Case 1:20-cv-00886-N/A Document 5 Filed 09/18/20 Page 1 of 24
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`UNITED STATES COURT OF INTERNATIONAL TRADE
`NEW YORK, NEW YORK
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`LOTUS FOODS, INC.,
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`
`Plaintiff,
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`v.
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`UNITED STATES OF AMERICA; OFFICE OF THE
`UNITED STATES TRADE REPRESENTATIVE;
`ROBERT E. LIGHTHIZER, U.S. TRADE
`REPRESENTATIVE; U.S. CUSTOMS & BORDER
`PROTECTION; MARK A. MORGAN, U.S.
`CUSTOMS & BORDER PROTECTION ACTING
`COMMISSIONER
`
`
`Defendants.
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`Court No. 20-00886
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`
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`Plaintiff Lotus Foods, Inc., by and through its counsel, alleges as follows:
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`COMPLAINT
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`INTRODUCTION
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`1.
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`This action concerns a trade war between the United States and China that
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`impacts over $500 billion in imports from China.
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`2.
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`On September 21, 2018, the Office of the United States Trade Representative
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`(“USTR”) imposed a third round of tariffs on products covered by a list commonly known as
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`“List 3.” Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices
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`Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 47,974
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`(Sept. 21, 2018). On August 20, 2019, USTR imposed a fourth round of tariffs, commonly
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`known as “List 4.” Notice of Modification of Section 301 Action: China’s Acts, Policies, and
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`Case 1:20-cv-00886-N/A Document 5 Filed 09/18/20 Page 2 of 24
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`Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg.
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`43,304 (Aug. 20, 2019). The imposition of tariffs under List 3 and List 4 is unlawful.
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`3.
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`Pursuant to Section 301 of the Trade Act of 1974 (“Trade Act”) (19 U.S.C.
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`§ 2411), the USTR investigated China’s unfair intellectual property policies and practices.
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`Section 304 of the Trade Act (19 U.S.C. § 2414) required USTR to determine what action to take,
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`if any, within 12 months after initiation of that investigation. USTR failed to issue List 3 or the
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`subsequent List 4 within that time.
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`4.
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`Section 307 of the Trade Act (19 U.S.C. § 2417) does not permit USTR to expand
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`the imposition of tariffs to other imports from China for reasons disconnected from the unfair
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`intellectual property policies and practices it originally investigated under Section 301 of the
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`Trade Act. Yet that is exactly what Defendants did here. Defendants promulgated the List 3 and
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`List 4 duties in response to China’s retaliatory duties and other unrelated issues separate from
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`USTR’s original investigation. Defendants’ promulgation of List 3, and later List 4, was not a
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`valid modification of its initial action because it was not based on the acts, policies, or practices
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`covered by USTR’s original investigation.
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`5.
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`The arbitrary manner in which Defendants implemented the List 3 and List 4 tariff
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`actions also violate the Administrative Procedure Act (“APA”). USTR (1) failed to provide
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`sufficient opportunity for comment; (2) failed to consider relevant factors when making its
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`decision, e.g., undertaking no analysis of the supposed “increased burden” imposed on U.S.
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`commerce from the unfair policies and practices that it originally investigated; and (3) failed to
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`connect the record facts to the choices it made. Indeed, despite receiving over 9,000 comments
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`from the public, USTR said absolutely nothing about how those comments shaped its final
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`promulgation of List 3 and List 4.
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`Case 1:20-cv-00886-N/A Document 5 Filed 09/18/20 Page 3 of 24
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`6.
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`The Court should set aside Defendants’ actions as ultra vires and otherwise contrary
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`to law, as well as order Defendants to refund (with interest) any duties paid by Plaintiff pursuant
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`to List 3 and List 4.
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`JURISDICTION
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`7.
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`The Court possesses subject matter jurisdiction over this action pursuant to 28
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`U.S.C. § 1581(i)(1)(B), which confers “exclusive jurisdiction” to the Court over “any civil action
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`commenced against the United States, its agencies, or its officers, that arises out of any law of the
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`United States providing for . . . tariffs, duties, fees, or other taxes on the importation of
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`merchandise for reasons other than the raising of revenue.” 28 U.S.C. § 1581(i)(1)(B).
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`PARTIES
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`8.
