Case 1:20-cv-01239-N/A Document 2 Filed 09/18/20 Page 1 of 24
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`Plaintiff,
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`v.
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`UNITED STATES COURT OF INTERNATIONAL TRADE
`_________________________________________________
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`Axiom Foods, Inc.,
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`UNITED STATES OF AMERICA;
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`OFFICE OF THE UNITED STATES TRADE
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`REPRESENTATIVE; ROBERT E. LIGHTHIZER, U.S.
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`TRADE REPRESENTATIVE; U.S. CUSTOMS &
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`BORDER PROTECTION; MARK A. MORGAN, U.S.
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`CUSTOMS AND BORDER PROTECTION ACTING
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`COMMISSIONER,
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`Defendants,
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`________________________________________________:
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`Court No.
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`COMPLAINT
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`Plaintiff Axiom Foods, Inc. (“Axiom”) by its undersigned attorneys, alleges the following:
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`1.
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`This action contests Defendants’ unlawful imposition of tariffs on Chinese-origin
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`goods imported by Plaintiff pursuant to Section 301 of the Trade Act of 1974 (“Trade Act”), 19
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`U.S.C. § 2411. This Complaint specifically asserts that tariffs imposed under Section 301 upon a
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`list of products generally referred to as “List 3,” 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), and tariffs imposed under Section 301 upon a
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`list of products generally referred to as “List 4” or “List 4A,” Notice of Modification of Section
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`301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual
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`Property, and Innovation, 84 Fed. Reg. 43,304 (Aug. 20, 2019), are unlawful.
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`2.
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`The List 3 and List 4 tariffs are unlawful because they were imposed in violation
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`of time limits specified by statute. The Office of the United States Trade Representative (“USTR”)
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`1
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`20-01239
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`Case 1:20-cv-01239-N/A Document 2 Filed 09/18/20 Page 2 of 24
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`conducted an investigation into China’s unfair intellectual property policies and practices pursuant
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`to Section 301 of the Trade Act (19 U.S.C. § 2411). Section 304 of the Trade Act (19 U.S.C. §
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`2414) required USTR to determine what action to take, if any, within 12 months after initiation of
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`that investigation. But USTR failed to issue List 3 or List 4 within the 12 month time period
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`specified by statute.
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`3.
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`The List 3 and List 4 tariffs are also unlawful because they were imposed for
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`reasons other than the acts, policies, or practices which were the subject of the investigation under
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`Section 301. The stated purposes of the investigations on China which the USTR conducted were
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`China’s unfair intellectual property policies and practices. However, the List 3 and List 4 tariffs
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`were imposed in response to retaliatory duties which China had imposed on U.S. imports, as well
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`as for other purposes unrelated to the investigation. While USTR asserted authority to “modify”
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`the tariffs which it was imposing pursuant to Section 307 of the Trade Act (19 U.S.C. § 2417),
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`Section 307 of the Trade Act does not permit USTR to expand the imposition of tariffs to other
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`imports from China for reasons untethered to the unfair intellectual property policies and practices
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`it originally investigated under Section 301 of the Trade Act.
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`4.
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`The List 3 and List 4 tariffs are also unlawful because they were imposed in an
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`arbitrary manner which violates the APA. Specifically, USTR: (1) failed to provide sufficient
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`opportunity for comment, e.g., requiring interested parties to submit affirmative and rebuttal
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`comments on the same day; (2) failed to consider relevant factors when making its decision, e.g.,
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`undertaking no analysis of the supposed “increased burden” imposed on U.S. commerce from the
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`unfair policies and practices that it originally investigated; and (3) failed to connect the record facts
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`to the choices it made.
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`Case 1:20-cv-01239-N/A Document 2 Filed 09/18/20 Page 3 of 24
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`5.
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`The Court should set aside Defendants’ actions as ultra vires and as arbitrary,
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`capricious, an abuse of discretion, or otherwise contrary to law, as well as order Defendants to
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`refund (with interest) all duties paid by Plaintiff pursuant to List 3 and List 4 (specifically, pursuant
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`to a portion of List 4 known as “List 4A”).
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`JURISDICTION
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`6.
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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 merchandise
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`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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`7.
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`Plaintiff is an importer of various products subject to duties under List 3 and/or the
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`portion (tranche) of List 4 known as “List 4A.”
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`8.
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`Plaintiff has made numerous entries of goods classified under HTSUS
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`subheadings which were subject to ad valorem duties under List 3.
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`9.
