Case 1:20-cv-01966-N/A Document 2 Filed 09/19/20 Page 1 of 14
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`UNITED STATES COURT OF INTERNATIONAL TRADE
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`BG 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 AND
`BORDER PROTECTION; MARK A. MORGAN, U.S.
`CUSTOMS AND BORDER PROTECTION ACTING
`COMMISSIONER,
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`Defendants.
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`Court No. 20-01966
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`COMPLAINT
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`Plaintiff, BG Foods, Inc., by and through its attorneys, alleges and states as follows:
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`1.
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`This action concerns Defendants' unlawful imposition of tariffs on products
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`imported from the People's Republic of China ("China") under Section 301 of the Trade Act of
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`1974 ("Trade Act").
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`2.
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`This Complaint focuses on Defendants' so-called "List 3" and/or "List 4"
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`tariffs/duties.
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`3.
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`List 3 and/or List 4 is untimely because it was not issued within 12 months of the
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`United States Trade Representative's (USTR) investigation into China's unfair intellectual
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`property policies and practices pursuant to Section 301 (19 U.S.C. § 2411). List 3 and/or List 4 is
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`not an authorized modification of earlier timely Section 301 duties under Section 307 of the Trade
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`Act (19 U.S.C. § 2417) because it was based on China's retaliatory duties, not the intellectual
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`property policies and practices investigated by the USTR, and increased, rather than delayed,
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`reduced or terminated, the actions Defendants had already taken.
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`4.
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`In addition, List 3 and/or List 4 violates the Administrative Procedure Act (APA)
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`because the USTR failed to provide sufficient opportunity for public comment, failed to consider
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`comments and relevant factors, and failed to base its decisions on a factual record. Rather, the
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`USTR's predetermined decision to implement List 3 and/or List 4 was arbitrary and capricious.
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`5.
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`Accordingly, the Court should set aside Defendants' ultra vires imposition of List
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`3 and/or List 4. Further, the Court should order Defendants to refund, with interest, any
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`tariffs/duties paid by Plaintiff assessed pursuant to List 3 and/or List 4.
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`JURISDICTION
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`6.
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`Pursuant to 28 U.S.C. § 1581(i)(l)(B), this court has subject matter jurisdiction
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`over this action. This statute confers "exclusive jurisdiction" to this 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
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`the 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)(l )(B).
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`PARTIES
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`7.
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`Plaintiff is an importer that filed numerous entries for products which are
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`subject to the additional ad valorem tariffs/duties under List 3 and/or List 4A, and those
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`tariffs/duties are paid.
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`8.
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`Defendant United States of America received the disputed tariffs/duties and is the
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`statutory defendant under 5 U.S.C. § 702 and 28 U.S.C. § 1581(i)(l)(B).
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`9.
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`Defendant 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. The USTR
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`conducted this Section 301 investigation and made numerous decisions regarding List 3 and/or
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`List 4.
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`10.
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`Defendant Ambassador Robert Lighthizer currently holds the position of USTR
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`and serves as the director of the Office of the USTR. In these capacities, he made numerous
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`decisions regarding List 3 and/or List 4.
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`11.
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`Defendant U.S. Customs and Border Protection (CBP) is the agency that collects
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`duties on imported merchandise entered into the United States. CBP collected payments made by
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`Plaintiff for List 3 and/or List 4A tariffs/duties.
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`12.
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`Defendant Mark A. Morgan is the Acting Commissioner of CBP. In this capacity,
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`he oversees CBP's collection of tariffs/duties paid by Plaintiff under List 3 and/or List 4A.
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`STANDING
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`13.
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`Plaintiff has standing because it is "adversely affected or aggrieved" by agency
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`action within the meaning of the AP A. 5 U.S.C. § 702; see 28 U.S.C. § 2631 (i) ("Any civil action
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`of which the Court oflnternational Trade has jurisdiction ... may be commenced in the court
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`by any person adversely affected or aggrieved by agency action within the meaning of
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`Section 702 of title 5."). Tariffs imposed by Defendants pursuant to List 3 and/or List 4
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`adversely affected and aggrieved Plaintiff because it was legally required to pay these
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`unlawful duties.
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`TIMELINESS OF ACTION
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`14.
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`A plaintiff must commence an action under 28 U.S.C. § 1581(i)(l)(B) "within
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`two years after the cause of action first accrues." 28 U.S.C. §2636(i).
