CTA Has ‘Plausible’ Case to Block Tariffs, but USTR’s ‘Discretion’ Broad, Say Experts
CTA, having filed its “objections” to the proposed third tranche of Trade Act Section 301 tariffs on Chinese imports in Sept. 6 comments that also questioned the duties’ legality (see 1809070032), “will decide our best course of action if and when the president imposes retaliatory tariffs.” So said CTA President Gary Shapiro when we asked if the association will sue the Trump administration to block the tariffs from taking effect. President Donald Trump told reporters at the White House Monday that imposition of the tariffs would be announced imminently in a "pretty comprehensive statement."
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There’s “substantial concern” at CTA whether the proposed third tranche “complies” with the 1974 Trade Act, commented the association in its Sept. 6 submission. “Section 301 does not authorize the additional $200 billion in List 3 tariffs,” said CTA.
CTA in the document cited no case law backing its argument that U.S. Trade Representative Robert Lighthizer will have overstepped his authority if he orders the imposition of the third tranche, as he's expected to do. “We're looking into all of that, and basing the argument for now on the reading of section 301,” emailed Sage Chandler, CTA vice president-international trade, when asked about the missing citations of legal precedent. “We believe the administration has the authority to launch an investigation, and find damage, but not to continue into an unfettered trade war, based on the reaction of China to its initial findings,” said Chandler.
The courts in recent legal challenges involving the Trade Act have given the USTR broad “discretion” to carry out enforcement actions under a Section 301 investigation, said a March Congressional Research Service report. Virtually all those cases had to do with the USTR’s enforcement of trade agreements the U.S. had with other countries, said the report: “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.”
In the current trade war with China, “the US is not using 301 to oppose actions of a foreign country that violate US trade agreement rights, but instead that involve actions not regulated in existing WTO rules, but which the US still finds unreasonable or unfair,” emailed Cornell Law School professor John Barcelo, referencing the World Trade Organization. On the “plausibility of claims that the President does not have authority to continue a tit for tat trade war under section 301, without first obtaining a further USTR investigation, I would say I know of no precedent for this situation,” Barcelo told us. “Still, the arguments to that effect seem plausible to me -- that is, that the President needs a further USTR investigation and finding. Though presumably USTR would easily find Chinese retaliation to be unreasonable or unfair.”
Jennifer Hillman, an international trade law expert at Georgetown Law Center, agrees “the petitioners in the case have made strong arguments” about the USTR overstepping his authority, she emailed us about CTA’s hypothetical court challenge. “The difficulty is the degree to which the statute gives broad discretion to the President and USTR in a way that makes it hard to challenge their actions, coupled with the strong evidence that China has indeed engaged in widespread IP theft, forced tech transfers and such. So the substance of the 301 report is strong but the tactic of using ever escalating tariffs to address it is not.”
Questioning the USTR’s authority under Section 301 is “certainly a justification" for a court challenge, said consultant Robert Heiblim, incoming chairman of CTA’s Small Business Council and the outgoing chairman of CTA’s Audio Division. "And I suspect that we'll see it, whether it's CTA or they join with the National Retail Federation or one of those many trade organizations that are all pretty much aligned against this," he said, emphasizing that he's not a lawyer.
Heiblim, who serves on CTA’s 45-member board of industry leaders, hasn't heard anything in that capacity from the association "about next steps" in the ongoing legal strategy, he told us. The industry-leaders board doesn’t set policy, nor does it get involved in CTA’s “day-to-day” decision making as the higher-tier executive board does, said Heiblim. Any decision to mount a court challenge "almost certainly” would come after an authorization vote of the executive board, he said. The executive board "is currently reviewing all options," emailed Sony Electronics President Mike Fasulo, a longtime board member. We asked for comment from several other executive board members, but none responded.
USTR Lighthizer’s office released a notice Monday with instructions for making product exclusion requests for the second tranche of Section 301 tariffs that took effect Aug. 23. Granted requests will be good for a year after publication of the exclusion determination in the Federal Register and will be effective retroactively to Aug. 23, said the notice. The exclusion requests are due by Dec. 18 and responses due 14 days after a request is posted in docket USTR-2018-0032 at regulations.gov, it said.