Small Businesses Sue Trump Administration Over New Section 301 Tariffs

Two U.S. small businesses are challenging the Trump administration's latest tariffs on imports from 60 trading partners, arguing that federal trade officials stretched a law designed to address unfair foreign trade practices beyond the authority Congress granted.

Burlap & Barrel, a New York spice importer, and Collective Horology, a California watch retailer, filed the lawsuit Friday in the U.S. Court of International Trade. The companies are challenging tariffs generally set at 10% or 12.5% that took effect July 24 under Section 301 of the Trade Act of 1974.

The new duties followed investigations by the Office of the U.S. Trade Representative into whether 60 economies were failing to prohibit, or adequately enforce bans on, imports produced with forced labor. USTR concluded in June that the policies of all 60 were unreasonable and placed a burden on U.S. commerce, making them subject to action under Section 301.

Trade officials argue that countries allowing goods made with forced labor into their markets create an unfair advantage for lower-cost products and hurt companies that do not rely on forced labor. USTR said its investigations included consultations with more than 45 governments, two rounds of public hearings and more than 2,100 public comments across the investigation and tariff proposal process.

Burlap & Barrel and Collective Horology do not dispute the government's ability to use Section 301 tariffs when the law's requirements are met. Their lawsuit instead claims USTR did not make sufficiently detailed findings connecting each country's conduct to harm suffered by U.S. commerce or explain why tariffs covering such a broad range of imports were an appropriate response.

According to the complaint, the agency applied largely similar tariff rates to economies with different laws, enforcement records and trade relationships. The businesses also argue that many of the affected imports have no identified connection to forced labor and that USTR failed to adequately consider narrower measures directed at particular products, industries or supply chains.

Section 301 gives the U.S. Trade Representative authority to respond when a foreign government's act, policy or practice is found to be unreasonable or discriminatory and burdens or restricts U.S. commerce. The available responses can include tariffs. The law also directs the government toward measures intended to obtain the elimination of the foreign practice that led to the trade action.

That connection between the foreign conduct and the government's response is central to the new lawsuit. The businesses argue that Congress authorized Section 301 as a tool to address identified trade practices, not as general authority to place standardized tariffs across most U.S. imports. Their challenge asks the trade court to decide whether the government's findings and chosen tariffs satisfy the limits built into the statute.

The complaint also relies on the Administrative Procedure Act, the federal law governing how courts review many agency decisions. Under that law, a court can set aside agency action found to be arbitrary or capricious, including when an agency fails to adequately explain how the evidence before it supports the decision it made. Burlap & Barrel and Collective Horology claim USTR failed to provide a sufficient reason for treating substantially different economies in largely the same way.

The dispute follows two earlier court challenges over President Donald Trump's use of other laws to impose broad tariffs.

In February, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act did not authorize the president to impose the sweeping tariffs at issue in an earlier challenge. Trump then imposed a temporary 10% global tariff under Section 122 of the Trade Act, which permits limited trade measures to address certain international payment problems. The U.S. Court of International Trade later ruled that the tariff was unlawful, a decision the administration is appealing.

Section 301 presents a different legal question because the provision has long been used by U.S. administrations to impose tariffs in response to foreign trade practices. The new case therefore does not turn on whether Section 301 allows tariffs at all. Instead, the court will be asked to determine whether USTR followed the requirements Congress established before imposing them on this scale.

The businesses also raise a broader constitutional argument tied to Congress's power over tariffs and foreign commerce. Congress may give parts of that authority to the executive branch, but the complaint argues that federal officials must remain within the limits of the law granting that power. The companies claim that interpreting Section 301 as authority for tariffs of nearly unlimited geographic and product scope would give the executive branch powers that Congress did not provide.

Burlap & Barrel says the tariffs increase the cost of spices it imports from farmers and producers overseas, while Collective Horology imports watches from independent manufacturers in Europe and other markets. Because U.S. importers pay tariffs when covered goods enter the country, both companies claim the new duties directly increase their costs.

The lawsuit asks the Court of International Trade to declare the Section 301 tariffs unlawful, block their enforcement, and preserve the ability of the businesses and a proposed class of affected importers to recover duties already paid, with interest.