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`Plaintiff Lotus Foods, Inc. is a privately-owned company based in California that
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`imports and sells rice, rice-based noodles, and soups. Lotus Foods has made numerous entries of
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`rice, rice-based noodles, and paper packaging materials (e.g., cartons, boxes, and cups) classified
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`under HTSUS subheadings 1006.30.9015, 1006.30.9065, 1902.19.2090, 1902.19.4000,
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`4819.20.0040, and 4823.69.0020, respectively, which are subject to the additional ad valorem
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`duties under List 3. Lotus Foods also made numerous entries of soups and broths classified
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`under HTSUS subheadings 2104.10.0020, which are subject to the additional ad valorem duties
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`under List 4.
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`9.
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`Defendant United States of America is the Federal Government of the United
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`States of America. Defendant United States of America received the disputed tariffs and is the
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`statutory defendant under the APA, 5 U.S.C. § 702, and 28 U.S.C. § 1581(i)(1)(B).
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`10.
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`The Office of the USTR is an executive agency of the United States charged with
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`investigating a foreign country’s trade practices under Section 301 of the Trade Act and
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`implementing “appropriate” responses, subject to the direction of the President. USTR conducted
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`the Section 301 investigation at issue and made numerous decisions regarding List 3 and List 4.
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`11.
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`Ambassador Robert Lighthizer currently holds the position of USTR and serves as
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`the director of the Office of the USTR. In these capacities, he made numerous decisions regarding
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`List 3 and List 4.
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`12.
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`Defendant U.S. Customs and Border Protection (“CBP”) is the executive agency
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`of the U.S. Government responsible for collecting duties on imports. CBP collected payments
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`made by Plaintiff to account for the tariffs imposed by USTR under List 3 and List 4.
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`13.
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`Defendant Mark A. Morgan is the Acting Commissioner of the CBP and is sued
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`in his official capacity only. He oversees CBP’s collection of duties paid by Plaintiff under List 3
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`and List 4.
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`STANDING
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`14.
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`Plaintiff Lotus Foods has standing to sue because it is “adversely affected or
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`aggrieved by agency action within the meaning of” the APA. 5 U.S.C. § 702; see 28 U.S.C.
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`§ 2631(i) (“Any civil action of which the Court of International Trade has jurisdiction . . . may
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`be commenced in the court by any person adversely affected or aggrieved by agency action
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`within the meaning of Section 702 of title 5.”). Tariffs imposed by Defendants pursuant to List 3
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`and List 4 adversely affected and aggrieved Plaintiff Lotus Foods because it was required to pay
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`these unlawful duties.
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`TIMELINESS OF THIS ACTION
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`15.
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`A plaintiff must commence an action under 28 U.S.C. § 1581(i)(1)(B) “within two
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`years after the cause of action first accrues.” 28 U.S.C. § 2636(i).
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`Case 1:20-cv-00886-N/A Document 5 Filed 09/18/20 Page 5 of 24
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`16.
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`Plaintiff’s claims accrued at the earliest on September 21, 2018, when USTR
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`published notice of List 3 in the Federal Register. Notice of Modification of Section 301 Action:
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`China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and
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`Innovation, 83 Fed. Reg. 47,974 (Sept. 21, 2018). Plaintiff Lotus Foods has therefore timely filed
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`this action.
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`RELEVANT LAW
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`17.
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`Section 301 of the Trade Act authorizes USTR to investigate a foreign country’s
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`trade practices. 19 U.S.C. § 2411(b). If the investigation reveals an “unreasonable or
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`discriminatory” practice and “burdens or restricts United States commerce,” USTR may take
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`“appropriate” action, such as imposing tariffs on imports from the country that administered the
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`unfair practice. Id. § 2411(b)(1), (c)(1)(B).
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`18.
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`Section 304 of the Trade Act requires USTR to determine what action to take, if
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`any, within 12 months after the initiation of the underlying investigation. Id. § 2414(a)(1)(B),
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`(2)(B).
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`19.
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`Section 307 of the Trade Act, in relevant part, allows USTR to “modify or
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`terminate” an action taken pursuant to Section 301 of the Trade Act either when the “burden or
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`restriction on United States commerce” imposed by the investigated foreign country’s practice has
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`“increased or decreased” or when the action “is no longer appropriate.” Id. § 2417(a)(1)(B), (C).
