DOJ Proposes Strict Terms if It Loses Section 301 Injunction Fight

The preliminary injunction the Section 301 plaintiffs seek to freeze liquidations of unliquidated customs entries from China with Lists 3 and 4A tariff exposure (see 2104230059) is “unwarranted,” falls short of the high legal "bar" required and if granted, “would impose an enormous administrative burden” on Customs and Border Protection when the agency is already stretched thin, argued DOJ’s opposition (in Pacer) Friday at the U.S. Court of International Trade. Importers filed for the injunction April 23 after DOJ refused to stipulate it would support refunds of liquidated entries if the plaintiffs won the litigation and the tariffs were declared unlawful.

If the court grants the injunction, DOJ’s “alternative proposed order” (in Pacer) would attach strict mandates to the order on the sharing of customs data between the sides and which among the importers would qualify for injunctive relief. DOJ also asks that the terms include a 90-day waiting period before liquidation suspensions would begin. Importers waiting for their suspensions to take effect would still risk liquidation with no government obligation to reverse the status within the 90 days, though liquidated entries would be ordered returned to unliquidated status after the waiting period expires.

Plaintiffs likely will file vigorous objections in a reply brief, saying DOJ’s proposed terms are onerous and unjustifiable, we learned over the weekend. If the court grants the injunction, it can either set terms in its order or ask the two sides to agree on conditions, finally ordering the terms if there’s no agreement. Akin Gump lawyers for sample-case plaintiffs HMTX Industries and Jasco Products declined comment.

Akin Gump’s injunction motion sought blanket relief for all Section 301 litigants to avoid duplicative filings from plaintiffs in the 3,600+ cases, except for those deciding later to opt out. But DOJ’s proposed ground rules would make liquidation suspensions far less sweeping and more drawn out and would shift burdens to the plaintiffs in determining which importers would qualify.

DOJ's proposal would require the plaintiff steering committee to furnish the government within 30 days of the injunctive order a “spreadsheet” listing the correct importer of record (IOR) numbers of all plaintiffs seeking liquidation suspensions, plus the court information about their individual Section 301 cases. Importers whose IORs for undetermined reasons went missing from the spreadsheet would be denied relief, said DOJ. The government would have 90 days after taking possession of the spreadsheet to put the suspensions into effect, and would have no obligation “to return any entries that liquidate during that 90-day period to unliquidated status,” it said. The steering committee would be required to update the spreadsheet every 30 days, and the 90-day waiting-period process would begin again.

In proposing those terms and conditions, DOJ “endeavored to identify ways to reduce the cataclysmic impact that a suspension of liquidation in this mammoth litigation would have on CBP,” said the government. It did so, it said, to heed the three-judge panel’s terminology requests during an April 26 status conference if the court was to order an injunction.

During the 35-minute virtual conference that dispensed mostly with housekeeping items, Chief Judge Mark Barnett asked DOJ lawyers to raise “any special language” that the panel he shares with Judges Claire Kelly and Jennifer Choe-Groves might consider incorporating in an injunction order for "facilitating" CBP’s administrative challenges. He stipulated the language adopted could not diminish “in any way” the “effects” of the injunctive relief the court granted the plaintiffs.

CBP recorded more than 12.7 million customs entries with Lists 3 and 4A tariff exposure through the March 31 end of the fiscal year from all importers, not just those that filed cases in the massive Section 301 litigation, said the declaration (in Pacer) of Thomas Overacker, executive director-cargo and conveyance security in CBP’s Office of Field Operations. Of those 12.7 million entries, more than 4.9 million, just under 40%, remained unliquidated through March 31, he said.

If the court orders liquidations suspended of the entries of the roughly 6,500 plaintiff importers in the Section 301 cases, “CBP would have to implement the order on an importer-by-importer basis,” using the IORs provided in the steering committee spreadsheet, said Overacker. “CBP would need to run over 6,500 reports just to identify the unliquidated entries filed by each individual importer in question. Until it runs these reports and tabulates the results, CBP is unable to determine which entries would be subject to a court-ordered suspension.”

