In previous articles we have brought to your attention various aspects of the China 301 Tariffs imposed by the US government on selected imports from China. These measures have been broken into four groupings: Lists 1, 2, 3, and 4A which were promulgated by the USTR and published in the Federal Register. The subject tariffs have been as high as 25% ad valorem. Importers by the tens of thousands filed Exclusion Requests through a specially designated USTR Portal and a fraction of them were granted, leaving most to pay the tariffs imposed in the 301 Tariff actions.

For the majority of the importers subject to these 301 Tariffs the question remains – what, if anything, can they do to object to these tariffs which are still being levied? Our last few articles have discussed the possibility of relief pursued through an action filed in the Court of International Trade (CIT). On September 10 HTMX Industries filed the first case challenging the US authority to impose the China 301 Tariffs against imports classified in Lists 3 and 4A and within two weeks over 3,500 other claims were filed by various aggrieved importers.

We have heard of some importers being advised to file protests with CBP to preserve their right to relief. That is the subject of this article, is it worthwhile for an importer subject to a China 301 Tariff to file a protest with CBP?

Authority for Protests / CIT Eligibility

There is a typical route to get judicial review at the CIT and it presupposes a denial of a protest.

Authority for protests is found within 19 U.S.C. § 1514 after a determination has been made by CBP. If CBP denied the protest the protestant is eligible to challenge the decision in the Court of International Trade (CIT) under the authority of 28 U.S.C. § 1581 (a). The language of the statute reads, “The Court of International Trade shall have exclusive jurisdiction of any civil action commenced to contest the denial of a protest, in whole or in part, under section 515 of the Tariff Act of 1930.”

The proper authority to file a 301 Tariff action in the CIT is not via 28 U.S.C. § 1581 (a), however, because the matter is non-protestable under Section 1514. That is because the rile of CBP is ministerial only and it would not have made a protestable determination. Proper authority for a 301 CIT claim is found instead through the CIT’s residual grant of jurisdiction, 28 U.S.C. §1581 (i)(1).

“In addition to the jurisdiction conferred upon the Court of International Trade by subsections (a)–(h) of this section and subject to the exception set forth in subsection (j) of this section, the Court of International Trade shall have exclusive jurisdiction of any civil action commenced against the United States, its agencies, or its officers, that arises out of any law of the United States providing for—

* * * *

(B)

tariffs, duties, fees, or other taxes on the importation of merchandise for reasons other than the raising of revenue;”

All of the recently filed 3,500 court cases claimed jurisdiction through this authority.

This residual grant of jurisdiction is based on Section 1581 (a) being not available. In other words, the filing of protests and going to the CIT after protest denial is either a viable program or it is not. Sections 1581 (a) and Section 1581 (i) ae mutually exclusive.

Effect of the Conrad Case

A June 1, 2020 decision in the CIT has important bearing on the issue of the necessity of protests as a prerequisite to bringing a court action. See J. Conrad LTD v. United States, Slip Op.20- 79 (CIT 2020). Chief Judge Timothy Stanceu ruled that a court has great latitude to grant equitable relief regardless of whether a protest was initially filed for the underlying action. The Conrad plaintiffs found themselves in court on what the presiding judge deemed a “non-protestable decision by Customs.” In strong language on pages 24-25of the Slip Opinion, the judge proclaimed the extensive powers of the CIT in awarding relief.

“This Court possesses “all the powers in law and equity” of a district court. 28 U.S.C. § 1585. Accordingly, with exceptions not applicable here, this Court may award any form of relief appropriate in a civil action, id. § 2643(c)(1), including, generally, a money judgment against the United States in a civil action commenced under 28 U.S.C. § 1581. Id. § 2643(a)(1).”

· * * *
…liquidation of Plaintiffs’ relevant entries prior to judgment would not constitute irreparable harm.

The CIT’s vast equitable powers can provide relief, including the refund of duties, to any plaintiff that has filed a Section 301 case in court with or without a protest having been filed. This relief is available both to the Conrad plaintiffs or to any of the importers injured after paying China 301 Tariffs. Neither Conrad nor a successful Section 301 Claimant would have to file a protest in order to preserve the right to relief.

Accordingly, it is our conclusion that advice to aggrieved 301 Tariff payers to file a protest is errant and a meaningless or futile gesture. It is not necessary for these aggrieved importers to file a protest per the decision in Conrad and in the first instance these importers are not entitled to file a protest because no negative determination by CBP triggered the right to protest. Query, if a protest has been denied as being non-protestable, how would the importer get into court after Section 1581 (a) has been ruled out?

To be sure, there is one, narrow role to play here for protests. That would be in those instances in which the importer contests the levy of the Section 301 Tariff either on the basis that the tariff classification was wrong at entry, and the product was therefore not subject to the List 3 or List 4A Tariffs, or the country of origin of the imported article was not China, to the same effect.

Aggrieved parties can go straight to court as long as they are not time-barred. There is speculation amongst customs and trade lawyers that the two year statute of limitations on CIT challenges to the payments of China 301 Tariffs does not run until an importer has paid the 301 Tariff, under the Administrative Procedure Act. Some claims have been filed in the CIT even after two years had passed after the September 21, 2018 notice of the List 3 action being published in the Federal Register or the September 24, 2018 effective date for collection of those tariffs. List 4A activities were only undertaken on August 20, 2019 at the earliest, so there is unquestionably plenty of time within which to file a claim based on List 4A exactions.

Please refer to our September 27 blog entry, CIT Court Actions re: China 301 Tariffs, List 3 and List 4A, which discusses the deadlines for an aggrieved importer to bring a CIT action to court. Please contact our law firm if you have any questions.

Many of you will know about the challenges to the List 3 and List 4A tariffs–the hottest thing at the CIT in 25 years.

