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`Shaver Foods LLC
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`
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` v.
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`The United States of America; Office of the United
`States Trade Representative; Robert E. Lighthizer, U.S.
`Trade Representative; U.S. Customs and Border
`Protection; and Mark A. Morgan, U.S. Customs and
`Border Protection Acting Commissioner,
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`
`
`
`
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`
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`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 1 of 25
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`UNITED STATES COURT OF INTERNATIONAL TRADE
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`
`
`
`Plaintiffs,
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`Court No. 20-03210
`
`Defendants.
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`
`
`
`
`
`
`
`
`
`
`
`
`
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`COMPLAINT
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`Plaintiffs, Shaver Food LLC (hereafter “plaintiffs”) by and through their attorneys, allege
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`and state the following:
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`1.
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`This action concerns Defendants’ prosecution of an unprecedented, unbounded, and
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`unlimited trade war impacting over $500 billion in imports from the People’s Republic of
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`China. This complaint focuses on Defendants’ unlawful escalation of that trade war through
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`the imposition of a third round of tariffs on products covered by so-called “List 3. ”Notice of
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`
`
`
`
`
`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 2 of 25
`September 21, 2020
`Page 2
`
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`Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to
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`Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 47,974 (Sept. 21,
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`2018) and a fourth round of tariffs on products covered by so-called “List 4. ” Notice of
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`Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to
`
`Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 43,304 (Aug. 20,
`
`2019)
`
`2.
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`The Trade Act of 1974 (“Trade Act”) does not confer authority on Defendants to engage in
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`a vast trade war for however long, and by whatever means, they choose. The Office of the
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`United States Trade Representative (“USTR”) conducted an investigation into China’s
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`unfair intellectual property policies and practices pursuant to Section 301 of the Trade Act
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`(19 U.S.C. § 2411). Section 304 of the Trade Act (19 U.S.C. § 2414) required USTR to
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`determine what action to take, if any, within 12 months after initiation of that investigation.
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`USTR failed to issue List 3 and List 4 within that window. USTR may not fall back on its
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`“modification” authority under Section 307 of the Trade Act (19 U.S.C. § 2417) to salvage
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`List 3 and List 4. Section 307 of the Trade Act does not permit USTR to expand the
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`imposition of tariffs to other imports from China for reasons untethered to the unfair
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`intellectual property policies and practices it originally investigated under Section 301 of
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`the Trade Act. Yet that is exactly what Defendants did here when they promulgated the List
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`3 and List 4 duties
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`in
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`response
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`to China’s
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`retaliatory duties and other
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`unrelated issues. Even if USTR deems the existing tariffs “no longer appropriate,” as it also
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`did here, the Trade Act permits USTR only to delay, taper, or terminate—not ratchet up—
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`the actions it has already taken.
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`The arbitrary manner in which Defendants implemented the List 3 tariff action also violates
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`3.
`
`
`
`
`
`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 3 of 25
`September 21, 2020
`Page 3
`
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`the Administrative Procedure Act (“APA”). 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,
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`e.g., undertaking no analysis of the supposed “increased burden” imposed on U.S. commerce
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`from the unfair policies and practices that it originally investigated; and (3) failed to connect
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`the record facts to the choices it made. Indeed, despite receiving over 6,000 comments, USTR
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`said absolutely nothing about how those comments shaped its final promulgation of List 3.
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`USTR’s preordained decision-making bears no resemblance to the standards that the APA
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`demands.
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`4.
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`The arbitrary manner in which Defendants implemented the List 4 tariff action also violates
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`the Administrative Procedure Act (“APA”). USTR (1) failed to provide sufficient
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`opportunity for comment, only providing for written comments and limited rebuttal
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`comments only to post-hearing comments on testimony provided at the hearing, (2) failed to
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`consider relevant factors when making its decision, e.g., undertaking no analysis of the
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`supposed “increased burden” imposed on U.S. commerce from the unfair policies and
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`practices that it originally investigated; and (3) failed to connect the record facts to the
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`choices it made. Indeed, despite receiving over 2800 comments, USTR said nothing about
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`how those comments shaped its final promulgation of List 4. USTR’s preordained decision-
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`making bears no resemblance to the standards that the APA demands.