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`15.
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`The instant action contests Defendants' imposition of List 3 and/or List 4.
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`Plaintiffs claims accrued at the earliest on September 21, 2018, when USTR published notice of
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`List 3 in the Federal Register. Therefore, Plaintiff has filed this action timely.
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`RELEVANT LAW
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`16.
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`Section 301 of the Trade Act authorizes the USTR to investigate a foreign
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`country's 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
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`imports from the country that administered the unfair practice. Id. § 241 l(b), (c)(l)(B).
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`17.
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`Section 304 of the Trade Act requires the USTR to determine what action to
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`take, if any, within 12 months after the initiation of the underlying investigation. Id. §
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`2414(a)(l)(B), (2)(8).
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`18.
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`Section 307 of the Trade Act, in pertinent part, allows the USTR to "modify or
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`terminate" a previous action appropriately taken pursuant to Section 301 of the Trade Act either
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`when the "burden or restriction on United States commerce" imposed by the investigated foreign
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`country's practice has "increased or decreased" or when the action "is no longer appropriate." Id.
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`§ 2417(a)(l)(B), (C).
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`PROCEDURAL HISTORY
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`19.
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`On August 14, 2017, President Trump directed Ambassador Lighthizer to
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`consider initiating a targeted investigation concerning China's laws, policies, practices, and
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`actions related to intellectual property, innovation, and technology pursuant to Section 301 (b) of
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`the Trade Act.
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`20.
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`On August 18, 2017, the USTR formally initiated an investigation into whether
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`acts, 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.
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`21.
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`On March 22, 2018, the USTR released a report announcing the results of its
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`investigation into China's trade policies and practices. The USTR found that certain acts, policies,
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`and practices of the Chinese government related to technology transfer, intellectual property
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`rights (IPR), and innovation (hereinafter "unfair technology and IPR trade policies and
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`practices") are unreasonable or discriminatory and burden or restrict U.S. commerce.
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`22.
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`On April 6, 2018, the USTR published notice of its intent to impose an additional
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`duty of 25 percent on a list of products of Chinese origin under Section 301 in response to its
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`findings about China's unfair technology and IPR trade policies and practices. The products on
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`the proposed list covered 1,333 tariff subheadings with a total value of approximately $50 billion
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`of estimated annual trade value for calendar year 2018, which, the USTR explained, was
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`commensurate with an economic analysis of the harm caused by China's unfair technology and
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`IPR trade policies and practices to the U.S. economy, as determined by the USTR's Section 301
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`investigation.
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`23.
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`On June 20, 2018, the USTR published notice of its final list of products,
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`commonly known as "List 1," imposing an additional duty of 25% ad valorem on those
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`products in response to China's unfair technology and IPR trade policies and practices as
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`determined by the USTR. The USTR narrowed the proposed list in the April 6, 2018 notice to
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`818 tariff subheadings, with an estimated annual trade value of $34 billion.
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`24.
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`On August 16, 2018, the USTR published notice of a second final list of
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`products, commonly known as "List 2," which were subject to an additional duty of 25% ad
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`valorem. This list is comprised of 279 tariff subheadings with an annual trade value of
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`approximately $16 billion.
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`25.
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`The $50 billion total trade value for List 1 and 2 matched the $50 billion in
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`estimated harm caused to U.S. businesses by China's unfair technology and IPR trade policies
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`and practices, as determined by the USTR in its report.
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`26.
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`After the USTR finalized List 1 in mid-June 2018, President Trump warned
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`China that he would consider imposing additional tariffs on Chinese goods if China
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`retaliated against the United States, i.e., a different basis for imposing Section 301 tariffs
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`other than the unfair technology and IPR trade policies and practices investigated and reported
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`on by the USTR that formed the basis of List 1 and 2.
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`27.
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`On June 18, 2018, the USTR, acknowledging the President's directive, stated that
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`it would design newly proposed duties to address China's threatened retaliatory measures, rather
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`than any of the unfair technology and IPR trade policies and practices identified in its Section
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`301 investigation and report.
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`28.
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`Despite these warnings from Defendants, China retaliated by imposing 25% ad
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`valorem tariffs on $50 billion in U.S. goods imposed in two stages of $34 billion and $16 billion
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`on the same dates the United States began collecting its own 25% tariffs under List 1 (July 6,
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`2018) and List 2 (August 23, 2018).
