Filing Protests to Object to the China 301 Tariff an Act of Futility – And a Waste of Money

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—

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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).”

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…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.

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