President Donald Trump’s forced labor tariffs, imposed July 24 under Section 301 of the Trade Act of 1974, are the latest duties drawn up by an administration eager to reanimate what appears to be a flagging, or at least legally dubious, trade strategy. They won’t be the last.
However, as the administration pivots to new policies to underwrite its tariff regime—the central pillar of its economic and foreign policy agenda—importers are also evolving their strategies to combat the impacts of the duties.
Most notably, they’re taking the federal government to court.
The most recent round of Section 301 tariffs faced challenges in the Court of International Trade (CIT) the same day it took effect. Two of the small businesses responsible for suits against Trump’s International Emergency Economic Powers Act (IEEPA) duties—cases that eventually made it to the Supreme Court—came back for round two, accusing the president, again, of overstepping his authority.
On Monday, 25 states followed suit. Twenty-three state attorneys general and two governors alleged that their states have purchased and imported goods that are subject to the 10-12.5 percent duties.
According to Augustine Lo, a partner at Dorsey Whitney LLP who advises clients on U.S. customs and international trade law, economic sanctions and export controls, the case bears some resemblance to the one against Trump’s global 10 percent duties that plaintiffs brought to the CIT—and won—in May. However, he said, this group of plaintiffs appears to have learned from those that came before them.
A coalition of several states went up against Trump’s universal baseline tariffs, levied under Section 122 of the Trade Act of 1974, this spring, “but only one state was found to have actual standing to pursue the case,” Lo said.
The state of Washington, alongside two small business plaintiffs, won its case by proving direct impacts from the tariff action. The other importers that filed alongside the three plaintiffs remained subject to the Section 122 tariffs unless they brought their own lawsuits against the government.
“In the latest complaint brought against the [Section 301] tariff action based on forced labor, they allege that all the state plaintiffs have purchased goods or imported goods subject to the tariff, and that may have been one of the learnings by the state plaintiffs in this case,” Lo said.
According to the lawyer, the Section 122 ruling may have served as a “warning” to future plaintiffs. The CIT and other federal courts “tend to disfavor generalized complaints alleging harm,” as opposed to specific complaints that point to concrete consequences, Lo explained.
This goes back to a Supreme Court case last year—Trump v. CASA Inc.—wherein the nine justices ruled that federal district courts don’t have the power to issue “universal” injunctions that apply to parties beyond the specific plaintiffs in a case. This precedent “may serve as a gating function to make it difficult for states to bring actions on behalf of their citizens unless they’re able to also assert some kind of traceable harm,” Lo said.
Whether the state leaders made those cases effectively is yet to be seen, though the lawyer said it appears that “they’re trying to head off that issue in this case” by pinpointing consequences to local economies.
Lo said he believes that the cases brought by the states and the small businesses have opened the door to others, and that they may have a good shot against the administration.
“There have been cases in the past that have upheld Section 301 tariff actions in the past, though those actions were of a different flavor; they weren’t so wide ranging as this one. They typically involved the goods of one country as opposed to 60 economies at the same time, and they tended to involve some kind of practice that’s more historically associated with trade disputes,” he added. “The idea that other countries have not effectively enforced their own forced labor prohibitions, and therefore that has some kind of a downstream effect on competition with American goods—that’s a novel strategy.”
It remains to be seen whether the CIT will buy the plaintiffs’ cases against the federal government and accept their allegations of harm as sufficient. But if there’s any indication that the court is favoring the plaintiffs in these actions, that could be serve as an incentive for other companies to bring their own lawsuits,” he believes.
One argument that has been at the center of the cases against the Section 301 tariffs, both from small businesses and the states, centers around the timing of the new duties, which took effect on the same day that the Section 122 duties expired. Meanwhile, the Section 122 duties were implemented just days after the IEEPA tariffs were invalidated by the Supreme Court, meaning there’s been virtually no gap between tariffs.
“Historically, courts have afforded significant discretion to the executive branch in conducting these trade investigations,” Lo said, referring to the Section 301 probes, “but maybe there is a point at which the courts will start questioning whether or not decisions have been predetermined, and so that appears to be the strategy the plaintiffs are pursuing.”
Regardless of the growing stack of lawsuits now littering law firm desks as they make their way to federal courts, Lo doesn’t see the government stepping back from trying to impose tariffs through whatever means necessary.
“I see the administration pressing forward. That has been its response to previous losses in court, as with the IEEPA tariffs—to follow up using investigations, implementing measures under other existing laws that provide for tariffs, and it seems like they have significant appetite for fighting these cases,” he explained. “So I see this litigation trend continuing.”
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