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`5.
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`The Court should set aside Defendants’ actions as ultra vires and otherwise contrary to law,
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`as well as order Defendants to refund (with interest) any duties paid by Plaintiffs pursuant to
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`Lists 3 and 4.
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`
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`JURISDICTION
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`
`
`
`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 4 of 25
`September 21, 2020
`Page 4
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`6.
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`The Court possesses subject matter jurisdiction over this action pursuant to 28 U.S.C. §
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`1581(i)(l )(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
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`of the United States providing f o r . . . tariffs, duties, fees, or other taxes on the importation
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`of merchandise for reasons other than the raising of revenue.” 28 U.S.C. § 1581(i)(l)(B)
`
`
`7.
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`8.
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`9.
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`PARTIES
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`Plaintiffs are corporations and other juridical persons. Plaintiffs imported and sold various
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`products subject to enhanced duties under Lists 3 and/or 4A.
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`Defendant United States of America received the disputed tariffs and is the statutory
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`defendant under 5 U.S.C. § 702 and 28 U.S.C. § 1581(i)(1)(B).
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`The Office of the USTR is an executive agency of the United States charged with
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`investigating a foreign country’s trade practices under Section 301 of the Trade Act and
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`implementing “appropriate” responses, subject to the direction of the President. USTR
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`conducted the Section 301 investigation at issue and made numerous decisions regarding
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`Lists 3 and 4.
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`10.
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`Ambassador Robert Lighthizer currently holds the position of USTR and serves as the
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`director of the Office of the USTR. In these capacities, he made numerous decisions
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`regarding Lists 3 and 4.
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`11.
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`Defendant U.S. Customs & Border Protection (“CBP”) is the agency that collects duties on
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`imports. CBP collected payments made by Plaintiffs to account for the tariffs imposed by
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`USTR under Lists 3 and 4.
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`12.
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`Defendant Mark A. Morgan is the Acting Commissioner of CBP. In this capacity, he oversees
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`CBP’s collection of duties paid by Plaintiffs under Lists 3 and 4.
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`
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`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 5 of 25
`September 21, 2020
`Page 5
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`STANDING
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`13.
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`Plaintiffs have standing to sue because they are “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. § 263 l(i) (“Any civil
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`action of which the Court of International Trade has jurisdiction . . . may be commenced in
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`the court by any person adversely affected or aggrieved by agency action within the meaning
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`of Section 702 of title 5.”). Tariffs imposed by Defendants pursuant to List 3 and 4 adversely
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`affected and aggrieved plaintiffs because they were required to pay these unlawful duties.
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`TIMELINESS OF THE ACTION
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`14.
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` A plaintiff must commence an action under 28 U.S.C. § 1581(i)(1)(B) “within two years
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`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 action taken by Defendants that resulted in List 3 and 4. Notice of
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`Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to
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`Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 47,974 (Sept. 21,
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`2018) and 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, 84 Fed. Reg. 43,304
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`(Aug. 20, 2019).
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`16.
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`Plaintiffs’ claims accrued at the earliest on September 21, 2018, when USTR published notice
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`of List 3 in the Federal Register. Id. Plaintiffs have therefore timely filed this action.
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`RELEVANT LAW
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`Section 301 of the Trade Act authorizes USTR to investigate a foreign country’s
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`trade practices. 19 U.S.C. § 2411(b). If the investigation reveals an “unreasonable or
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`discriminatory” practice, USTR may take “appropriate” action, such as imposing tariffs on
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`imports from the country that administered the unfair practice. Id. § 2411(b), (c)(1)(B).
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`
`17.
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`
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`
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`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 6 of 25
`September 21, 2020
`Page 6
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`18.
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`Section 304 of the Trade Act requires USTR to determine what action to take, if any, within
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`12 months after the initiation of the underlying investigation. Id. § 2414(a)(1)(B), (2)(B).
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`19.