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`Section 307 further requires USTR to “consult with . . . representatives of the domestic industry
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`concerned, and . . . provide opportunity for the presentation of views by other interested persons
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`affected by the proposed modification or termination concerning the effects of the modification
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`or termination and whether any modification or termination of the action is appropriate.” Id.
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`§ 2417(a)(2).
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`Case 1:20-cv-00886-N/A Document 5 Filed 09/18/20 Page 6 of 24
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`I.
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`USTR’s Investigation
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`STATEMENT OF FACTS
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`20.
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`The current U.S.-China trade war grew from a narrow dispute. On August 14, 2017,
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`President Trump directed Ambassador Lighthizer to determine whether to investigate China’s
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`laws, policies, practices, or actions related to intellectual property, innovation, and technology.
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`Addressing China’s Laws, Policies, Practices, and Actions Related to Intellectual Property,
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`Innovation, and Technology, 82 Fed. Reg. 39,007 (Aug. 17, 2017). According to the President,
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`certain Chinese “laws, policies, practices, and actions” on intellectual property, innovation, and
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`technology “may inhibit United States exports, deprive United States citizens of fair
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`remuneration for their innovations, divert American jobs to workers in China, contribute to our
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`trade deficit with China, and otherwise undermine American manufacturing, services, and
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`innovation.” Id.
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`21.
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`Four days later, on August 18, 2017, USTR formally initiated an investigation into
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`“whether acts, policies, and practices of the Government of China related to technology transfer,
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`intellectual property, and innovation are actionable under [Section 301(b) of] the Trade Act.”
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`Initiation of Section 301 Investigation; Hearing; and Request for Public Comments: China’s Acts,
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`Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 82
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`Fed. Reg. 40,213 (Aug. 24, 2017).
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`22.
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`On March 22, 2018, USTR released a report announcing the results of its
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`investigation. OFFICE OF THE U.S. TRADE REPRESENTATIVE, Findings of the Investigation Into
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`China’s Acts, Policies, And Practices Related to Technology Transfer, Intellectual Property, and
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`Innovation Under Section 301 of The Trade Act of 1974 (Mar. 22, 2018),
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`https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF. USTR found that “China’s
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`acts, policies, and practices” related to technology transfer, intellectual property, and innovation
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`are “unreasonable” and “burden or restrict U.S. commerce.” Id. at 45. USTR based its findings
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`on (1) China’s use of foreign ownership restrictions, foreign investment restrictions, and
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`administrative licensing and approval processes to pressure technology transfers from U.S. to
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`Chinese companies, id. at 45; (2) China’s use of licensing processes to transfer technologies from
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`U.S. to Chinese companies on terms that favor Chinese recipients, id. at 48; (3) China’s
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`facilitation of systematic investment in, and acquisition of, U.S. companies and assets by
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`Chinese entities to obtain technologies and intellectual property for purposes of large-scale
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`technology transfer, id. at 147; and (4) China’s cyber intrusions into U.S. computer networks to
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`gain access to valuable business information, id. at 171. In its report, USTR did not quantify the
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`burden or restriction imposed on U.S. commerce by the investigated practices.
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`23.
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`On the same day, March 22, 2018, USTR published a “Fact Sheet” stating that
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`“[a]n interagency team of subject matter experts and economists estimates that China’s policies
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`result in harm to the U.S. economy of at least $50 billion per year.” OFFICE OF THE U.S. TRADE
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`REPRESENTATIVE, Section 301 Fact Sheet (Mar. 22, 2018), https://ustr.gov/about-us/policy-
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`offices/press-office/fact-sheets/2018/march/section-301-fact-sheet. USTR also indicated that, at
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`President Trump’s direction, it would “propose additional tariffs” of 25% ad valorem “on certain
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`products of China, with an annual trade value commensurate with the harm caused to the U.S.
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`economy resulting from China’s unfair policies.” Id.; see Actions by the United States Related to
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`the Section 301 Investigation of China’s Laws, Policies, Practices, or Actions Related to
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`Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 13,099 (Mar. 27, 2018)
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`(President Trump’s directive).
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`II.
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`Lists 1 & 2
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`24.
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`Between April and August 2018 (i.e., within the 12-month statutory deadline from
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`the initiation of the investigation in August 2017, see 19 U.S.C. § 2414(a)(2)(B)), Defendants
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`undertook actions to remedy the estimated harm to the U.S. economy caused by the investigated
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`unfair practices, ultimately imposing duties on imports from China covered by lists commonly
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`known as Lists 1 and 2.
