Two U.S. businesses are suing the federal government over new Section 301 tariffs imposed last week, adding another chapter of legal scrutiny for the Trump administration’s duty-reliant trade policy.
The companies, spice importer Burlap and Barrel and watch retailer Collective Horology, are calling for the removal of the new levies and the payment of refunds, according to a lawsuit filed with the U.S. Court of International Trade on Friday.
In the filing, the businesses argue that the tariffs, installed to address forced labor regulations of more than 60 trading partners, are “arbitrary and capricious" and being used as a backdoor attempt to replace levies that were previously removed. The businesses also claim the Trump administration did not effectively follow or meet Section 301 requirements before imposing the duties.
The Section 301 tariffs went into place on Friday, the same day the lawsuit was filed and exactly 150 days after President Donald Trump implemented temporary Section 122 tariffs. Duties installed under the statute can remain in place for up to 150 days unless extended by an act of Congress. Trump instituted the Section 122 levies following a February Supreme Court decision that revoked sweeping tariffs he installed using the International Emergency Economic Powers Act the year prior, including a global baseline duty of 10%.
“The rates imposed by the Section 301 Action closely track the rate structure previously imposed or negotiated under the invalidated IEEPA program, including its 10 percent baseline tariff and additional country-specific rates,” the lawsuit says.
The lawsuit further alleges the Trump administration determined the Section 301 tariff rates before concluding the investigation and then assembled supporting evidence to install the duties after the fact.
The Trump administration will now have to convince the court “that the proportional relief to the alleged harm occasioned by each of the 60ish countries just happened to fall in the 10-12.5% range in every instance, which in turn just happened to be more or less the same rate heretofore deployed under Section 122,” Alexander Schaefer, a partner at Crowell & Moring told Supply Chain Dive in an email last week, adding: “That strikes me as a pretty tough sell.”
Beyond questioning the integrity of the investigation’s outcome, the lawsuit also asserts that the probe was completed in a protracted timeline that breaks with historical precedence.
U.S. Trade Representative Jamieson Greer launched the forced labor investigation, as well as a separate probe into global manufacturing capacity, in March. Just under three months later, he announced the conclusion for the forced labor probe and proposed a 10% or 12.5% tariff on 60 trading partners in response to the findings. The USTR provided for a comment period that ended earlier this month and a set of public hearings before instituting the tariffs last week, with some adjustments.
“The abbreviated process, the scope of the action, and the resulting record demonstrate that USTR did not genuinely consider the economy-specific questions its final action purported to resolve,” the lawsuit says, noting that a previous Section 301 investigation into China’s policies related to technology and intellectual property conducted during the first Trump administration took more than twice as long as the forced labor probe.
Along with challenging the speed by which the investigation was completed, the lawsuit also takes issue with tariffs as a proposed remedy to address ineffective forced labor regulations. It argues that the USTR did not provide a meaningful country-by-country analysis of each country’s regulations nor a specific rationale for how the new tariffs would effectively improve forced labor bans globally.
“Section 301 does not permit USTR to substitute a generalized assertion that forced labor is harmful, unfair, or economically distortive worldwide for the statute’s required determination concerning an identified foreign act, policy, or practice and its burden or restriction on United States commerce,” the lawsuit says.
This is far from the first time the Trump administration has had to fight in the courts over its broad tariff regime. Prior to being struck down, Trump’s IEEPA tariffs faced several lawsuits that were eventually consolidated and heard before the Supreme Court.
Similarly, a group of more than 20 states and two businesses, including Burlap and Barrel, sued the administration over the now-expired Section 122 tariffs. The Court of International Trade in May said those levies were illegal, although the ruling remains under appeal.
Reporter Antone Gonsalves contributed to this story.