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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
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`or restriction on United States commerce” imposed by the investigated foreign country’s
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`practice has “increased or decreased” or when the action “is no longer appropriate.” Id. §
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`2417(a)(1)(B), (C).
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`PROCEDURAL HISTORY
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`I. USTR’s Investigation
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`The current U.S.-China trade war grew from a narrow dispute. On August 14, 2017, President
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`20.
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`Trump directed Ambassador Lighthizer to consider initiating a targeted investigation
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`pursuant to Section 301(b) of the Trade Act concerning China’s laws, policies, practices, and
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`actions related to intellectual property, innovation, and technology. Addressing China’s
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`Laws, Policies, Practices, and Actions Related to Intellectual Property, Innovation, and
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`Technology, 82 Fed. Reg. 39,007 (Aug. 17, 2017). According to the President, certain
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`Chinese “laws, policies, practices, and actions” on intellectual property, innovation, and
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`technology “may inhibit United States exports, deprive United States citizens of fair
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`remuneration for their innovations, divert American jobs to workers in China, contribute to
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`our trade deficit with China, and otherwise undermine American manufacturing, services,
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`and innovation.” Id.
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`21.
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`On August
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`18,
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`2017, USTR
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`formally
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`initiated
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`an
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`investigation
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`into
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`“whether acts, policies, and practices of the Government of China related to technology
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`transfer, intellectual property, and innovation are actionable under [Section 301(b) of] the
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`
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`
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`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 7 of 25
`September 21, 2020
`Page 7
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`Trade Act.” Initiation of Section 301 Investigation; Hearing; and Request for Public
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`Comments: China’s Acts, Policies, and Practices Related to Technology Transfer,
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`Intellectual Property, and Innovation, 82 Fed. Reg. 40,213 (Aug. 24, 2017)
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`22.
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`Seven months later, on March 22, 2018, USTR released a report announcing the
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`results of
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`its
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`investigation. OFFICE OF THE UNITED STATES TRADE
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`REPRESENTATIVE, Findings of the Investigation Into China’s Acts, Policies, And
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`Practices Related to Technology Transfer, Intellectual Property, and Innovation Under
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`Section 301 of The Trade Act of 1974
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`(Mar. 22, 2018), available at
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`ttps://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF. USTR found that certain
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`“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
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`restrict U.S. commerce.” Id. at 17. USTR based its findings on (1) China’s use of foreign
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`ownership restrictions, foreign investment restrictions, and administrative licensing and
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`approval processes to pressure technology transfers from U.S. to Chinese companies, id. at
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`45; (2) China’s use of licensing processes to transfer technologies from U.S. to Chinese
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`companies on terms that favor Chinese recipients, id. at 48; (3) China’s facilitation of
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`systematic investment in, and acquisition of, U.S. companies and assets by Chinese entities
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`to obtain technologies and intellectual property for purposes of large-scale technology
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`transfer, id. at 147; and (4) China’s cyber intrusions into U.S. computer networks to gain
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`access to valuable business information, id. at 171. In its report, USTR did not quantify the
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`burden or restriction imposed on U.S. commerce by the investigated practices.
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`23.
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`On the same date, USTR published a “Fact Sheet” stating that “[a]n interagency team of
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`subject matter experts and economists estimates that China’s policies result in harm to the
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`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 8 of 25
`September 21, 2020
`Page 8
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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-
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`fact-sheet. USTR also indicated that, consistent with a directive from President Trump, it
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`would “propose additional tariffs” of 25% ad valorem “on certain products of China, with an
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`annual trade value commensurate with the harm caused to the U.S. economy resulting from
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`China’s unfair policies.” Id.; see Actions by the United States Related to the Section 301
`
`Investigation of China’s Laws, Policies, Practices, or Actions Related to Technology
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`Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 13,099 (Mar. 27, 2018)
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`(President Trump’s directive).
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`II.
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`Lists 1 & 2
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`24.
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` Between April and August 2018 (i.e., within the 12-month statutory deadline from the
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`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
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`the investigated unfair practices, ultimately imposing duties on imports from China covered
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`by the so called Lists 1 and 2.
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`25.