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`25.
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`On April 6, 2018, USTR published notice of its intent to impose “an additional duty
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`of 25 percent on a list of products of Chinese origin.” Notice of Determination and Request for
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`Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s
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`Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and
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`Innovation, 83 Fed. Reg. 14,906, 14,907 (Apr. 6, 2018). The products on the proposed list covered
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`approximately 1,300 separate tariff lines with a total value of “approximately $50 billion in
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`terms of estimated annual trade value for calendar year 2018.” Id. USTR explained that it chose
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`$50 billion because that amount was “commensurate with an economic analysis of the harm
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`caused by China’s unreasonable technology transfer policies to the U.S. economy, as covered by
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`USTR’s Section 301 investigation.” OFFICE OF THE U.S. TRADE REPRESENTATIVE, Under Section
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`301 Action, USTR Releases Proposed Tariff List on Chinese Products (Apr. 3, 2018),
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`https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/april/under-section-301-
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`action-ustr.
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`26.
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`On June 20, 2018, USTR published notice of its final list of products subject to an
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`additional duty of 25% ad valorem, the list commonly known as “List 1.” Notice of Action and
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`Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section
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`301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property,
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`and Innovation, 83 Fed. Reg. 28,710 (June 20, 2018). USTR explained that it had “narrow[ed] the
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`proposed list in the April 6, 2018 notice to 818 tariff subheadings, with an approximate annual
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`trade value of $34 billion.” Id. at 28,711.
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`27.
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`At the same time that it finalized List 1, USTR announced that it intended to impose
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`a 25% ad valorem duty on a second proposed list of Chinese products to “maintain the
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`effectiveness of a $50 billion trade action” grounded in its Section 301 investigation. Id. at
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`28,712. USTR announced a proposed List 2 covering 284 tariff subheadings with “an
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`approximate annual trade value of $16 billion.” Id. at 28,711–12.
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`28.
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`On August 16, 2018, USTR published notice of the final list of products subject to
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`an additional duty of 25% ad valorem in List 2, including “279 tariff subheadings” with an “annual
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`trade value . . . remain[ing] approximately $16 billion.” Notice of Action Pursuant to Section
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`301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property,
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`and Innovation, 83 Fed. Reg. 40,823, 40,823–24 (Aug. 16, 2018).
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`III. List 3 and List 4
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`29.
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`After USTR announced the results of its investigation in March 2018, tensions
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`between the governments of China and the United States escalated. In the following months,
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`Defendants expanded the scope of the tariffs imposed under Section 301 of the Trade Act to
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`cover imports worth more than $500 billion—ten times the amount it had deemed
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`“commensurate” with the findings of USTR’s original investigation. See OFFICE OF THE U.S.
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`TRADE REPRESENTATIVE, Under Section 301 Action, USTR Releases Proposed Tariff List on
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`Chinese Products (Apr. 3, 2018), https://ustr.gov/about-us/policy-offices/press-office/press-
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`releases/2018/april/under-section-301-action-ustr. Defendants did so for reasons untethered to the
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`unfair practices that USTR had originally investigated.
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`A.
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`30.
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`List 3
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`Shortly after President Trump directed USTR in March 2018 to consider
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`imposing duties on $50 billion in Chinese products, China promptly threatened to impose
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`retaliatory duties on the same value of imports from the United States. In response, President
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`Trump “instructed the USTR to consider whether $100 billion of additional tariffs would be
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`appropriate under Section 301” due to “China’s unfair retaliation.” THE WHITE HOUSE, Statement
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`from Donald J. Trump on Additional Proposed Section 301 Remedies, STATEMENT & RELEASES
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`(Apr. 5, 2018), https://www.whitehouse.gov/briefings-statements/statement-president-donald-j-
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`trump-additional-proposed-section-301-remedies/.
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`31. When USTR finalized List 1 in mid-June 2018, President Trump warned China that
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`he would consider imposing additional tariffs on Chinese goods if China retaliated against the
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`United States. See, e.g., Vicki Needham & Max Greenwood, Trump Announces Tariffs on $50
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`Billion in Chinese Goods, THE HILL (June 15, 2018),
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`https://thehill.com/homenews/administration/392421-trump-announces-tariffs-on-50-billion-in-
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`chinese-goods (“The president said the United States will pursue additional tariffs if China
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`retaliates ‘such as imposing new tariffs on United States goods, services or agricultural products;
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`raising non-tariff barriers; or taking punitive actions against American exporters or American
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`companies operating in China.’”).