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`Plaintiff has made numerous entries of goods classified under HTSUS
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`subheadings which were subject to ad valorem duties under List 4 (specifically, under List 4A).
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`10. Defendant United States of America received the disputed tariffs and is the
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`statutory defendant under 5 U.S.C. § 702 and 28 U.S.C. § 1581(i)(1)(B).
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`11. USTR is an executive agency of the United States charged with investigating a
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`foreign country’s trade practices under Section 301 of the Trade Act and implementing
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`“appropriate” responses, subject to the direction of the President. USTR conducted the Section
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`301 investigation at issue and made numerous decisions regarding List 3 and List 4.
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`12. 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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`13. Defendant U.S. Customs & Border Protection (“CBP”) is the agency that collects
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`duties on imports. CBP collected payments made by Plaintiffs to account for the tariffs imposed
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`by USTR under List 3 and List 4.
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`14. Defendant Mark A. Morgan is the Acting Commissioner of CBP. In this capacity,
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`he oversees CBP’s collection of duties paid by Plaintiffs under List 3 and List 4.
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`STANDING
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`15. Axiom has standing to sue because it is “adversely affected or aggrieved by agency
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`action within the meaning of” the APA. 5 U.S.C. § 702; see 28 U.S.C. § 2631(i) (“Any civil action
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`of which the Court of International Trade has jurisdiction . . . may be commenced in the court by
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`any person adversely affected or aggrieved by agency action within the meaning of Section 702 of
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`title 5.”). Tariffs imposed by Defendants pursuant to List 3 and List 4 adversely affected and
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`aggrieved Axiom because it was required to pay these unlawful duties.
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`TIMELINESS OF THE ACTION
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`16. 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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`17.
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`The instant action contests action taken by Defendants that resulted in List 3 and
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`List 4. See 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 (Sept.
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`21, 2018) (notice that List 3 was being imposed) and 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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`4
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`Innovation, 84 Fed. Reg. 43,304 (Aug. 20, 2019) (notice that List 4 was being imposed). Plaintiff’s
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`claims accrued at the earliest on September 21, 2018, when USTR published notice of List 3 in
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`the Federal Register. Id. Alternatively, Plaintiff’s claims accrued at the earliest on September 24,
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`2018, when tariffs were first levied on goods on List 3 pursuant to the USTR’s determination
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`published in the Federal Register on September 21, 2018. Id.
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`18.
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`Plaintiff has timely filed this action because it was filed within two years of the date
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`that the List 3 notice and List 4 notices were issued.
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`19.
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`Alternatively, Plaintiff has timely filed this action because it was filed within two
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`years of the date that Plaintiff paid the List 3 and List 4A duties.
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`RELEVANT LAW
`Section 301 of the Trade Act authorizes USTR to investigate a foreign country’s
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`20.
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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, USTR may take “appropriate” action, such as imposing tariffs on imports
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`from the country that administered the unfair practice. Id. § 2411(b), (c)(1)(B).
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`21.
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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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`22.
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`Section 307 of the Trade Act (in pertinent 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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`I.
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`USTR’s Investigation
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`PROCEDURAL HISTORY
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`23. On August 14, 2017, President Trump directed Ambassador Lighthizer to consider
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`initiating a targeted investigation pursuant to Section 301(b) of the Trade Act concerning China’s
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`laws, policies, practices, and 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 remuneration
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`for their innovations, divert American jobs to workers in China, contribute to our trade deficit with
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`China, and otherwise undermine American manufacturing, services, and innovation.” Id.
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`24. On August 18, 2017, USTR formally initiated an investigation into “whether acts,
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`policies, and practices of the Government of China related to technology transfer, intellectual
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`property, and innovation are actionable under [Section 301(b) of] the Trade Act.” Initiation of
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`Section 301 Investigation; Hearing; and Request for Public Comments: China’s Acts, Policies,
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`and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 82 Fed. Reg.
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`40,213 (Aug. 24, 2017).
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`25. On March 22, 2018, USTR released a report announcing the results of its
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`investigation. OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, Findings of the
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`Investigation Into China’s Acts, Policies, And Practices Related to Technology Transfer,
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`Intellectual Property, and Innovation Under Section 301 of The Trade Act of 1974 (Mar. 22, 2018),
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`available at https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF. USTR found
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`that certain “acts, policies, and practices of the Chinese government related to technology transfer,
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`intellectual property, and innovation are unreasonable or discriminatory and burden or restrict U.S.
