Section 301 Litigation Update: Potential Statute of Limitations Deadline Looms for Challenging List 4A Tariffs

As the litigation in the U.S. Court of International Trade (CIT) challenging the validity of the Section 301 List 3 and List 4A duties marches forward (In Re Section 301 Cases, 1:21-cv-00052), affected importers are continuing to file so-called “me too” lawsuits to effectively join a large (and growing) group of plaintiffs hoping to recover duty refunds if the lead case is successful.

We expect that many more “me too” lawsuits will be filed in the coming months, as importers affected by the List 4A tariffs that have yet to file a lawsuit face an August 20, 2021, deadline. This is arguably the first deadline for challenging the Section 301 List 4A tariffs, coming two years after the Federal Register notice that originally announced List 4A. As explained below, however, newly filed “me too” lawsuits are continuing to challenge List 3 tariffs as well.

Background

On September 10, 2020, an importer of vinyl tiles filed a lawsuit at the CIT (HMTX Industries LLC et al. v. United States (Court No. 20-00177)) challenging the U.S. Trade Representative’s (USTR) authority to assess Section 301 List 3 duties (a substantive claim under the Trade Act of 1974) on certain products originating from China, as well as the USTR’s procedural steps to implement those duties (a procedural claim under the Administrative Procedures Act (APA)). The complaint was subsequently amended to include the same claims against Section 301 List 4A duties.

Since that time, nearly 4,000 “me-too” lawsuits have been filed challenging the List 3 and/or List 4A Section 301 duties on the same grounds as HMTX — hoping to benefit if the lead case is successful, but without incurring the large expense of fully litigating their own claims (given that, per court order, all “me too” lawsuits are automatically stayed pending a resolution of the lead case).

The parties are in the process of briefing the merits of the case, as the government submitted its opening brief (and motion to dismiss) on June 1, 2021. The plaintiffs are slated to submit their opening brief and response on August 2, 2021. Per the court’s current scheduling order, all merits briefing will be completed by November 15, 2021.

Statute of Limitations for Challenging List 3 Tariffs

The majority of the “me-too” lawsuits challenging List 3 were filed by September 21, 2020, which was two years after the USTR published List 3 in the Federal Register. This was the most conservative approach for avoiding a statute of limitations defense, as this is arguably the deadline for the APA procedural claim.

However, as described in our September 30, 2020 client alert, there is an argument that a “me-too” lawsuit asserting a substantive challenge to List 3 duties may still be timely under a so-called “continuing claim” theory. Specifically, there is an argument — which continues to be pled in newly filed “me too” lawsuits — that the cause of action for a substantive challenge to List 3, as opposed to a procedural challenge to its method of promulgation, accrues each time List 3 duties are assessed on an aggrieved importer. Under this “continuing claim” theory, an importer may have the opportunity to file a “me-too” lawsuit based on each entry subject to Section 301 List 3 duties. Therefore, a lawsuit filed today may be considered timely for List 3 duties paid within two years prior to the filing of the action.

Statute of Limitations for Challenging List 4A Tariffs

Although smaller in scope than the List 3 tariffs (which cover over 6,000 subheadings under the Harmonized Tariff Schedule of the United States (HTSUS) and, in total, impact approximately $200 billion in annual imports from China), the List 4A tariffs still cover a large swath of products, including, but not limited to, foodstuffs, footwear, apparel, accessories, chemical products, steel, aluminum and machinery (impacting approximately $116 billion in annual imports from China).

Because USTR published List 4A in the Federal Register on August 20, 2019, the two-year statute of limitations for filing a List 4A lawsuit based on publication date is set to expire on August 20, 2021. This means that importers still have an opportunity to file List 4A claims within two years after the USTR published this list in the Federal Register, arguably meeting the statute of limitations deadline for an APA procedural claim on these duties.

The relatively minimal cost of filing a “me-too” lawsuit, coupled with the potentially significant relief at issue, continues to present a low-risk/high-reward scenario for those importers that have not yet filed suit. For List 4A importers, the upcoming two-year anniversary of publication presents a significant consideration for those that have not yet joined the litigation.

For More Information

If you are still interested in filing a “me-too” lawsuit to preserve your rights to potential List 3 and/or List 4A duty refunds, or if you have any questions about this pending litigation (including alternative options for relief, such as intervening in the pending HMTX Industries case or filing administrative protests), please contact one of the Faegre Drinker professionals below.