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`32.
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`On June 18, 2018, President Trump formally directed USTR to consider whether
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`the United States should impose additional duties on products from China with an estimated trade
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`value of $200 billion—despite USTR having not yet implemented List 1 and List 2. President
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`Trump acknowledged that China’s threatened retaliatory “tariffs on $50 billion worth of United
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`States exports” motivated his decision. THE WHITE HOUSE, Statement from the President
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`Regarding Trade with China, STATEMENT & RELEASES (June 18, 2018),
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`https://www.whitehouse.gov/briefings-statements/statement-president-regarding-trade-china-2/
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`(“This latest action by China clearly indicates its determination to keep the United States at a
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`permanent and unfair disadvantage, which is reflected in our massive $376 billion trade imbalance
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`in goods. This is unacceptable.”).
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`33.
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`Acknowledging the purpose of the President’s directive, USTR stated that it would
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`design the newly “proposed tariffs to offset China’s action,” rather than to address any of the
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`harms identified in its Section 301 investigation. OFFICE OF THE U.S. TRADE REPRESENTATIVE,
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`USTR Robert Lighthizer Statement on the President’s Additional China Trade Action (June 18,
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`2018), https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/june/ustr-robert-
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`lighthizer-statement-0 (explaining that, although Lists 1 and 2 “were proportionate and
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`responsive to forced technology transfer and intellectual property theft by the Chinese” identified
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`in the Section 301 investigation, the proposed duties for a third list of products were necessary to
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`respond to the retaliatory and “unjustified tariffs” that China may impose to target “U.S.
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`workers, farmers, ranchers, and businesses”).
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`34.
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`China retaliated by imposing 25% ad valorem tariffs on $50 billion in U.S. goods
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`implemented in two stages of $34 billion and $16 billion on the same dates the United States
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`began collecting its own 25% tariffs under List 1 (July 6, 2018) and List 2 (August 23, 2018).
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`See, e.g., China hits back after US imposes tariffs worth $34bn, BBC News (July 6, 2018),
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`https://www.bbc.com/news/business-44707253; Fred Imbert, China slaps 25% tariffs on $16
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`billion worth of US goods, CNBC (Aug. 8, 2018, 8:26 AM),
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`https://www.cnbc.com/2018/08/08/china-announces-25percent-tariffs-on-16-billion-worth-of-us-
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`goods-including.html.
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`35.
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`About a week after China imposed its first round of retaliatory duties, on July 17,
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`2018, USTR published notice of its proposal to “modify the action in this investigation by
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`maintaining the original $34 billion action and the proposed $16 billion action, and by taking a
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`further, supplemental action” in the form of “an additional 10 percent ad valorem duty on [a list
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`of] products [from] China with an annual trade value of approximately $200 billion.” Request for
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`Comments Concerning Proposed Modification of Action Pursuant to Section 301: China’s Acts,
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`Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83
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`Fed. Reg. 33,608 (July 17, 2018). USTR invoked Section 307(a)(1)(C) of the Trade Act,
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`pursuant to which USTR “may modify or terminate any action, subject to the specific direction, if
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`any, of the President with respect to such action, . . . if . . . such action is being taken under section
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`301(b) of this title and is no longer appropriate.” Id. at 33,609 (citing 19 U.S.C. § 2417(a)(1)(c)).
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`USTR initially set a deadline of August 17, 2018 for initial comments; August 20–23, 2018 for a
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`public hearing; and August 30, 2018 for rebuttal comments. Id. at 33,608.
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`36.
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`In its notice, USTR confirmed that it had relied on China’s decision to impose
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`“retaliatory duties” as the primary basis for its proposed action. Id. at 33,609 (asserting as
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`justification “China’s response to the $50 billion action announced in the investigation and its
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`refusal to change its acts, policies, and practices”). USTR explicitly tied the $200 billion in its
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`proposed action to the level of retaliatory duties imposed by China on U.S. imports, noting that
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`“action at this level is appropriate in light of the level of China’s announced retaliatory action ($50
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`billion) and the level of Chinese goods imported into the United States ($505 billion in 2017).”