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`commerce.” Id. at 17. USTR based its findings on (1) China’s use of foreign ownership restrictions,
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`foreign investment restrictions, and administrative licensing and approval processes to pressure
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`technology transfers from U.S. to Chinese companies, id. at 45; (2) China’s use of licensing
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`processes to transfer technologies from U.S. to Chinese companies on terms that favor Chinese
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`recipients, id. at 48; (3) China’s facilitation of systematic investment in, and acquisition of, U.S.
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`companies and assets by Chinese entities to obtain technologies and intellectual property for
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`purposes of large-scale technology transfer, id. at 147; and (4) China’s cyber intrusions into U.S.
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`computer networks to gain access to valuable business information, id. at 171.
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`26. On March 22, 2018, USTR published a “Fact Sheet” stating that “[a]n interagency
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`team of subject matter experts and economists estimates that China’s policies result in harm to the
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`U.S. economy of at least $50 billion per year.” OFFICE OF THE UNITED STATES TRADE
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`REPRESENTATIVE, Section 301 Fact Sheet
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`(Mar. 22, 2018), available at
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`https://ustr.gov/aboutus/policy-offices/press-office/fact-sheets/2018/march/Section-301-fact-
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`sheet. USTR also indicated that, consistent with a directive from President Trump, it would
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`“propose additional tariffs” of 25% ad valorem “on certain products of China, with an annual trade
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`value commensurate with the harm caused to the U.S. economy resulting from China’s unfair
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`policies.” Id.; see Actions by the United States Related to the Section 301 Investigation of China’s
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`Laws, Policies, Practices, or Actions Related to Technology Transfer, Intellectual Property, and
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`Innovation, 83 Fed. Reg. 13,099 (Mar. 27, 2018) (President Trump’s directive).
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`II.
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`Lists 1 & 2
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`27. 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 a series of actions to remedy the estimated harm to the U.S. economy caused by the
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`investigated unfair practices, ultimately imposing duties on imports from China covered by the so-
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`called Lists 1 and 2.
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`28. 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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`1,333 tariff subheadings with a total value of “approximately $50 billion in terms of estimated
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`annual trade value for calendar year 2018.” Id. at 14,907. USTR explained that it chose $50 billion
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`because that amount was “commensurate with an economic analysis of the harm caused by China’s
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`unreasonable technology transfer policies to the U.S. economy, as covered by USTR’s Section 301
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`investigation.” OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, Under
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`Section 301 Action, USTR Releases Proposed Tariff List on Chinese Products (Apr. 3, 2018),
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`available at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/april/under-
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`section-301-action-ustr .
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`29. 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, a 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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`30. 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 in order to “maintain the
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`effectiveness of [the] $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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`31. 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, comprising “279 tariff subheadings” whose “annual
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`trade value . . . remains approximately $16 billion.” Notice of Action Pursuant to Section 301:
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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. 40,823, 40,823-24 (Aug. 16, 2018).
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`III. List 3 and List 4
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`32. Notwithstanding USTR’s determination that tariffs in the amount of $50 billion
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`were “commensurate with an economic analysis of the harm caused by China’s unreasonable
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`technology transfer policies to the U.S. economy, as covered by USTR’s Section 301
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`investigation,” Defendants subsequently expanded the scope of the tariffs imposed under Section
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`301 to cover imports worth more than $500 billion, or more than ten times the amount that it had
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`deemed “commensurate” with the findings of USTR’s original investigation. Defendants did so
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`for reasons unrelated to the unfair trade practices that USTR had investigated.
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`A.
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`List 3
`33.
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`Shortly after President Trump directed USTR in April 2018 to consider imposing
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`duties on $50 billion in Chinese products, China threatened to impose retaliatory duties on the
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`same value of imports from the United States. In response, President Trump “instructed the USTR
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`to consider whether $100 billion of additional tariffs would be appropriate under Section 301” due
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`to “China’s unfair retaliation.” THE WHITE HOUSE, Statement from Donald J. Trump on
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`Additional Proposed
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`Section
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`301 Remedies
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`(Apr.
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`5,
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`2018),
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`available
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`at
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`https://www.whitehouse.gov/briefings-statements/statement-president-donald-j-trump-additional
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`-proposed-section-301-remedies/.