It wouldn't be until then that CBP would know what percentage of the more than 4.9 million unliquidated entries with Lists 3 and 4A exposure “are entries filed by the plaintiffs in these actions,” said Overacker. “CBP anticipates that it is a significant percentage.”

CBP operates with “limited resources with a broad mission entailing many competing priorities,” said Overacker. Having to suspend liquidations of all the Section 301 plaintiffs, as the injunction would require, “would divert agency resources away from other priority trade functions,” he said. The burdens on CBP would be of the government’s “own making,” said Akin Gump’s injunction motion. “Defendants could avoid that burden by simply agreeing (as it has done at least twice in recent prior cases) that refunds are available should Plaintiffs prevail.”

If the court decides "reliquidation is available as a remedy if plaintiffs prevail on their claims," said the government, "we reserve our right to appeal this issue" due to the "uncertainty" of the case law on refund relief. The Section 301 litigation "should not serve as the basis for relief here, either at the preliminary injunction stage or, if plaintiffs prevail, when final judgment is entered," said DOJ. Contributing to the decision was the "magnitude" of the Section 301 "trade program," and the number of government "stakeholders involved," plus the "significance" of the Section 301 litigation, it said,

The court should deny Akin Gump’s injunction motion because plaintiffs “have not demonstrated a likelihood of success on the merits,” as the law requires, nor have they shown they're likely to suffer “irreparable harm” without injunctive relief, said DOJ. The public interest and “balance of hardships” metrics in preliminary injunction case law also “compel denial of injunctive relief” and weigh in the government’s favor, it said.

Plaintiffs “cannot meet the high bar that the Federal Circuit has set for successfully challenging” the actions of the president and the Office of the U.S Trade Representative under the 1974 Trade Act, said DOJ. Plaintiffs “incorrectly allege” that USTR, at President Donald Trump’s direction, “was precluded from taking action” on the Lists 3 and 4A tariffs because more than a year had passed since the Section 301 investigation was initiated, it said.

But the statute’s Section 307(a), under which the Trump administration justified Lists 3 and 4A, “does not contain a one-year time limit -- or any time limit at all,” said DOJ. “To the contrary, within the statutory structure,” that section of the Trade Act “serves the necessary role of allowing for a resolution of the issues under investigation, and the consequent termination of the trade action,” it said. If that section “were somehow construed as having the same one-year time limit as is applicable to the initial investigation, the statute would provide no mechanism for lifting a trade action upon a successful resolution,” it said.

Section 307 (a) authorizes USTR to act if the burden on U.S. commerce “subsequently increases,” said DOJ. That “supports both that the level of the action could increase,” and that Congress envisioned that USTR “would continue to monitor” Section 301 investigations “and react if the initial action was ineffective at resolving the unfair or discriminatory trade practice,” it said.

Plaintiffs’ “misreading of the statute” would deny the president and USTR “the flexibility to respond to a trading partner’s refusal to eliminate its unfair trade practices and, instead, to retaliate in hope of pressuring the United States to withdraw its initial action,” said DOJ. That would be “fundamentally inconsistent” with the purpose of acting under Section 301 “in the first place,” which was to implement whatever measures were appropriate to get China to curb its unfair trading practices, it said.

HMTX-Jasco also wrongly assert that Section 307's modification authorities limit the president and USTR to only delay, taper or terminate the initial Section 301 action, said DOJ. “This interpretation is at odds with the plain text of the provision,” which authorizes modifications “to address situations in which the burden on U.S. commerce has increased,” it said.

But Section 307 “does not permit USTR to expand the imposition of tariffs to other imports from China for reasons untethered to the unfair intellectual property policies and practices it originally investigated under Section 301,” argued Akin Gump for HMTX-Jasco in its first-filed September complaint (in Pacer). “Yet that is exactly what Defendants did here when they promulgated the List 3 and List 4A duties in response to China’s retaliatory duties and other unrelated issues.”