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Automakers Sue U.S. Government Over ‘Unlawful’ China Tariffs

Posted September 25, 2020


Several automakers including Tesla, Volvo, Ford, and Mercedes-Benz have filed lawsuits in the Court of International Trade against the Trump administration over what they claim are “unlawful” tariffs levied on certain parts imported from China.
Tesla Interior Featuring Chinese-Made Display
The cases, along with thousands of others that have been submitted to the court in recent weeks, target the expansion of tariffs by the Office of the U.S. Trade Representative, under Section 301 of the Trade Act of 1974. 

Background


Following an investigation into Beijing’s unfair trade practices, mainly concerning the forced transfer of technology and widespread violation of intellectual property rights, the U.S. had initially imposed duties on $50 billion worth of Chinese imports.

However, after China retaliated with retaliatory tariffs on U.S. exports, the administration greatly expanded the Section 301 duties to cover Chinese goods worth hundreds of billions of dollars.

In its filing, Mercedes accused the Trump administration of “prosecution of an unprecedented, unbounded, and unlimited trade war,” while Tesla denounced the tariffs on Chinese imports as being “arbitrary, capricious, and an abuse of discretion.”

The Argument


Tesla’s case involving Chinese-made computer and display screens incorporated into its Model 3 electric car, which had previously been denied a product exemption from the 25% duty, argues that the USTR failed to:

  • articulate a rational connection between the imposition of the Section 301 duties on Chinese products covered by List 3 and List 4A and the acts or policies found in its report to “burden or restrict” U.S. commerce, as required by law.
  • take action to impose duties on List 3 and List 4 products from China within the 12-month period required by law; and
  • articulate any basis—much less a reasoned basis—for its finding that the burden on U.S. commerce from the investigated unfair policies or practices increased as a result of China’s reaction to the Section 301 tariffs.

Additionally, the automaker contends that while Section Section 301 trade actions may be modified when no longer appropriate, this authorization does not permit USTR to increase an existing remedy action, but only allows for it to be decreased, removed, or suspended. Accordingly, the “USTR’s attempt to assert its modification authority as a basis to impose new duties on additional goods is thus contrary to the statute,” the filing states.

“Test Case” Possible


Importers have reportedly filed around 3,400 suits challenging the Section 301 tariffs over the past few weeks, vastly more than all the cases filed in the trade court during an entire year. In view of this deluge of claims, the Trump administration has asked the CIT to pause litigation while it decides how to manage the cases.

The Department of Justice has proposed that the CIT adopt a similar case management approach to that used in the 1990s concerning litigation over the Harbor Maintenance Tax. In that situation, with over 700 claims before it, the CIT decided to select United States Shoe Corporation as the nominal plaintiff in a test case, but with several prominent members of the customs bar invited to submit arguments.  

By whatever manner the court eventually proceeds with the matter, the U.S. government is expected to vigorously contest the arguments made and will most probably appeal any adverse rulings. That calculus may change, of course, should the upcoming presidential election result in a new administration, possibly with different views about the legitimacy of the Section 301 trade actions.    

Related Information

 

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Try our Section 301 Search Tool


GHY’s Section 301 – Search Tool can help you easily navigate through the complex array of Section 301 tariffs and product exclusions. Search by HTSUS number (i.e. 0304.61.0000; decimals are required, or the first 4 digits i.e. 0304), or search by product description (with a word/few words). 

If you have any questions about Section 301 product exclusions or Section 321 programs, don’t hesitate to contact one of our helpful trade experts today.

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