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`29.
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`Approximately one week after China imposed its first round of retaliatory duties,
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`the USTR published notice of a new proposed action to impose an additional 10 percent ad
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`valorem duty on a new list of products from China with an annual trade value of approximately
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`$200 billion. In support, the USTR invoked Section 307(a)(l)(C) of the Trade Act, pursuant to
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`which USTR may modify or terminate any action, subject to the specific direction, if any, of the
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`President with respect to such action, if such action is being taken under Section 301(b) and is
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`no longer appropriate. But in its notice, the USTR confirmed that it had relied on China's
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`decision to impose retaliatory duties as the basis for its proposed new action, not on the
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`unfair technology and IPR trade policies and practices identified in the USTR's Section 301
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`investigation and report. The USTR set a deadline of August 17, 2018 for initial comments,
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`August 20-23, 2018 for a public hearing, and August 30, 2018 for rebuttal comments.
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`30.
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`Shortly thereafter, Ambassador Lighthizcr announced that the USTR would
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`propose to increase the additional duty from 10% to 25% ad valorem, once again in response to
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`China's retaliatory tariffs, not its unfair technology and IPR trade policies and practices.
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`31.
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`At approximately the same time, the USTR adjusted the deadlines for the
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`submission of written comments, setting September 6, 2018, less than a month later, as the new
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`deadline for both initial and rebuttal comments from the public. The adjustment, deviating from
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`its own past practices, prevented both the USTR and the public from considering the initial
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`comments presented at the hearing, and left insufficient time for interested parties to review and
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`respond to the initial comments filed by other parties. The USTR also limited each hearing
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`participant to five minutes. Nevertheless, approximately 350 witnesses appeared at the six-day
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`hearing, and the public submitted over 6,000 comments. The USTR did not respond to any of
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`the over 6,000 comments that it received or address any of the testimony presented by
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`roughly 350 witnesses.
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`32.
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`On September 21, 2018, USTR published notice of the final list of products
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`subject to an additional duty, commonly known as "List 3." The USTR ultimately imposed
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`a 10% advalorem tariff that was set to rise automatically to 25% on January 1, 2019. The
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`USTR determined that the List 3 duties would apply to all products on List 3 that enter the
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`United States from China on or after September 24, 2018.
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`33.
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`As legal support for its List 3 action, the USTR cited Section 307(a)(l)(B) of
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`the Trade Act, which provides that USTR may modify or terminate any action, subject to
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`the 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
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`are the subject of such action has increased or decreased. The USTR also cited Section
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`307(a)(l)(C) of the Trade Act, asserting that China's response to the $50 billion tariff action
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`had shown that the current List 1 and List 2 actions were no longer as appropriate.
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`34.
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`In May 2019, the USTR announced its intent to raise the tariff rate on List 3
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`goods to 25%, effective either May 10, 2019 or June I, 2019, depending on the day of export.
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`35.
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`The duties imposed on products covered by List 3 remain in effect as of the date
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`of this Complaint, with the exception of products which the USTR granted exclusions from the
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`List 3 duties.
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`36.
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`On May 17, 2019, a mere eight days after it published notice of its decision to
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`increase the duty rate on imports covered by List 3, the USTR announced its intent to proceed
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`with yet another list, "List 4," covering even more products subject to additional duties. Under
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`the USTR's proposal, List 4 would impose an additional duty of 25% ad valorem, once again for
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`China's retaliation, not its unfair technology and IPR trade policies and practices.
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`37.
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`As with List 3, the USTR invited the public to comment on proposed List 4
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`and participate in a hearing. The public submitted nearly 3,000 comments. Despite the
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`opportunity to comment, the timeline for participation in the hearing left little room for
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`meaningful input because the USTR required witnesses to submit drafts of their testimony
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`by June 10, 2019, some seven days before the deadline for fully developed written
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`comments, and then it again limited witnesses to five minutes of testimony at the hearing.
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`38.
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`On August 1, 2019, citing another new basis for action, namely China's failure to
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`follow through on agricultural purchases and to reduce exports of fentanyl flowing into the United
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`States, President Trump announced that the List 4 tariffs would become effective September 1,
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`201 9 at a rate of 10% ad valorem.
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`39.
