Trump's latest global tariffs face legal challenge from small businesses

Two lawsuits filed in US Court of International Trade argue that the govt unlawfully used Section 301 of the Trade Act of 1974 to impose fresh import duties after earlier tariffs were struck down

By Zoe Tillman and Erik Larson

 

The Trump administration is facing a fresh legal challenge to the president’s latest round of global tariffs that took effect Friday. 

Small businesses filed a pair of lawsuits in the US Court of International Trade accusing President Donald Trump and US officials of unlawfully using Section 301 of the Trade Act of 1974 to replace earlier tariffs struck down by the US Supreme Court.

 

The Trump administration announced Thursday that the US will collect duties of between 10 per cent and 12.5 per cent on imports from most major trading partners. The move under Section 301 followed a probe into the alleged failure of around 60 economies to prevent forced labor in their supply chains to the detriment of American workers.

 

 

Trump aims to rebuild a tariff wall that was struck down in February when the Supreme Court ruled his global levies, issued under the International Emergency Economic Powers Act, or IEEPA, were illegal.

 

Trump subsequently imposed 10 per cent global tariffs, under Section 122 of the Trade Act, and those were ruled illegal by a trade court but were allowed to stay in effect during an appeal. The Section 122 tariffs expire Friday.

 

Section 301 allows the US Trade Representative, under the direction of the president, to impose tariffs in response to other nations’ trade measures it deems discriminatory to American businesses or in violation of US rights under international trade agreements.

 

Spokespeople for the trade representative, White House and Justice Department didn’t immediately respond to requests for comment.

 

Lawyers in one of the cases filed on Friday on behalf of two small businesses — spice importer Burlap and Barrel Inc. and watch retailer Collective Horology LLC — alleged in the complaint that the new tariffs failed to reflect the “country-specific inquiry” that Congress expected when it adopted Section 301. They filed the case as a proposed class action suit covering all importers of record who will pay the new tariffs.

 

“It is not a freestanding authorisation to tax substantially all imports from substantially all trading partners at rates selected to replicate the invalidated IEEPA tariff regime,” they wrote.

‘Generalised Assertions’ 

The businesses argued that the trade representative failed to explain “how each economy’s particular practices burden or restrict United States commerce, rather than relying on generalised assertions regarding the effects of forced labor and forced-labor inputs in global supply chains.”

 

Sara Albrecht, chief executive officer of the Liberty Justice Center, which brought the Burlap & Barrel case, said in a statement that “forced labor is morally indefensible, but an important objective does not give the government permission to ignore the law.”

 

Liberty Justice Center previously brought lawsuits challenging the IEEPA and Section 122 tariffs. 

 

Another lawsuit challenging the Section 301 tariffs was filed on Friday on behalf of seven businesses, including two educational toymakers — Learning Resources Inc. and hand2mind Inc. — that were involved in the earlier IEEPA tariff litigation that reached the Supreme Court.

 

The latest litigation comes as the administration continues to face fallout from the IEEPA tariffs. In the months since the Supreme Court invalidated those tariffs, customs authorities have had to contend with refund demands from thousands of businesses that paid the roughly $166 billion in levies collected.

Refund Headaches

The ongoing disputes over IEEPA refunds provides a preview to potential logistical and legal headaches ahead for everyone involved in challenges to the new Section 301 tariffs — the government, businesses and the New York-based trade court. The trade court had declined requests from companies to block the administration from enforcing the IEEPA tariffs before the Supreme Court ruled, which allowed the volume of disputed levies to grow in size and complexity for months.

 

The US government has paid billions of dollars in IEEPA tariff refunds so far, but the Justice Department continues to fight the extent of the trade court’s authority to dictate how that process should work. The administration is appealing a judge’s order that would require tariffs to be recalculated across-the-board to all importers that paid them, arguing that he can only issue orders that apply to parties in court. 

 

The cases are Burlap and Barrel Inc. v. Greer, 26-cv-3345, and Learning Resources Inc. v. United States, 26-cv-3347, US Court of International Trade (New York).