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`On April 6, 2018, USTR published notice of its intent to impose “an additional duty of 25
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`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:
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`China 's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property,
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`and Innovation, 83 Fed. Reg. 14,906, 14,907 (Apr. 6, 2018). The products on the proposed
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`list covered 1,333 tariff subheadings with a total value of “approximately $50 billion in terms
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`of estimated annual trade value for calendar year 2018.” Id. at 14,907. USTR explained that
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`
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`
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`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 9 of 25
`September 21, 2020
`Page 9
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`it chose $50 billion because that amount was “commensurate with an economic analysis of
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`the harm caused by China’s unreasonable technology transfer policies to the U.S. economy,
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`as covered by USTR’s Section 301 investigation.” OFFICE OF THE UNITED STATES
`
`TRADE REPRESENTATIVE, Under Section 301 Action, USTR Releases Proposed Tariff
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`List on Chinese Products (Apr. 3, 2018), available at https://ustr.gov/about-us/policy-
`
`offices/press-office/press-releases/2018/april/under-section-301-action-ustr
`
`26.
`
`On June 20, 2018, USTR published notice of its final list of products subject to an additional
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`duty of 25% ad valorem, a list commonly known as “List 1.” Notice of Action and Request
`
`for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301:
`
`China 's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property,
`
`and Innovation, 83 Fed. Reg. 28,710 (June 20, 2018). USTR explained that it had
`
`“narrow[ed] the proposed list in the April 6, 2018 notice to 818 tariff subheadings, with an
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`approximate annual trade value of $34 billion.” Id. at 28,711.
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`27.
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`At the same time that it finalized List 1, USTR announced that it intended to impose a 25%
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`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 28,712. USTR announced a proposed “List 2” covering 284 tariff subheadings with “an
`
`approximate annual trade value of $16 billion.” Id. at 28,711-12.
`
`28.
`
`On August 16, 2018, USTR published notice of the final list of products subject to an
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`additional duty of 25% ad valorem in List 2, comprising “279 tariff subheadings” whose
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`“annual trade value . . . remains approximately $16 billion.” Notice of Action Pursuant to
`
`Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer,
`
`Intellectual Property, and Innovation, 83 Fed. Reg. 40,823, 40,823-24 (Aug. 16, 2018).
`
`
`
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`
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`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 10 of 25
`September 21, 2020
`Page 10
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`III.
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`List 3 & List 4
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`29.
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` As soon as USTR announced the results of its investigation in March 2018, tensions
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`between the governments of China and the United States escalated dramatically. In the
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`months that followed, Defendants wildly expanded the scope of the tariffs imposed under
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`Section 301 of the Trade Act to cover imports worth more than $500 billion—ten times the
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`amount it had deemed “commensurate” with the findings of USTR’s original investigation.
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`Defendants did so for reasons untethered to the unfair practices that USTR had investigated,
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`namely China’s tit-for-tat countermeasures and a hodgepodge of grievances related to
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`China’s role on the world stage.
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`A. List 3
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`30.
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`Shortly after President Trump directed USTR in April 2018 to consider imposing duties on
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`$50 billion in Chinese products, China promptly threatened to impose retaliatory duties on
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`the same value of imports from the United States. In response, President Trump “instructed
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`the USTR to consider whether $100 billion of additional tariffs would be appropriate under
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`Section 301” due to “China’s unfair retaliation.” THE WHITE FIOUSE, Statement from
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`Donald J. Trump on Additional Proposed Section 301 Remedies (Apr. 5, 2018), available at
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`https://www.whitehouse.gov/briefmgs-statements/statement-president-donald-j-trump-
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`additional-proposed-section-301-remedies/.
`
`31. When USTR finalized List 1 in mid-June 2018, President Trump warned China that he would
`
`consider imposing additional tariffs on Chinese goods if China retaliated against the United
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`States. E.g., Vicki Needham & Max Greenwood, Trump Announces Tariffs on $50 Billion in
`
`Chinese
`
`Goods,
`
`THE
`
`HILL
`
`(June
`
`15,
`
`2018),
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`available
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`at
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`http://thehill.com/homenews/administration/39242l-trump-announces-tariffs-on-50-billion-
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`
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`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 11 of 25
`September 21, 2020
`Page 11
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`in-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
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`products; raising non-tariff barriers; or taking punitive actions against American exporters or
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`American companies operating in China.’”)