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`Id.; see also id. (Because “China’s retaliatory action covers a substantial percentage of U.S. goods
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`exported to China ($130 billion in 2017),” “the level of the U.S. supplemental action must cover a
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`substantial percentage of Chinese imports.”). Although it pointed to China’s retaliatory measures,
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`USTR did not identify any increased burdens or restrictions on U.S. commerce resulting from the
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`unfair practices that USTR had investigated. See id.
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`37.
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`USTR’s contemporaneous press statements confirmed that China’s retaliatory
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`duties motivated its proposed action. Ambassador Lighthizer stated that the proposed action
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`came “[a]s a result of China’s retaliation and failure to change its practice.” OFFICE OF THE U.S.
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`TRADE REPRESENTATIVE, Statement by U.S. Trade Representative Robert Lighthizer on Section
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`301 Action (July 10, 2018), https://ustr.gov/about-us/policy-offices/press-office/press-
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`releases/2018/july/statement-us-trade-representative.
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`38.
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`That same day, President Trump suggested that the United States’ trade imbalance
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`with China supported the decision. President Trump (@realDonaldTrump), TWITTER (July 10,
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`2018, 9:17 PM), https://twitter.com/realDonaldTrump/status/1005982266496094209. Over the
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`following weeks, President Trump also expressed his frustration over China’s purported
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`manipulation of its currency and national monetary policy, as well as his continued displeasure
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`over China’s retaliatory tariffs and the trade imbalance between the two nations. See, e.g.,
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`President Trump (@realDonaldTrump), TWITTER (July 20, 2018, 8:43 AM),
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`https://twitter.com/realDonaldTrump/status/1020287981020729344; President Trump
`
`(@realDonaldTrump), TWITTER (July 20, 2018, 8:51 AM),
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`https://twitter.com/realDonaldTrump/status/1020290163933630464; President Trump
`
`(@realDonaldTrump), TWITTER (July 25, 2018, 7:20 AM),
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`https://twitter.com/realDonaldTrump/status/1022079127799701504; President Trump
`
`(@realDonaldTrump), TWITTER (July 25, 2018, 7:01 AM EDT),
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`https://twitter.com/realDonaldTrump/status/1022074252999225344.
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`Case 1:20-cv-00886-N/A Document 5 Filed 09/18/20 Page 14 of 24
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`39.
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`Shortly thereafter, on August 1, 2018, Ambassador Lighthizer announced that, in
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`light of China’s retaliatory duties, USTR would propose to increase the additional duty from
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`10% to 25% ad valorem. Rather than addressing the practices that USTR investigated pursuant to
`
`Section 301 of the Trade Act, he stated that China “[r]egrettably . . . has illegally retaliated against
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`U.S. workers, farmers, ranchers and businesses.” OFFICE OF THE U.S. TRADE REPRESENTATIVE,
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`Statement by U.S. Trade Representative Robert Lighthizer on Section 301 Action (Aug. 1, 2018),
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`https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/statement-us-
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`trade-representative.
`
`40.
`
`On August 7, 2018, USTR, at the direction of President Trump, formally
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`proposed “raising the level of the additional duty in the proposed supplemental action from 10
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`percent to 25 percent.” Extension of Public Comment Period Concerning Proposed Modification
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`of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology
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`Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 38,760, 38,760 (Aug. 7, 2018).
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`USTR also set new dates for a public hearing over six days ending on August 27, 2018. See id.;
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`see also OFFICE OF THE U.S. TRADE REPRESENTATIVE, Public Hearings on Proposed Section 301
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`Tariff List (Aug. 17, 2018), https://ustr.gov/about-us/policy-offices/press-office/press-
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`releases/2018/august/public-hearings-proposed-section-301 (modifying hearing schedule).
`
`41.
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`At the same time, USTR adjusted the deadlines for the submission of written
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`comments, setting September 6, 2018—less than a month later—as the new deadline for both
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`initial and rebuttal comments from the public. Extension of Public Comment Period Concerning
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`Proposed Modification of Action Pursuant to Section 301: China’s Acts, Policies, and Practices
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`Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. at 38,761.
