Compromise Looms on Reliquidated Entries in Section 301 Litigation

Opposing sides in the Section 301 litigation appeared from Thursday’s status conference at the U.S. Court of International Trade to be inching toward a compromise that would spare Customs and Border Protection the administrative burden of complying with the court's July 6 preliminary injunction (PI) order freezing liquidation of many thousands of unliquidated customs entries with Lists 3 and 4A tariff exposure. The court called the conference to gauge progress in creating the order's “repository” for importers to seek the suspension of entries due to be liquidated during a 28-day temporary restraining order period that expires Aug. 2.

With the Tuesday repository deadline days away, the sides appeared far from agreement on how the repository would work. Plaintiffs steering committee member Michael Roll, with Roll & Harris, asked the court to extend the TRO period to 90 days or more, citing the complications and disagreements with the government on the record keeping burden importers should bear. Lead DOJ attorney Jamie Shookman said it was the first she had heard of the TRO extension proposal and would need to confer with her team before responding.

Unforeseen CBP technicalities are prompting DOJ to weigh proposing a reliquidation modification to the order, said Shookman, after months in which the government expressed doubts CIT had reliquidation authority. “At the moment, CBP has not been able to come up with a way to identify the subject entries that would be restrained from liquidation during the 28-day temporary restraint period,” opening the possibility an untold number of entries would be liquidated inadvertently in violation of the PI.

CBP also lacks methods “to reset to unliquidated status entries en masse the way it can suspend entries en masse,” said Shookman. The government will propose a modification in the order stipulating that any entries that improperly liquidate during the 28 days can be reliquidated at the end of the litigation with a refund of “any duties that are found to have been unlawfully collected” if the plaintiffs win, she said. “What we propose as a modification to the order, given the inability to identify subject entries and the inability to reset a large number of entries to unliquidated status at one time, is ordering that any entries that liquidate during the temporary restraint period be reliquidated at the conclusion of litigation.”

Shookman’s statements sparked Chief Judge Mark Barnett to ask if the government was now “conceding” that the court has the authority to order reliquidations “at the end of this process.” Shookman responded: “We are conceding that the court in limited circumstances may order reliquidations to preserve the integrity of its order -- in this case, this order on interim relief.” He asked Shookman to propose the government’s modifications by the close of business Monday, along with DOJ’s response to Roll’s proposal for an extension of the TRO. The government also will propose that importers file future suspension requests at least 30 days before goods are to be liquidated to give CBP a “window of time” to hash out any “syntax” errors that are likely to block any requests, she said.

Rather than confining reliquidation relief “on an entry-by-entry basis” only to entries inadvertently liquidated during the TRO, as DOJ plans to propose, “we see no reason why the government could not simply stipulate that all entries subject to the PI order” can be afforded the same relief, said Akin Gump lawyer Pratik Shah for sample case plaintiffs HMTX Industries and Jasco Products. That “straightforward alternative” would save “thousands of hours collectively between plaintiffs and defendants in trying to come up with and comply with the repository,” he said. It also would “fully protect the government’s ability to pursue its legal argument on appeal as to all entries that liquidated prior to the PI order,” he said.

Plaintiffs see “zero downside to this approach and lots of upside for everyone involved,” said Shah. The basic language for the proposal already exists in Judge Claire Kelly’s PI order, and need only be modified to cover all entries not yet liquidated before the injunction, said Shah. He said he communicated the proposal by phone to Shookman on Wednesday and followed up with her by email on Thursday. Shookman said she hadn’t had the chance to discuss the proposal with her team.

Shah agreed, when Kelly asked if his approach would punt the record keeping burden to the end of litigation if the plaintiffs win and would need to work through CBP on getting the tariff refunds sorted out. Barnett expressed worry about what he said from his court experience was the need to address the burden “upfront.” Amid the number of entries and importers involved in the massive litigation, deferring the burden until after the case is resolved will result in a “guaranteed train wreck of epic proportions,” he said. Kelly said later she wasn't so concerned.

The government proposes establishing the repository using the existing document image system (DIS) in CBP’s Automated Commercial Environment database, said Shookman. Importers seeking to have liquidations suspended would submit information to this system via email or a “system-to-system transfer,” she said. DOJ is working on “detailed instructions that would tell importers exactly the format to use to submit information,” including spreadsheets for the covered entries, she said. “Our intention is to file those instructions, along with sample transmission emails and spreadsheets” by Tuesday’s deadline for the establishment of the repository, she said.

The steering committee’s Roll responded that the government’s approach places too much burden on importers. CBP is asking importers to provide data “that Customs already has,” he said. “If they have the importer numbers, the same data that they’re asking us to provide already resides in their system.” Asking importers to email CBP a list of entries is too burdensome, said Roll. “The solution there ought to be that simpler is better,” and the DIS system the government proposes “is not simple,” he said.