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`34. 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. E.g., Vicki Needham & Max Greenwood, Trump Announces Tariffs on $50 Billion
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`in
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`Chinese
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`Goods,
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`THE
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`HILL
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`(June
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`15,
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`2018),
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`available
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`at
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`http://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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`35. 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 (June 18, 2018), available at https://www.whitehouse.gov/briefings-
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`statements/statement-president-regarding-trade-china-2/ (“This latest action by China clearly
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`indicates its determination to keep the United States at a permanent and unfair disadvantage, which
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`is reflected in our massive $376 billion trade imbalance in goods. This is unacceptable.”).
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`36. Acknowledging the purpose of the President’s directive, USTR stated that it would
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`design the newly proposed duties to address China’s threatened retaliatory measures, rather than
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`any of the harms identified in its Section 301 investigation. OFFICE OF THE UNITED STATES
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`TRADE REPRESENTATIVE, USTR Robert Lighthizer Statement on the President’s Additional
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`China Trade Action (June 18, 2018), available at https://ustr.gov/about-us/policy-offices/press-
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`office/press-releases/2018/june/ustr-robert-lighthizer-statement-0 (explaining that, although Lists
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`1 and 2 “were proportionate and responsive to forced technology transfer and intellectual property
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`theft by the Chinese” identified in the Section 301 investigation, the proposed duties for a third list
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`of products were necessary to respond to the retaliatory and “unjustified tariffs” that China may
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`impose to target “U.S. workers, farmers, ranchers, and businesses”).
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`37. 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 began
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`collecting its own 25% tariffs under List 1 (July 6, 2018) and List 2 (August 23, 2018).
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`38. About a week after China imposed its first round of retaliatory duties, USTR
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`published notice of its proposal to “modify the action in this investigation by maintaining the
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`original $34 billion action and the proposed $16 billion action, and by taking a further,
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`supplemental action” in the form of “an additional 10 percent ad valorem duty on [a list of]
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`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, 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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`39.
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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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`40. USTR’s contemporaneous press statements corroborated the contents of its notice:
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`China’s retaliatory duties motivated its proposed action. Ambassador Lighthizer stated that the
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`proposed action came “[a]s a result of China’s retaliation and failure to change its practice.”
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`OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, Statement by U.S. Trade
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`Representative Robert Lighthizer on Section 301 Action (July 10, 2018), available at
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`https://ustr.gov/aboutus/policy-offices/press-office/press-releases/2018/july/statement-us-trade-
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`representative.
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`41. On July 10, 2018, President Trump suggested that the United States’ trade
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`imbalance with China supported the decision. @realDonaldTrump, TWITTER (July 10, 2018,
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`9:17 PM EDT), 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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`@realDonaldTrump, Twitter (July 20, 2018, 8:43 AM EDT),
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`https://twitter.com/realDonaldTrump/status/1020287981020729344; @realDonaldTrump,
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`TWITTER (July 20, 2018, 8:51 AM EDT), https://twitter.com/realDonald
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`Trump/status/1020290163933630464; @realDonaldTrump, TWITTER (July 25, 2018, 7:20 AM
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`EDT), https://twitter.com/realDonaldTrump/status/1022079127799701504; @realDonaldTrump,
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`Twitter (July 25, 2018, 7:01 AM EDT),
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`https://twitter.com/realDonaldTrump/status/1022074252999225344.
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`42. On August 1, 2018, Ambassador Lighthizer announced that, in light of China’s
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`retaliatory duties, USTR would propose to increase the additional duty from 10% to 25% ad
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`valorem. Rather than addressing the practices that USTR investigated pursuant to Section 301 of
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`the Trade Act, he stated that China “[r]egrettably . . . has illegally retaliated against U.S. workers,
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`farmers,
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`ranchers and businesses.” OFFICE OF THE UNITED STATES TRADE
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`REPRESENTATIVE, Statement by U.S. Trade Representative Robert Lighthizer on Section 301
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`Action (Aug. 1, 2018), available at https://ustr.gov/about-us/policy-offices/press-office/press-
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`releases/2018/august/statement-us-traderepresentative.
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`43. One week later (on August 7, 2018), USTR, at the direction of President Trump,
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`formally proposed “raising the level of the additional duty in the proposed supplemental action
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`from 10 percent to 25 percent.” Extension of Public Comment Period Concerning 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, 83 Fed. Reg. 38,760, 38,760 (Aug. 7,
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`2018). USTR also set new dates for a public hearing over six days ending on August 27, 2018. See
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`id.; see also OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, Public Hearings
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`on Proposed Section 301 Tariff List (Aug. 17, 2018) (modifying hearing schedule), available at
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`https://ustr.gov/about-us/policyoffices/press-office/press-releases/2018/august/public-hearings-
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`proposed-section-301.
