On August 24,2017, the Office of the U.S. Trade Representative (USTR) began a Section 301 investigation to determine whether acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation were actionable under the Trade Act of 1974. On March 22, 2018, USTR announced its affirmative findings and imposed tariff measures on technology related products to address China’s its affirmative finding. Thereafter, China retaliated with import tariffs against US products and President Trump ordered the USTR to impose additional tariffs on a variety of non-technology products at varying additional duty rates (from 7.5% to 25%). And in September 2018 and August 2019, USTR issued those further tariffs on non-technology related products (called List 3 and List 4A products), which imposed an additional $300 billion in tariffs on imported products from China.
In September 2020, companies and importers filed over 3,000 Complaints involving more than 6,500 plaintiffs alleging that Lists 3 and 4A exceed USTR’s authority under the Trade Act of 1974 and violated the Administrative Procedure Act (APA). The initial case, HMTX Industries, Ct. No. 20-177, was assigned to a three-judge panel of Chief Judge Barnett, Judge Kelly and Judge Choe-Groves. Thereafter, the court stayed all cases under a new lead case In re Section 301, Ct. No. 21-00052, and ordered a steering committee to assist the court. The government filed a Master Answer responding to all of the Complaints and then the U.S. government alleged that the CIT lacked authority to order refunds for List 3 or List 4A duties paid after liquidation even if plaintiffs prevail on the merits. Liquidation is defined as “the final computation or ascertainment of duties.” 19 C.F.R. § 159.1. Accordingly, on April 23, 2021, Plaintiffs filed a motion for a PI to protect the entries at issue in this case and require CBP to suspend liquidation of 301 entries. The Government responded and, Plaintiffs’ moved to and filed a Reply brief on their PI Motion. On June 17, 2021, the court held a remote oral argument on the Motion.
On July 6, 2021, the three-judge panel issued a decision with a two-judge majority (Judge Kelly and Judge Choe-Groves) granting a preliminary injunction that suspends the liquidation of unliquidated entries subject to List 3 and List 4A duties. Chief Judge Barnett dissented. The CIT’s majority decision held that liquidation of Plaintiffs’ entries constituted irreparable harm because it may foreclose Plaintiffs’ ability to challenge the Government’s imposition of duties paid or have those duties returned. The majority indicated that the potential unavailability of reliquidation or refund in this case sufficiently demonstrated irreparable harm. The court used a sliding scale approach where the greater the potential harm to the plaintiff, the lesser the burden on Plaintiffs to make the required showing of likelihood of success on the merits. To obtain a preliminary injunction, a party must demonstrate that there is a: (1) likelihood of success on the merits; (2) irreparable harm absent immediate relief; (3) the balance of interests weighs in favor of relief, and (4) that the injunction serves the public interest. The majority decision found that there was a sufficient likelihood of success on the merits and relief was warranted because the harm to Plaintiffs was great if they were unable to recover Section 301 duties that were unlawfully paid. Chief Judge Barnett dissented, stating that the court has the authority to order reliquidation on finally liquidated entries as a remedy in this case, and thus Plaintiffs’ did not show irreparable harm. The majority opinion also pointed to the court’s authority to issue refunds on finally liquidated entries, but still found irreparable harm given the Government’s refusal to conceded this point. He agreed with the position that the court has the authority to issue refunds on all past entries, but seeking suspension of liquidation of entries is a precautionary step in case the CIT’s view is overturned on appeal.
The CIT’s order regarding the PI temporarily restrained liquidation of any entries for the next 28 days and ordered the U.S. government to establish a repository through which plaintiffs who have filed a lawsuit may identify any unliquidated entries affected by the List 3 and List 4A duties. Within 7 days of the order, the government must meet with the Plaintiffs’ steering committee to discuss the establishment of the repository for any unliquidated entries. And within 14 days of the order, the government must establish such a repository.
The order requires the Plaintiffs to take the following steps in order to obtain suspension of liquidation of their unliquidated entries:
- Any plaintiff requesting suspension of liquidation must provide:
(i) Its full Importer of Record (IOR) number(s), including any suffix(es);
(ii) The case/court number and filing date of the Section 301 complaint as well as the CBP Center and team assignment (if known); and
(iii) The entry number and date of entry for any entries where suspension of liquidation is to be requested,
- The government is enjoined during the remainder of this litigation from liquidating any entries for which they received a request for suspension of liquidation, unless within 14 days of receiving such a request, and at their option, the government stipulates to refund any duties found to have been illegally collected and notifies the Plaintiffs of such stipulation.
- Any entry for which liquidation is suspended under the July 6, 2021 Order will be liquidated in accordance with any final court decision, and
- Any entry inadvertently liquidated by CBP in contravention of the order must be returned to unliquidated status.
The parties will next appear before the CIT for a status conference on July 15, 2021. If you have any questions regarding this case please do not hesitate to contact us.