`
`32.
`
`Following through on his warning, on June 18, 2018, President Trump formally directed
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`USTR to consider whether the United States should impose additional duties on products
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`from China with an estimated trade value of $200 billion—despite USTR having not yet
`
`implemented List 1 and List 2. President Trump acknowledged that China’s threatened
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`retaliatory “tariffs on $50 billion worth of United States exports” motivated his decision.
`
`THE WHITE HOUSE, Statement from the President Regarding Trade with China (June 18,
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`2018), available at https://www.whitehouse.gov/briefings-statements/statement-president-
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`regarding-trade-china-2/ (“This latest action by China clearly indicates its determination to
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`keep the United States at a permanent and unfair disadvantage, which is reflected in our
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`massive $376 billion trade imbalance in goods. This is unacceptable.”).
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`33.
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`Acknowledging the purpose of the President’s directive, USTR stated that it would design
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`the newly proposed duties to address China’s threatened retaliatory measures, rather than any
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`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 China Trade Action (June 18, 2018), available at https://ustr.gov/about-us/policy-
`
`offices/press-office/press- releases/2018/june/ustr-robert-lighthizer-statement-0 (explaining
`
`that, although Lists 1 and 2 “were proportionate and responsive to forced technology transfer
`
`and intellectual property theft by the Chinese” identified in the Section 301 investigation, the
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`proposed duties for a third list of products were necessary to respond to the retaliatory and
`
`
`
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`
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`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 12 of 25
`September 21, 2020
`Page 12
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`“unjustified tariffs” that China may impose to target “U.S. workers, farmers, ranchers, and
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`businesses”).
`
`34.
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`Despite these warnings from Defendants, China retaliated by imposing 25% ad valorem
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`tariffs on $50 billion in U.S. goods implemented 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, 2018) and List 2 (August 23, 2018).
`
`35.
`
`About a week after China imposed its first round of retaliatory duties, USTR published notice
`
`of its proposal to “modify the action in this investigation by maintaining the original $34
`
`billion action and the proposed $16 billion action, and by taking a further, supplemental
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`action” in the form of “an additional 10 percent ad valorem duty on [a list of] products [from]
`
`China with an annual trade value of approximately $200 billion.” Request for Comments
`
`Concerning Proposed Modification of Action Pursuant to Section 301: China’s Acts,
`
`Policies, and Practices Related to Technology Transfer, Intellectual Properly, and
`
`Innovation, 83 Fed. Reg. 33,608, 33,608 (July 17, 2018). USTR invoked Section
`
`307(a)(1)(C) of the Trade Act, pursuant to which USTR “may modify or terminate any action,
`
`subject to the specific direction, if any, of the President with respect to such action, . . . if . .
`
`. such action is being taken under [Section 301(b)] of this title and is no longer appropriate.”
`
`Id. at 33,609 (citing 19 U.S.C. § 2417(a)(1)(c)). USTR initially set a deadline of August 17,
`
`2018 for initial comments; August 20-23, 2018 for a public hearing; and August 30, 2018 for
`
`rebuttal comments. Id. at 33,608.
`
`36.
`
`In its notice, USTR confirmed that it had relied on China’s decision to impose “retaliatory
`
`duties” as the primary basis for its proposed action. Id. at 33,609 (asserting as justification
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`“China’s response to the $50 billion action announced in the investigation and its refusal to
`
`
`
`
`
`
`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 13 of 25
`September 21, 2020
`Page 13
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`change its acts, policies, and practices”). USTR explicitly tied the $200 billion in its proposed
`
`action to the level of retaliatory duties imposed by China on U.S. imports, noting that “action
`
`at this level is appropriate in light of the level of China’s announced retaliatory action ($50
`
`billion) and the level of Chinese goods imported into the United States ($505 billion in
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`2017).” Id.; see also id. (Because “China’s retaliatory action covers a substantial percentage
`
`of U.S. goods exported to China ($130 billion in 2017), the level of the U.S. supplemental
`
`action must cover a substantial percentage of Chinese imports.”). Although it pointed to
`
`China’s retaliatory measures, USTR did not identify any increased burdens or restrictions on
`
`U.S. commerce resulting from the unfair practices that USTR had investigated. See id.
