Judges Pepper DOJ With Tough Questions in Section 301 Oral Argument

The three-judge panel in the Section 301 litigation at the Court of International Trade peppered a government lawyer with tough questions June 17 when the judges asked the Department of Justice to explain how its opposition to a court-ordered reliquidation, or money judgment, if the plaintiffs win the case, doesn’t support a finding of irreparable harm for the importers. Oral argument lasting nearly 80 minutes was held on the preliminary injunction (PI) motion Akin Gump filed April 23 for sample-case plaintiffs HMTX Industries and Jasco Products to freeze liquidation of unliquidated customs entries from China with lists 3 and 4A tariff exposure.

“My understanding of irreparable harm is very simply a harm that cannot be undone,” said Judge Claire Kelly in questioning DOJ trial attorney Jamie Shookman. HMTX and Jasco claim they will suffer irreparable harm because tariffs paid on entries reaching liquidation during the litigation will be irretrievably lost if no refunds are available, especially problematic if the court rules the tariffs unlawful. The government argues that the CIT lacks the authority to order reliquidation or grant the plaintiffs money judgment, but DOJ’s position doesn’t “deal with the question of a harm that cannot be undone,” Kelly said. ”If plaintiffs here pay $100,000 in duties, $1 million in duties, and they can never get that back, why is that not a harm that cannot be undone?”

Shookman responded, as she did repeatedly, that HMTX and Jasco could have mitigated their losses by challenging the lawfulness of the tariffs years earlier. All the suits were filed within the court’s two-year statute of limitations, countered Akin Gump lawyer Pratik Shah. “We’re not aware of any rule that parties have to file early within the statute of limitations to protect their remedies.”

Chief Judge Mark Barnett interjected to say that the 1929 Supreme Court opinion in Ohio Oil v. Conway found that “if you don’t have a remedy to go back to and get a tax refund for what was collected, that’s irreparable harm.” The 1929 case “seems to be directly on point and to the contrary of the argument you’re making,” he told Shookman. She responded that she was “not familiar with that case offhand, but I certainly understand the principle there you’re citing it for.”

The government believes the court needs to “evaluate harm in the broader context of this case,” Shookman said. “Plaintiffs have not demonstrated irreparable harm,” the first key bar for granting injunctive relief, she said. “Even if the court finds plaintiffs will suffer irreparable harm with respect to the liquidated entries, that still is not a grounds for granting plaintiffs’ motion for all the reasons set forth in our papers.”

If the plaintiffs lose the litigation and are denied refunds on appeal, asked Judge Jennifer Choe-Groves, would the government “then concede there would be irreparable harm because there would be no other relief available?” DOJ agrees plaintiffs “would not have the ability to seek refunds of those entries that have already liquidated, yes,” Shookman said. “Isn’t that the definition of irreparable harm?” Choe-Groves asked. “With respect to those entries, perhaps,” Shookman replied. “We think that the court should take into consideration the fact that we didn’t have to be in this position years after these duties have been assessed.” The List 3 tariffs took effect September 2018, List 4A about a year later.

Barnett, his voice raised, asked Shookman: “Why does that matter? Even taking your argument at face that there’s two years of liquidated entries that maybe we could have started looking at two years earlier, why does that mean there can be continuing irreparable harm while the case goes forward?” She again cited the administrative burden that would confront CBP in freezing the liquidations of “potentially millions of entries” as grounds for denying the injunction. Complying with an injunction would give CBP “a lot of work” that’s not “all that particularly complicated,” Akin Gump lead attorney Matthew Nicely countered. “Put enough people on it and it can get done.”

The government has “injected uncertainty” for importers by “flipping 180" from its previous positions and now withholding support for refunds of liquidated entries if the plaintiffs win the litigation, Akin Gump’s Shah said. That DOJ would deny refund relief of the tariffs if the court declares them illegal “is a profound decision for the government to make,” he said. Any burden put on CBP would be “of the government’s own making,” he said.

Akin Gump denies DOJ’s contention that granting the injunction will imply plaintiffs are likely to succeed on the merits of the litigation, weakening U.S. trade negotiating leverage with China, Shah said. “I would concede that we would be in a very different spot if we had come in here, guns blazing, trying to seek a PI to shut down the 301 tariffs altogether.” If plaintiffs had done so, the government’s arguments “might have some traction,” he said. “But that’s not the PI that we’re seeking.”

The judges will render a decision on the PI motion "as soon as we can," Barnett said as the hearing ended.