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`That adjustment, deviating from its past practices, prevented both USTR and the public from
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`Case 1:20-cv-00886-N/A Document 5 Filed 09/18/20 Page 15 of 24
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`considering initial comments at the hearing, and left insufficient time for interested parties to
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`review and respond to the initial comments filed by other parties. USTR also limited each
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`hearing participant to five minutes. OFFICE OF THE U.S. TRADE REPRESENTATIVE, Proposed
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`Modification of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to
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`Technology Transfer, Intellectual Property, and Innovation, REGULATIONS.GOV (July 17, 2018),,
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`https://beta.regulations.gov/document/USTR-2018-0026-0001. Despite those obstacles, the
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`public submitted over 6,000 comments, and 350 witnesses appeared at the six-day hearing. Id.;
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`see also Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices
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`Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 47,974
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`(Sept. 21, 2018).
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`42.
`
`On September 17, 2018—eleven days after receiving final comments from the
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`public—President Trump announced that he had directed USTR “to proceed with placing
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`additional tariffs on roughly $200 billion of imports from China.” THE WHITE HOUSE, Statement
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`from the President, STATEMENT & RELEASES (Sep. 17, 2018),
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`https://www.whitehouse.gov/briefings-statements/statement-from-the-president-4/. Once again,
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`the President made clear that China’s response to the $50 billion tariff action (i.e., List 1 and List
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`2 duties) motivated his decision, pointing specifically to China’s “recently imposed new tariffs.”
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`Id. He immediately promised to proceed with “phase three” of the plan—an additional $267
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`billion tariff action—“if China takes retaliatory action against our farmers or other industries.”
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`Id.
`
`43.
`
`Following the President’s announcement, on September 21, 2018, USTR
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`published notice of the final list of products subject to an additional duty, a list commonly known
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`as “List 3.” Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices
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`Case 1:20-cv-00886-N/A Document 5 Filed 09/18/20 Page 16 of 24
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`Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 47,974
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`(Sept. 21, 2018). USTR imposed a 10% ad valorem tariff that was set to rise automatically to
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`25% ad valorem on January 1, 2019. Id. USTR determined that the List 3 duties would apply to
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`all listed products that enter the United States from China on or after September 24, 2018. Id.
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`USTR did not respond to any of the over 6,000 comments that it received or any of the testimony
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`provided by roughly 350 witnesses. Id.
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`44.
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`As legal support for its action, USTR cited Section 307(a)(1)(B) of the Trade Act,
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`which provides that USTR “may modify or terminate any action, subject to the specific direction
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`. . . of the President . . . taken under Section 301 if the burden or restriction on United States
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`commerce of the denial of rights, or of the acts, policies, and practices, that are the subject of such
`
`action has increased or decreased.” Id. (brackets omitted). USTR stated that the relevant burden
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`“continues to increase, including following the one-year investigation period,” adding that
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`“China’s unfair acts, policies, and practices include not just its specific technology transfer and
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`IP polices referenced in the notice of initiation in the investigation, but also China’s subsequent
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`defensive actions taken to maintain those policies.” Id. USTR also cited Section 307(a)(1)(C) of
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`the Trade Act, arguing that China’s response to the $50 billion tariff action “has shown that the
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`current action no longer is appropriate” because “China openly has responded to the current
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`action by choosing to cause further harm to the U.S. economy, by increasing duties on U.S.
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`exports to China.” Id. at 47,975.
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`45.
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`In the following months, China and the United States attempted to resolve their
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`differences through trade negotiations. Based on the progress made with China in those
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`negotiations, the Trump Administration announced in December 2018, and again in March 2019,
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`that it would delay the scheduled increase in the List 3 duty rate from 10% to 25%. Notice of
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`Case 1:20-cv-00886-N/A Document 5 Filed 09/18/20 Page 17 of 24
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`Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology
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`Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 65,198 (Dec. 19, 2018); Notice of
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`Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology
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`Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 7,966 (Mar. 5, 2019).
`
`46.
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`The trade negotiations ultimately stalled. In May 2019, USTR announced its
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`intent to raise the tariff rate on List 3 goods to 25%, effective either May 10, 2019 or June 1, 2019,
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`depending on the day of export. See Notice of Modification of Section 301 Action: China's Acts,
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`Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 84
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`Fed. Reg. 20,459 (May 9, 2019) (“List 3 Rate Increase Notice”); see also Implementing
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`Modification to Section 301 Action: China’s Acts, Policies, and Practices Related to Tec