CTA, ‘Reviewing All Options,’ Weighs Court ‘Challenge’ to Block Chinese Tariffs

Tariffs in the third tranche “may be vulnerable to a legal challenge because they are not based on the required legal finding” of unfair Chinese trade practices, “and instead are retaliatory in nature and require a separate Section 301 investigation,” which U.S. Trade Representative Robert Lighthizer “did not conduct,” said CTA. Section 301 “authorizes actions following fact-based investigations, not the responses to China's retaliatory actions,” it said.

Section 307 of the Trade Act spells out USTR authority to modify or terminate trade actions, but “'does not extend so far as to allow USTR to quadruple the amount of goods subject to tariffs without a new investigation,” said CTA. Lighthizer’s office didn’t comment.

Any authority the USTR had to impose the third tranche expired “under the statutory deadlines” of Sections 304 and 305, said CTA. The USTR’s July 10 announcement proposing the third tranche “came well outside the 30-day limit” after Lighthizer concluded his 301 investigation into Chinese trade practices on March 22, it said. The third tranche also was based on “impermissible reasons post-dating the Section 301" -- a counter-reaction to Chinese retaliation -- rather than on the original Section 301 investigatory findings, as the statute requires, it said.

The law doesn't authorize Lighthizer “to impose brand new penalties that more than quadruple those imposed following the original investigation,” said CTA. Nor does the law give the administration “a blank check to increase tariffs at any time based on events post-dating the initial Section 301 investigation,” it said. “Such unfettered discretion is inconsistent with the fact-based determination required by Section 301.”

Even “setting aside” the questions whether the third tranche is “unlawful,” the administration’s procedures for “gathering public input and the substance of its tariff decisions are arbitrary and capricious and contrary to law,” said CTA. It complained of “shifting logistics and deadline changes” that “forced parties to focus their attention on navigating a confusing and inefficient process,” instead of addressing the “substance” of the administration’s “critical decisions,” it said. The administration “failed to provide reasoned rationales for the choices it has made, leaving parties without substantial official guidance on USTR’s deliberations and making it difficult for constituents to participate meaningfully in the review process,” it said.

CTA “can discern no consistent reason for USTR’s decisions to remove certain tariff lines from the proposed lists while others remain.” The agency “finalized and publicized” the first and second tranches “in a seemingly arbitrary process that provides no adequate reason for tariff inclusion or exclusion,” it said. Such “unreasoned decisionmaking is impermissible” under previous case law, it said.

Lighthizer’s office “has provided only narrow and confusing guidance on its decision-making process throughout the commenting period,” said CTA. “USTR has not made public how it weighs public comment.” USTR emailed us recently to say no records exist “responsive” to our Aug. 6 Freedom of Information Act request explaining how and why the agency removed finished TVs from China from the first tranche of tariffs imposed July 6 (see 1808310001).

Tight and "shifting deadlines" in the comment periods for all three tranches put a huge burden on CTA and its member companies, said the association. "Overlapping deadlines between actions on all three lists added to confusion among CTA’s member companies, especially small businesses that do not employ staff with trade expertise and do not frequently submit public comments."

CTA and its members are "growing increasingly concerned that the administration is not taking its obligation to carefully consider public comments seriously," in violation of the Administrative Procedure Act (APA), and may in fact be planning to implement the third tranche "as soon as the public comment period closes," said the association. "If the outcome of this process is not to be a fait accompli, USTR must seriously and carefully consider the many thousands of stakeholder views expressed in the comments, not rush to impose tariffs as soon as the comment period is over."

Media reports Friday quoted President Donald Trump as saying the third tranche could take effect “very soon” and that his administration was preparing a fourth tranche on $267 billion worth of Chinese imports. Trump's call "even more tariffs is irresponsible, not to mention legally questionable," said CTA Friday. "By slapping more punitive taxes on goods that Americans depend on, he is hurting our businesses, workers, innovation and the global standing of our nation. "A 25 percent tariff on a total of $517 billion worth in goods would be, by far, the biggest tax increase U.S. consumers have faced during his presidency."

It "appears settled" from the case law that the U.S. Court of International Trade is the venue for trying legal challenges to USTR actions stemming from Section 301 investigations, said a Congressional Research Service (CRS) analysis released March 29, a week after Lighthizer concluded his Section 301 probe on allegedly unfair Chinese trade practices. Past legal challenges have "centered" on whether the USTR complied with the APA, it said.

The case law also suggests the court will afford the USTR's actions "substantial deference" when challenged under the Trade Act, said the CRS. "What remains open to challenge before the courts, however, are allegations of statutory misinterpretations on the part of the USTR, violations of the statute’s procedures, actions that exceed the authority delegated to the USTR by statute, and similar claims," it said.