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`On August 20, 2019, the USTR issued a final notice adopting List 4 in two
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`tranches, List 4A and List 4B. List 4A would impose a 10% ad valorem duty on goods worth
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`roughly $120 billion, effective September 1, 201 9. List 4 B would impose a 10% ad valorem
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`duty on the remaining goods (with limited exclusions based on health, safety, national security,
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`and other factors), effective December 15, 2019. Once again, the USTR did not address any of
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`the nearly 3,000 comments submitted or any of the testimony provided by witnesses, other than
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`to vaguely claim without justification or support that its determination took account of the public
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`comments and the testimony.
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`40.
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`As legal support for its action, the USTR again cited Section 307(a)(l)(B) and
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`(C) of the Trade Act, stating that it may modify its prior action pursuant to Section 301 of the
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`Trade Act.
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`41.
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`Just ten days later, the USTR published notice of its decision to increase the
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`tariff rate applicable to goods covered by List 4A and List 4B from 10% to 15%. The USTR
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`explained that it increased the tariff rate because, shortly after it finalized List 4A and List 4B,
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`China responded by announcing further tariffs on U.S. goods. The USTR once again cited to
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`China's retreat from its negotiation commitments and devaluation of its currency, not its unfair
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`technology and IPR trade policies and practices, as grounds for its action.
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`42.
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`On December 18, 2019, as a result of successfully negotiating a limited trade deal
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`with China, the USTR published notice that it would suspend indefinitely the imposition of
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`additional duties of 15 percent ad valorem on products of China covered by List 4B. The
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`USTR also stated its intent to reduce the tariff rate applicable to products covered by List 4A,
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`an action that ultimately became effective on February 14, 2020, when the USTR reduced the
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`applicable duty rate by half to 7 .5 percent ad valorem.
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`43.
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`The duties imposed on products covered by List 4A remain in effect as of the
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`date of this Complaint, with the exception of products which the USTR granted exclusions from
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`the List 4A duties. Although the proposed duties on products covered by List 4B remain
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`suspended, President Trump has continued to threaten to impose them if China does not meet
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`its obligations under their limited trade deal.
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`ST A TEMENT OF CLAIMS
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`COUNT ONE
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`(DECLARATORY JUDGMENT-VIOLATION OF THE TRADE ACT OF 1974)
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`44.
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`Paragraphs 1 through 43 are incorporated herein by reference as though set
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`out in full.
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`45.
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`The Declaratory Judgment Act authorizes any court of the United States to
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`"declare the rights and other legal relations of any interested party seeking such declaration,
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`whether or not further relief is or could be sought." 28 U.S.C. § 2201(a).
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`46.
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`The Trade Act of 1974 does not authorize the actions taken by Defendants that
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`resulted in the List 3 and/or List 4 tariffs.
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`47.
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`Pursuant to Section 301 of the Trade Act, the USTR may impose tariffs when
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`it determines that an act, policy, or practice of a foreign country is unreasonable or
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`discriminatory and burdens or restricts United States commerce, and action by the United
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`States is appropriate. 19 U.S.C. § 241 l(b). The USTR failed to predicate its action giving
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`rise to List 3 and/or List 4 on any such determination. Rather, the USTR imposed List 3
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`and/or List 4 based solely on China's retaliation against List 1 and List 2 tariffs, which is
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`not an authorized justification under Section 301 the Trade Act.
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`48.
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`If USTR concludes, upon investigation that a foreign country maintains an
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`unfair trade practice, Section 304 of the Trade Act requires the USTR to determine what
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`action, if any, to take within 12 months after the date on which the investigation is
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`initiated. 19 U.S.C. § 2414(a)(l)(B), (2)(B). The USTR's action giving rise to List 3
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`and/or List 4 occurred in September 2018 and August 2019, over a year after August 18,
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`2017, when the USTR initiated the underlying Section 301.
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`49.
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`Section 307 of the Trade Act does not permit Defendants to increase tariffs
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`for reasons unrelated to the acts, policies, or practices that the USTR investigated pursuant to
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`Section 301 of the Trade Act. Contrary to Section 307, the USTR implemented List 3 based on
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`China's retaliation against List 1 and List 2 tariffs.
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`50.
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`Section 307 of the Trade Act does not authorize Defendants to increase tariff
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`actions that are no longer appropriate but only to delay, reduce, or terminate such actions in such
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`cases. Contrary to Section 307, the USTR increased tariffs through the imposition of List 3 and/or
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`List 4.