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`44. 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. 83 Fed. Reg. at 38,761. That adjustment, deviating
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`from its past practices, prevented both USTR and the public from considering initial comments at
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`the hearing, and left insufficient time for interested parties to review and respond to the initial
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`comments filed by other parties. USTR also limited each hearing participant to five minutes.
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`Docket No. USTR-2018-0026, https://beta.regulations.gov/document/USTR-2018-0026-0001.
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`Despite those obstacles, approximately 350 witnesses appeared at the six-day hearing, and the
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`public submitted over 6,000 comments. Id.
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`45. Very shortly after receiving final comments from the public, President Trump
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`announced that he had directed USTR “to proceed with placing additional tariffs on roughly $200
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`billion of imports from China.” THE WHITE HOUSE, Statement from the President (Sep. 17,
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`2018) https://www.whitehouse.gov/briefings-statements/statement-from-the-president-4/. Once
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`again, the President made clear that China’s response to the $50 billion tariff action (i.e., List 1
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`and List 2 duties) motived his decision, and he immediately promised to proceed with “phase
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`three” of the plan—an additional $267 billion tariff action—“if China takes retaliatory action
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`against our farmers or other industries.” Id.
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`Case 1:20-cv-01239-N/A Document 2 Filed 09/18/20 Page 15 of 24
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`46.
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`Following the President’s announcement, USTR published notice of the final list
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`of products subject to an additional duty, a list commonly known as “List 3.” 83 Fed. Reg. at
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`47,974. USTR imposed a 10% ad valorem tariff on products contained in List 3, that was set to
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`rise automatically to 25% on January 1, 2019. Id. USTR determined that the List 3 duties would
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`apply to all listed products that enter the United States from China on or after September 24, 2018.
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`Id. USTR did not respond to any of the over 6,000 comments that it received or any of the
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`testimony provided by roughly 350 witnesses. Id.
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`47. As legal support for its action, USTR for the first time cited Section 307(a)(1)(B)
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`of the Trade Act, which provides that USTR “may modify or terminate any action, subject to the
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`specific direction . . . of the President . . . taken under Section 301 if . . . the burden or restriction
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`on United States commerce of the denial of rights, or of the acts, policies, or practices, that are the
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`subject of such action has increased or decreased.” Id. (brackets omitted). USTR stated that the
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`relevant burden “continues to increase, including following the one-year investigation period,”
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`adding that “China’s unfair acts, policies, and practices include not just its specific technology
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`transfer and IP polices referenced in the notice of initiation in the investigation, but also China’s
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`subsequent defensive actions taken to maintain those policies.” Id. USTR also cited Section
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`307(a)(1)(C) of the Trade Act, arguing that China’s response to the $50 billion tariff action “has
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`shown that the current action no longer is appropriate” because “China openly has responded to
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`the current action by choosing to cause further harm to the U.S. economy, by increasing duties on
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`U.S. exports to China.” Id. at 47,975.
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`48.
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`In the months that followed, 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 February
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`Case 1:20-cv-01239-N/A Document 2 Filed 09/18/20 Page 16 of 24
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`2019, that it would delay the scheduled increase in the List 3 duty rate from 10 to 25%. 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, 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).
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`49. However, the trade negotiations ultimately broke down, and in May 2019, USTR
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`announced its intent to raise the tariff rate on List 3 goods to 25%, effective either May 10, 2019
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`or June 1, 2019, depending on the day of export. See 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, 84 Fed. Reg. 20,459 (May 9, 2019) (“List 3 Rate Increase Notice”); see also
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`Implementing Modification to Section 301 Action: China’s Acts, Policies, and Practices Related
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`to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 21,892 (May 15,
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`2019). The notice cited China’s decision to “retreat from specific commitments agreed to in earlier
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`rounds” of negotiations as the basis for the increase in the duty rate. List 3 Rate Increase Notice,
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`84 Fed. Reg. at 20,459. Unlike with past imposition of new tariffs, USTR did not seek public
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`comment but rather simply announced that the increase would occur. Id.
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`50.
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`The duties imposed on products covered by List 3 remain in effect as of the date of
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`this Complaint, with the exception of a limited number of products for which USTR extended its
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`originally granted exclusions from the List 3 duties. See, e.g., Notice of Product Exclusion
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`Extensions: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual
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`Property, and Innovation, 85 Fed. Reg. 48,600 (Aug