing and many more.

EXISTING LAWSUIT

On September 10, 2020, HMTX Industries LLC and two of its subsidiaries filed a complaint at 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 3 of the Section 301 tariffs. An amended complaint was filed on September 21, 2020 to include List 4A.

Plaintiffs have generally taken the position that, while initial retaliatory tariff action reflected in the implementation of Section 301 Tariffs on products found on List 1 and List 2 may have been lawful, the USTR’s subsequent round of actions (i.e., List 3 and List 4A) failed to comply with requirements under the Administrative Procedures Act.  These lawsuits, if successful, may ultimately eliminate List 3 (and where applicable, List 4A) tariffs and result in refunds.  It remains to be seen whether refunds would be applicable to all importers, or only those who filed complaints. 

The complainants seek to set aside these alleged unlawful actions and obtain a refund of any duties paid on imports of List 3 and List 4 products from China. All complaints are asking for a refund, with interest, of duties paid, costs, and reasonable attorney fees.

JOIN THE COMPLAINT

The strategy behind this type of lawsuit is to file suit and then move to consolidate with the HMTX Industries case or stay the lawsuit pending CIT’s disposition of the HMTX case. This strategy will allow the bandwagon importers to benefit if the HMTX Industries lawsuit is successful without incurring the large expenses of fully litigating their claims.

Because USTR published List 4A in the Federal Register on August 20, 2019, the two-year statute of limitations for filing a List 4A lawsuit based on publication date does not expire until August 20, 2021. This means importers that did not import products from China under List 3 (or chose not to file a List 3 lawsuit now) have an opportunity to file a lawsuit to join this challenge on imported Chinese products subject to duties under List 4A.

HOW BMD CAN HELP

Many of our clients may be directly or indirectly affected by these tariffs. Because of existing protest limitations, joining this lawsuit might be a reasonable option to attempt to recover those costs. If any clients are aware of imported items subject to these tariffs or wish to have their import documents reviewed, please contact International Law Attorney Kevin Burwell directly at kdburwell@bmdllc.com or 330-253-3715.

International LawKevin BurwellTariff
Client Alert

Changes to FFCRA Paid Leave: Congress’ Revisions to Employment COVID-19 Leave Benefits Signals the Light is at the End of the Tunnel

December 28, 2020Late in the evening on December 27th, President Trump signed into law the government’s $900 billion COVID-19 relief package (the “Stimulus Bill”). Among other economic stimulus benefits, the Stimulus Bill contains the $600 stimulus checks that will be issued to eligible individuals as well as, relevantly, changes to the Families First Coronavirus Response Act (“FFCRA”). The FFCRA was implemented in April 2020 and provided benefits to individuals who missed work as a result of an actual or suspected COVID-19 illness or to care for a child when their school or childcare service was closed because of COVID-19. Importantly, the Stimulus Bill extends eligibility for employer payroll tax refunds for leave payments made to employees on or before March 31, 2021 under the FFCRA, signaling to the American people that Congress believes many of the employed public will be vaccinated by this time, the light at the end of the tunnel. However, the Stimulus Bill does contain a caveat that employers are no longer required to provide FFCRA leave benefits after December 31, 2020, but if they do, they will receive the payroll tax credits, up to the maximums provided in the FFCRA, for payments made prior to April 1, 2021. Below we provide a list of questions and answers we received to date following the passage of the Stimulus Bill. We expect the U.S. Department of Labor (“DOL”) to issue additional questions and answers as the Stimulus Bill is implemented, and we will update this Client Alert as these are received.Client Alert

Healthcare Speaker Programs: New OIG Alert

December 11, 2020In a rare Special Fraud Alert issued on November 16, 2020 (the “Alert”), the Office of Inspector General (“OIG”) urged companies who host speaker programs to reassess their programs in light of the “inherent risks” associated with these activities. The Alert reports that, in the last three years, drug and device companies have reported paying nearly $2 billion to health care professionals for speaker-related services.Client Alert

Value-Based Care Advances – CMS Issues New Final Rules for Stark and Anti-Kickback Statutes

December 11, 2020The Centers for Medicare & Medicaid Services (“CMS”) and the Department of Health and Human Services (“HHS”) Office of the Inspector General (“OIG”) issued two highly anticipated (and quite extensive) Final Rules to reform the Stark Law and Anti-Kickback Statute (“AKS”) regulations. The Final Rules generally take effect on January 19, 2021. The Final Rules include new safe harbors for the AKS and new exemptions to the Stark Law to allow for greater flexibility. According to the HHS, the goal of updating both laws is to make it easier for providers to engage in care coordination and value-based care programs without running afoul of the statutes. Please note that this client alert could not cover the full extent of the Final Rule changes so please contact your BMD Healthcare attorney with questions.Client Alert

Mandatory Filings Under CFIUS New Rules

December 11, 2020On September 15, 2020, the Committee on Foreign Investment in the United States (“CFIUS”) promulgated a final rule modifying its mandatory declaration requirements for certain foreign investment transactions involving “TID US businesses” (sensitive U.S. businesses dealing in critical technologies, critical infrastructure and sensitive personal data) dealing in “critical technologies” – i.e., U.S. businesses that produce, design, test, manufacture, fabricate, or develop one or more critical technologies. The new rule also makes amendments to the definition of the term “substantial interest” (used to determine whether a foreign government has a substantial interest in an entity). The final rule became effective on October 15, 2020.Client Alert

IRS Guidance on Employee Retention Credit

December 11, 2020The Employee Retention Credit created under Section 2302 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a refundable tax credit against certain employment taxes equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. Since the adoption of the CARES Act, employers have expressed concern that if one employer acquires another employer that previously received a PPP loan, the acquirer’s entire aggregated group may no longer be eligible to claim the Employee Retention Credit.
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