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`51.
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`Plaintiff is therefore entitled to a declaratory judgment that Defendants' actions
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`giving rise to List 3 and/or List 4 are ultra vires and contrary to law.
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`COUNT TWO
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`(VIOLATION OF THE ADMINISTRATIVE PROCEDURE ACT)
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`52.
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`Paragraphs 1 through 43 are incorporated herein by reference as though set
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`out in full.
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`53.
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`The APA authorizes the Court to hold unlawful and set aside agency action
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`that is: "(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
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`law; (B) contrary to constitutional right, power, privilege, or immunity; (C) in excess of
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`statutory jurisdiction, authority, or limitations, or short of statutory right; (D) without
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`observance of procedure required by law; [or] (E) unsupported by substantial evidence." 5
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`U.S.C. § 706(2).
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`54.
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`Defendants exceeded their authority under the Trade Act in promulgating List 3
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`and/or List 4, and thereby acted not in accordance with the law and in excess of statutory authority
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`for the reasons set forth in Count One.
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`55.
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`Defendants failed to offer any evidence for any asserted increased burden from
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`China's intellectual property policies and practices that were the subject of USTR's Section 301
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`investigation.
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`56.
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`Defendants also promulgated List 3 and/or List 4 in an arbitrary and capricious
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`manner because they did not provide a sufficient opportunity for comment, failed to meaningfully
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`consider relevant factors when making their decisions, and failed to adequately explain their
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`rationale. Defendants' predetermined decision-making resulted in the unlawful imposition of
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`tariffs on Plaintiffs imports covered by List 3 and/or List 4A.
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`PRAYER FOR RELIEF
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`Wherefore, Plaintiffs respectfully request that this court
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`(1)
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`declare that Defendants' actions resulting in tariffs on products covered by List 3
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`and/or List 4 are unauthorized by, and contrary to, the Trade Act;
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`(2)
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`declare that Defendants arbitrarily and unlawfully promulgated List 3 and/or List
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`(3)
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`(4)
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`4 in violation of the APA;
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`vacate the List 3 and/or List 4 rulemaking;
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`order Defendants to refund, with interest, any duties paid by Plaintiff pursuant to
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`List 3 and/or List 4A;
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`(5)
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`permanently enjoin Defendants from applying List 3 and/or List 4 against Plaintiff
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`and collecting any duties from Plaintiff pursuant to List 3 and/or List 4;
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`(6)
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`(7)
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`award Plaintiffs their costs and reasonable attorney fees; and
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`grant such other and further relief as may be just and proper.
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`Dated: September 19, 2020
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`Respectfully submitted,
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`By:
`
`/s/ Elon A. Pollack, Esq
`Elon A. Pollack, Esq.
`Stein Shostak Shostak & Pollack O'Hara
`Attorneys for Plaintiff
`865 S. Figueroa Street, Suite 1388
`Los Angeles, California 90017
`Tel: (213) 630-8888
`e-mail: elon@steinshostak.com
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`CERTIFICATE OF SERVICE
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`Pursuant to U.S. Court of International Trade Rule 4(b) and (h), I hereby certify that on
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`September 19, 2020, copies of Plaintiffs' Summons and Complaint were served on the following
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`parties by certified mail, return receipt requested:
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`Attorney-In-Charge
`International Trade Field Office
`Commercial Litigation Branch
`U.S. Department of Justice
`26 Federal Plaza
`New York, NY 10278
`
`Attorney-In-Charge
`Commercial Litigation Branch
`U.S. Department of Justice
`1100 L Street, NW
`Washington, DC 20530
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`General Counsel Joseph L. Barloon
`Office of the General Counsel
`Office of the U.S. Trade Representative
`600 17th Street, NW
`Washington, DC 20006
`
`Chief Counsel Scott K. Falk
`Office of Chief Counsel
`U.S. Customs & Border Protection
`1300 Pennsylvania Ave., NW
`Washington, DC 20229
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`I declare that I am a member of the bar of this court.
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`I declare under penalty of perjury of the laws of the United States of America that the
`foregoing is true and correct.
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`Executed on September 19, 2020, in Los Angeles, California.
`
`/s/ Elon A. Pollack
`Elon A. Pollack
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`14
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