The lead case, HMTX Industries, LLC et. al. v. United States, was filed at the Court of International Trade on 9/10. The law firm behind the filing spent considerable time in drafting the 19 page complaint. After it was filed, 3,500 cases were swiftly filed in the following two weeks, relying on the same legal theories – that the USTR lacked the authority to impose a punitive tariff. ITC and co-counsel have already filed suits on behalf of 8 clients. Under one theory, if these lawsuits are successful, not only plaintiffs who filed suit will get a refund of 301 duties paid but also any importer who paid duties will be entitled to a refund. That last speculation is not tested, and prior experience under the Harbor Maintenance Fee cases 20-25 years ago has me doubting it. Obviously, it is safer to file suit.

It is most likely that the lead case will proceed on a test-case basis and all of the other cases will be suspended, with no regular activity other than housekeeping activities and monitoring developments.

Timing

Although there is a two year statute of limitations to bring such a declaratory judgment action in the CIT, the issue then becomes, when does the cause of action accrue?

For List 3 timing, a filing may still be viable even now, after the 9/18 date of the 301 announcement anniversary and the 9/24 date of first tariff collections. If the first imports took place after 9/24/18 the theory would be that the cause of action accrued with the first levy of the tariff–on another theory, a suit could be brought on even later filed entries as the cause of action would have accrued on the entries that were being challenged when the tariffs were paid

In the case of List 4A, the time to file is still 11 months away, actions can be filed until at least August 2021.

Bottom line—it is still possible to file on List 3 (especially if the $$ are substantial) and definitely ok for List 4A. A suit with challenges to both Lists 3 and 4A could proceed.

It is possible to lower the duty owing to at time of entry by lowering the value of the declared entry. A popular means to lower the value is through the use of a multi-tiered series of transactions.
    
In Nissho Iwai American Corp. v United States, 16 C.I.T. 86, 786 F. Supp. 1002, reversed in part, 982 F. 2d 505 (Fed. Cir. 1992), the Court of Appeals for the Federal Circuit reviewed the standard for determining transaction value when there is more than one sale which may be considered as being a sale for exportation to the United States. The case involved a foreign manufacturer, a middleman, and a United States purchaser. The court held that the price paid by the middleman/importer to the manufacturer was the proper basis for transaction value. The court further stated that in order for a transaction to be viable under the valuation statute, it must be a sale negotiated at arm’s length, free from any non-market influences, and involving goods clearly destined for the United States. See also, Synergy Sport International, Ltd. v. United States, 17 C.I.T. 18 (1993).
In accordance with the Nissho Iwai decision CBP will presume that transaction value is based on the price paid by the importer. In further keeping with the court’s holding, CBP will note that an importer may request appraisement based on the price paid by the middleman to the foreign manufacturer in situations where the middleman is not the importer. However, it is the importer’s responsibility to show that the “first sale” price is acceptable under the standard set forth in Nissho Iwai. That is, the importer must present sufficient evidence that the alleged sale was a bona fide “arm’s length sale,” and that it was “a sale for export to the United States” within the meaning of 19 U.S.C. § 1401a.
ITC has advised numerous importers on ways to successfully engineer a First Sale for Export program.

IF YOU HAVE PAID LIST 3 OR 4A TARIFFS FROM CHINA

A recently filed lawsuit may provide an opportunity for refunds of trade remedy duties. To preserve your opportunity to secure refunds, importers must file their own claims.

The deadline for filing claims is Friday, September 24. List 3 was announced in the Federal Register on 9/21/18 and took effect on 9/24/18 so the two year statue of limitations to file runs in a few days. The statute of limitations for List 4A does not run for a few months. List 4A was announced on 8/20/19 and took effect from 9/1/19–so there is plenty of time to file.

Importers must work with legal counsel to review their options and file claim(s).


An import company who has been paying trade remedy tariffs on imports from China has filed a lawsuit with the Court of International Trade. The lawsuit centers around the timing of tariffs levied on products covered by List 3 and by default List 4A. In essence, the case challenges the actions of the United States Trade Representative (USTR) and asserts that Congress did not empower the executive branch to transform investigations targeting specific practices by a foreign country into broad trade wars. The case also argues that in promulgating List 3 and List 4A, the USTR failed to follow required statutory provisions.

As you consider your options, you may access your import history via GEODIS’ IRIS system or ACE. If you have any questions, please contact GEODIS Trade Service at tradeservices.ff.us@geodis.com”

The Real Scoop for you:

The suit follows on the heels of the success in getting the US court (the CIT) to uphold the importers’ challenge to the Section 232 Turkish steel tariff. See attached. That came out in late July.

The legal theory is that CIT has jurisdiction under 1581 (i) which allows for a suit to be filed within 2 years of the cause of action accruing. Challenges to Lists 1 and 2 are out of reach but that still leaves Lists 3 and 4.

If you had List 3 and List 4 entries then you could file now in one lawsuit.

Mark Neville of the ITC law firm is registered with the CIT could organize CIT filings for you. If it is going to be like the successful Harbor Maintenance Tax challenge of 25 years ago, the suit would not entail much activity at all after initial filing–it would just be a protective filing and then passivity–if success, some heavy lifting in order to show what tariffs should be refunded–could be entry-specific–and that is when the process will get more involved . Decision cannot be expected before early 2022 and it will certainly be appealed.

Court filing fee–US$400; legal fees about $2,000-3,000 for each filing (it is filing of a summons, complaint (nearly 20 pages in length) and various forms. Later fees will be at normal billing rates and will be quite minimal (if filings are required by the court) unless importers are successful and it will be necessary to provide detail showing refunds due .

Bottom line– a long shot since Sections 232 and 301 are very different statutes–but maybe worth a shot.