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Section 301 Challenges: Timeliness of List 3 and 4A Claims

Oct. 5, 2020
By: Lois E. Wetzel


In a historic two-week rush of activity, over 3,500 importers have filed cases in the U.S. Court of International Trade (CIT) challenging the Trump Administration’s imposition of Section 301 duties assessed on Chinese-origin imports identified by the United States Trade Representative as “List 3” and “List 4.” The influx of 301 cases follows the lead of a case filed in the CIT on September 10, 2020, HMTX Industries LLC et al. v. United States (Court No. 20-00177).

HMTX challenges the 301 duties on both substantive and procedural grounds, asserting that the USTR acted outside its authority (under the Trade Act of 1974) in issuing Lists 3 and 4 against Chinese imports as well as failed to comply with procedural requirements of the Administrative Procedure Act (APA) when doing so. The essence of HMTX’s claim is that the List 3 and 4 tariffs were imposed outside the statutory 12-month window following the conclusion of the investigation into China’s practices and while the initial tariff actions taken under Section 301 may be modified or terminated, only modifications to deescalate the trade conflict are permitted (List 3 and 4 increased the duties of the initial action). HMTX’s also claims that procedural List 3 and 4 are impermissible because the rationale for the added duties was China’s retaliatory duties and not its policies relating to intellectual property and technology transfer, which the USTR found to be unreasonable burdens on U.S. commerce.

As noted, the HMTX complaint prompted thousands of importers to file their own action challenging the duties on the same grounds to preserve their right to refunds should HMTX be successful. The timeliness of these follow-on complaints has been the subject of considerable discussion amongst filers and within the trade bar. Section 1581(i) of the Court of International Trade’s governing statute instructs that any cause of action not otherwise specified must be filed within two years of when the cause of action first accrues.

The debate surrounding the deadline for filing a claim is focused on pinpointing when the cause of action first accrues. The prevailing theories as to how to answer that question are as follows:

The Date of Publication. The earliest date on which a claim challenging List 3 may have accrued is September 21, 2018, which is the date that USTR first published List 3 in the Federal Register. See Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 47,974 (Sept. 21, 2018). In accordance with CIT Rule 6(a), which closely follows the Federal Rules of Civil Procedure on calculating time for statute of limitations purposes, the deadline for filing challenges to List 3 under this theory would be September 22, 2020.

The Date of First Entry. The U.S. government began collecting the duties imposed under List 3 on September 24, 2018. There is an argument that until duties under List 3 were actively actually collected, there is no injury to redress and thus the clock on any claim could not begin running until collection began and duties under List 3 were an operational reality. Under this theory, the deadline for filing challenges to Section 301 duties under List 3 would be September 25, 2020.

The First Entry by an Importer: For many importers, the date of first payment of the duties on List 3 products would have been later than September 24, 2018. For those importers, the clock would not expire until two years from the date of the first payment of duties. This also indicates that a case challenging only List 4 would not need to be filed until two years from the effective date of that list, or September 1, 2021. See Notice of Modification of Section 301Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg 43304 (Aug. 20, 2019).

Entry-Specific Rolling Deadline: Typically, in customs cases, a separate cause of action accrues each an entry is made or liquidated. On that theory, there is not one universal deadline for each importer but a deadline for each entry. A failure to file on the earlier entries would extinguish the right to collect a refund but later entries would remain open to challenge.

At this moment, it is still an open question as to which statute of limitations theory governs List 3 challenges to Section 301 duties. There is very much an argument for additional actions to be filed. Furthermore, we also emphasize that the USTR first published List 4A in the Federal Register on August 20, 2019. This means that even using the conservative date of publication deadline for List 4A challenges, there remains ample opportunity for aggrieved importers with products subject to List 4A to timely file a claim (August 20, 2021).

For assistance in assessing or initiating a 301 action, under with List 3 or 4A, or for more information on 301 trade actions, please contact an attorney at Barnes, Richardson & Colburn LLP.