DOJ Rejects Backing Reliquidations When Section 301 Litigation Ends

The government rejected the proposal from Section 301 plaintiffs at a U.S. Court of International Trade status conference Friday that would have entitled importers to refunds from reliquidated customs entries from China with Lists 3 and 4A tariff exposure if they prevail on the merits at the end of the litigation.

The rejection was two weeks before the court’s Aug. 6 deadline for Customs and Border Protection to create a “repository” for importers to request that liquidation of their entries be suspended, in compliance with the court’s July 6 preliminary injunction order. The back-and-forth between plaintiffs and defendants at the conference suggested the repository and the processes involved in making it work were not quite ready for prime time.

DOJ communicated the refund stipulation rejection to plaintiffs Thursday but didn’t respond to follow-up emails asking for the government’s rationale and what plaintiffs could do to placate the objections, said Akin Gump lawyer Pratik Shah for sample case plaintiffs HMTX Industries and Jasco Products. The government is willing to stipulate refunds for importers whose entries liquidate inadvertently during the PI order’s temporary restraining order (TRO) period now set to expire Sept. 2, not for all entries that liquidate after PI’s July 6 effective date, said Shah.

It’s “unclear” to plaintiffs why the government is willing to agree to a refund stipulation for entries that liquidate accidentally during the TRO period but not to entries that would liquidate normally during “the entire period of time after July 6,” said Akin Gump lead attorney Matthew Nicely. The government is requesting “reliquidation for a finite period of time so that we can comply” with the PI order, responded lead DOJ attorney Jamie Shookman. CBP’s inability to reset a large number of entries to unliquidated status at one time during the TRO period is what necessitated the government’s proposed modification to the PI order supporting a limited reliquidation proposal, she said.

In the government’s view, “this proposal allows us to comply with the court’s order,” said Shookman. “Reliquidation in that circumstance fits into the narrow exception to the general rule that reliquidation is not available as a general remedy. The proposal that plaintiffs sent to us would ask us to agree to reliquidate any entry that liquidates after the court’s preliminary injunction order. This simply does not fit into the narrow exception that we believe exists to the general rule. We don’t think we need to articulate more of a reason to plaintiffs beyond that.”

Judge Claire Kelly asked Shookman if she could envision “any scenario” in which the government could support the plaintiffs’ proposal. “I don’t want to say that there’s no scenario,” said Shookman. “It’s not a matter of tweaking language or continuing negotiations. We are not agreeing to plaintiffs’ proposal.” Neither Nicely nor Shah on the Akin Gump side responded.

It’s an “open item” that plaintiffs and defendants disagree on what information importers will need to submit to the repository to qualify for preventing their entries from being liquidated, said Shookman. “We intend to require importers to submit information that is consistent” with the PI order, she said. Plaintiffs propose letting importers “choose the information that they submit,” she said.

The government doesn’t disagree with plaintiffs that the information CBP would require importers to submit is already available in the agency’s Automated Commercial Environment (ACE) database, said Shookman. “It’s not the complexity of the task” that’s at issue, “but the sheer volume,” she said.

Though it’s “theoretically possible” for CBP to generate reports and “to put those into the format needed to upload to ACE, if the court were to accept plaintiffs’ proposal, somebody at CBP would need to do this for potentially up to 6,500 importers on a rolling basis,” every month, said Shookman. “Generating thousands of those individual reports and then formatting them for all of the importers would be incredibly burdensome for CBP, as opposed to each importer compiling this information on its own.” As a concession to plaintiffs, “the government has decided not to require importers at this time to submit entry-line-level information.”

How the repository would be able to detect and resolve errors generated through importer submission or CBP mishaps remains a bone of contention between the sides. The government plans to publish comprehensive instructions for importers by the Aug. 6 deadline on how to use the repository, along with sample spreadsheets and other materials, said Shookman. DOJ hasn’t yet shared drafts of the instruction documents with the plaintiffs, only the “parameters” of the information it will be requiring of importers, she said.

It’s “hard to say what happens” when an error is discovered, “without knowing what the specific error is,” said Shookman under questioning from Judge Jennifer Choe-Groves. “We would envision the person at each CBP center assigned to handle a suspension request would be in touch with the importer and notify them of any errors as soon as possible.”

The debate about whether importers should bear the “burden” of generating their own reports and submitting them to the repository “is about the allocation of risk,” said plaintiffs’ steering committee member Larry Friedman with Barnes Richardson. “Every time the data is touched by a human being” at CBP, “there is a chance of an error or omission creeping into the data,” he said.

Plaintiffs alternatively propose submitting data to the repository that already resides in ACE, said Friedman. ACE is CBP’s “system of record,” he said. “It has the data that for intents and purposes everyone accepts as complete and accurate. No one should be touching that data any more than is necessary.” Plaintiffs worry that “at some point the government will say, that was not a fully compliant request and therefore the liquidation is final,” he said. “That is a significant risk that plaintiffs should not have to live with, given that there is a complete and accurate data set.”