`
`37.
`
`USTR’s contemporaneous press statements corroborated the contents of its notice: China’s
`
`retaliatory duties motivated its proposed action. Ambassador Lighthizer stated that the
`
`proposed action came “[a]s a result of China’s retaliation and failure to change its practice.”
`
`OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, Statement by U.S.
`
`Trade Representative Robert Lighthizer on Section 301 Action (July 10, 2018), available at
`
`https://ustr.gov/aboutus/policy-offices/press-office/press-releases/2018/july/statement-us-
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`trade-representative.
`
`38.
`
`That same day, President Trump suggested that the United States’ trade imbalance with
`
`China supported the decision. @realDonaldTrump, TWITTER (July 10, 2018, 9:17 PM
`
`EDT), https://twitter.com/realDonaldTmmp/status/1005982266496094209. Over
`
`the
`
`following weeks, President Trump also expressed his frustration over China’s purported
`
`manipulation of its currency and national monetary policy, as well as his continued
`
`displeasure over China’s retaliatory tariffs and the trade imbalance between the two nations.
`
`See,
`
`e.g., @realDonaldTrump, Twitter
`
`(July 20, 2018, 8:43 AM EDT),
`
`
`
`
`
`
`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 14 of 25
`September 21, 2020
`Page 14
`
`
`https://twitter.com/realDonaldTaimp/status/1020287981020729344; @realDonaldTrump,
`
`
`(July
`
`20,
`
`2018,
`
`8:51 AM EDT),
`
`https://twitter.com/realDonald
`
`Trump/status/1020290163933630464; @realDonaldTrump, TWITTER (July 25, 2018, 7:20 AM
`
`EDT),
`
`https://twitter.com/realDonaldTrump/status/1022079127799701504;@realDonaldTrump,
`
`
`(July
`
`25,
`
`2018,
`
`7:01
`
`AM
`
`EDT),
`
`https://twitter.com/realDonaldTrump/status/1022074252999225344.
`
`39. Within days of these statements, 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
`
`valorem. Rather than addressing the practices that USTR investigated pursuant to Section
`
`301 of the Trade Act, he stated that China “[r]egrettably . . . has illegally retaliated against
`
`U.S. workers, farmers, ranchers and businesses.” OFFICE OF THE UNITED STATES
`
`TRADE REPRESENTATIVE, Statement by U.S. Trade Representative Robert Lighthizer on
`
`Section 301 Action (Aug. 1, 2018), available at https://ustr.gov/about-us/policy-
`
`offices/press-office/press-releases/2018/august/statement-us-trade-representative.
`
`40.
`
`Shortly thereafter, USTR, at the direction of President Trump, formally proposed “raising the
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`level of the additional duty in the proposed supplemental action from 10 percent to 25
`
`percent.” Extension of Public Comment Period Concerning Proposed Modification of Action
`
`Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology
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`Transfer,Intellectual Property, and Innovation, 83 Fed. Reg. 38,760, 38,760 (Aug. 7, 2018).
`
`USTR also set new dates for a public hearing over six days ending on August 27, 2018. See
`
`id.; see also OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, Public
`
`Hearings on Proposed Section 301 Tariff List (Aug. 17, 2018) (modifying hearing schedule),
`
`available
`
`at
`
`https://ustr.gov/about-us/policyoffices/press-office/press-
`
`releases/2018/august/public-hearings-proposed-section-301.
`
`
`
`
`
`
`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 15 of 25
`September 21, 2020
`Page 15
`
`41.
