Lists 3, 4A Tariffs Not ‘Appropriately Connected’ to China’s Trade Abuses: Lawyer

Lawyer Paul Vandevert’s clients, Brose North America and GHSP, joined the roughly 3,500 other plaintiffs to inundate the Court of International Trade with allegations that USTR overstepped its 1974 Trade Act authority by imposing lists 3 and 4A in a tit-for-tat trade war with China and violated the Administrative Procedure Act with sloppy and nontransparent rulemakings. All the suits seek to have the tariff rulemakings vacated and the duties refunded. Brose and GHSP are virtually alone among the 3,500 to argue the constitutional issue (see 2009300007).

Tweets from Trump and statements from USTR Robert Lighthizer and other administration officials “at the very least suggest that the real purpose and intention” of lists 3 and 4A were not to address China’s allegedly bad trade behavior, but to fill the coffers of the U.S. Treasury and reduce the U.S. trade deficit with China, Vandevert said in an interview. “My theory would require essentially two proofs” -- that lists 3 and 4A are not “reasonably or appropriately connected” to China’s unfair trade practices, “and that they were in fact revenue measures,” he said. “The president’s on record. He said billions are going into the Treasury, and that’s a good thing.” Raising money and imposing taxes is “the sole responsibility of Congress,” he said. “The president can’t do it.”

USTR’s Section 301 investigative report was “solid” in its findings that China’s trade abuses were harming U.S. interests, he said. “List 1 and 2, I’m not fighting those,” he said. “They were legitimate” and “commensurate” remedies under Section 301 for addressing U.S. harms, he said. Lists 3 and 4A “impose additional duties,” based on “absolutely no finding” of Chinese trade abuse, absent a “further” Section 301 investigation, he said. USTR, the White House and DOJ didn't respond to questions.

Akin Gump, representing HMTX Industries and Jasco Products in the first of the 3,500 complaints, went on record last week to say its clients “do not assert a constitutional claim” as part of a request for a three-judge CIT panel. Asked if that puts him on a collision course with Akin Gump and the remaining plaintiffs’ lawyers, Vandevert responded: “It might.” He expects “some negotiation” will take place during case consolidation, he said. His “pitch” to the other plaintiffs: “Adopt my issue, I’ll take responsibility, just on the logistics. I’ll be responsible for it, and it doesn’t hurt you.” Adding this issue “doesn’t add to your workload,” he said. “I’m going to take care of it.”

Vandevert said he’s aware of no court “provision” of a constitutional claim “opening up the timelines” for establishing timeliness in a Section 301 complaint. An importer would still be required to file an action within two years after accruing injury to be eligible for refunded tariffs, he said.

Several lawyers argued Sept. 21 was the hard deadline for filing a Section 301 action because it was the two-year anniversary of the List 3 Federal Register notice. “When I saw that I immediately disagreed,” Vandevert said. “Before knowing when your time expires, you first have to know when your time starts. You can’t have a cause of action unless you have an injury. In this case, payment of taxes is the injury.” Sept. 24, 2018, was the first date “that anybody could possibly have incurred an injury” because that’s when List 3 tariffs had to be paid, he said. So Sept. 24 this year was the “first day that the two-year period” began to expire, he said.

The two-year cutoff for filing an action claiming injury “actually is a rolling deadline,” Vandevert said. “It’s two years from when you made a payment.” Expect additional importers to file complaints establishing timeliness on the two-year anniversary of their first tariff payments, even if the payments were made well after List 3 took effect Sept. 24, 2018, he said.

“There’s strong case law” in the harbor maintenance tax litigation supporting the rolling two-year deadline for establishing timeliness in a complaint, Vandevert said. HMT also is precedent for case management procedures to be adopted in the Section 301 actions, he said. CIT need not follow everything that was done in the HMT litigation, but “it’s certainly a strong model to look at,” he said. DOJ in its Section 301 filings has “made repeated reference to the HMT cases,” he said.

Vandevert supports Akin Gump’s motion for a three-judge panel, he said. “It’s a good idea, and even if I didn’t, I think it’s likely to happen,” he said. “The decision of a three-judge panel of the CIT can be appealed directly to the Supreme Court. It’s the Supreme Court’s choice to take the case or not.”

It’s clear that Akin Gump is “maneuvering” to be designated “lead counsel” in the Section 301 litigation test cases, Vandevert said. “On the flip side, there are a lot of lawyers with contingency fee arrangements, where they are perfectly happy, and their clients are happy, to let the lead go. They’ll monitor the cases, but they have to do no work. If they win, they and their clients win, with no expenditures or time spent, or little time spent.” The question facing the court in choosing the test cases will be which complaints “are genuinely representing all legitimate issues that have been raised,” he said. “In the consolidation, they could pick a couple.” Akin Gump didn’t comment.

Vandevert thinks the thousands of Section 301 plaintiffs have “a strong case,” he said. He told his clients that Akin Gump’s allegations are “strong arguments,” he said. But on the “likelihood of success,” Vandevert thinks the case is “still a long shot,” he said. DOJ will “pound” the argument that the tariffs are the administration’s trade policy, “and this is the job of the executive branch,” he said. “It’s our discretion to decide what we’re going to do and how we’re going to do it.” Lighthizer has been extraordinarily “explicit” in his congressional testimony that he thinks he enjoys broad discretionary Section 301 authorities, he said.

There’s a “judicial principle” at play at the CIT that “the role of the courts is not to decide policy and it’s not to second-guess congressional legislation or the policies or actions of the executive branch, as long as they are legal,” Vandevert said. A definite “advantage” of a three-judge panel is “you avoid the pitfalls of a lone judge,” he said. “There’s going to be a judge who’ll say, ‘I’m absolutely one of those people who thinks that the courts shouldn’t restrict the executive branch at all.’ With three judges you have a better ability, like with an arbitration panel, to get some kind of more balanced decision.” Others said CIT judges are not that rigid in the executive branch's favor, arguing plaintiffs have better than 50-50 odds of prevailing in the litigation.

Vandevert retired in September 2017 after 17 years as Ford’s inside counsel and similar roles before that at General Motors and Delphi, he said. He’s a “solo practitioner with an admittedly very small client base,” he said. He had “some thoughts” about drafting a Section 301 complaint, but didn’t actually do so until he learned of the Akin Gump litigation, he said. “I contacted my clients to see if they were interested. There were the two that I filed for that said yes.”