`
`At the same time, USTR adjusted the deadlines for the submission of written comments,
`
`setting September 6, 2018—less than a month later—as the new deadline for both initial and
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`rebuttal comments from the public. 83 Fed. Reg. at 38,761. That adjustment, deviating from
`
`its past practices, prevented both USTR and the public from considering initial comments at
`
`the hearing, and left insufficient time for interested parties to review and respond to the initial
`
`comments filed by other parties. USTR also limited each hearing participant to five minutes.
`
`Docket No. USTR-2018-0026, https://beta.regulations.gov/document/USTR-2018-0026-
`
`0001. Despite those obstacles, approximately 350 witnesses appeared at the six-day hearing,
`
`and the public submitted over 6,000 comments.
`
`42.
`
`Just eleven days after receiving final comments from the public, President Trump announced
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`that he had directed USTR “to proceed with placing additional tariffs on roughly $200 billion
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`of imports from China.” THE WHITE HOUSE, Statement from the President (Sep. 17, 2018)
`
`https://www.whitehouse.gov/briefmgs-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 and List 2 duties) motived his decision, and he immediately promised to proceed with
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`“phase three” of the plan—an additional $267 billion tariff action—“if China takes
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`retaliatory action against our farmers or other industries.” Id.
`
`43.
`
`Following the President’s announcement, USTR published notice of the final list of products
`
`subject to an additional duty, a list commonly known as “List 3.” 83 Fed. Reg. at 47,974.
`
`USTR imposed a 10% ad valorem tariff that was set to rise automatically to 25% on January
`
`1, 2019. Id. USTR determined that the List 3 duties would apply to all listed products that
`
`enter the United States from China on or after September 24, 2018. Id. USTR did not respond
`
`to any of the over 6,000 comments that it received or any of the testimony provided by
`
`
`
`
`
`
`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 16 of 25
`September 21, 2020
`Page 16
`
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`roughly 350 witnesses. Id.
`
`44.
`
`As legal support for its action, USTR for the first time cited Section 307(a)(1)(B) of the Trade
`
`Act, which provides that USTR “may modify or terminate any action, subject to the specific
`
`direction . . . of the President . . . taken under Section 301 if . . . the burden or restriction on
`
`United States commerce of the denial of rights, or of the acts, policies, or practices, that are
`
`the subject of such action has increased or decreased.” Id. (brackets omitted). USTR stated
`
`that the relevant burden “continues to increase, including following the one-year
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`investigation period,” adding that “China’s unfair acts, policies, and practices include not just
`
`its specific technology transfer and IP polices referenced in the notice of initiation in the
`
`investigation, but also China’s subsequent defensive actions taken to maintain those
`
`policies.” Id. USTR also cited Section 307(a)(1)(C) of the Trade Act, arguing that China’s
`
`response to the $50 billion tariff action “has shown that the current action no longer is
`
`appropriate” because “China openly has responded to the current action by choosing to cause
`
`further harm to the U.S. economy, by increasing duties on U.S. exports to China.” Id. at
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`47,975.
`
`45.
`
`In the months that followed, China and the United States attempted to resolve their
`
`differences through trade negotiations. Based on the progress made with China in those
`
`negotiations, the Trump Administration announced in December 2018, and again in February
`
`2019, that it would delay the scheduled increase in the List 3 duty rate from 10 to 25%. Notice
`
`of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to
`
`Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 65,198 (Dec. 19,
`
`2018); Notice of Modification of Section 301 Action: China\s Acts, Policies, and Practices
`
`Related to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 7,966
`
`
`
`
`
`
`Complaint
`Case 1:20-cv-03210-N/A Document 2 Filed 09/21/20 Page 17 of 25
`September 21, 2020
`Page 17
`
`
`(Mar. 5, 2019).
`
`46.
`
`The trade negotiations ultimately fell apart. In May 2019, USTR announced its intent to raise
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`the tariff rate on List 3 goods to 25%, effective either May 10, 2019 or June 1, 2019,
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`depending on the day of export. See Notice of Modification of Section 301 Action: China's
`
`Acts, 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
`
`Implementing Modification to Section 301 Action: China’s Acts, Policies, and Practices
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`Related to Technolog