No Injunction on Entity List Placement for Hong Kong Apparel Company, DOJ Argues

Hong Kong-based apparel company, Changji Esquel Textile (CJE), should not be granted a preliminary injunction against its placement on the Commerce Department's Entity List, the U.S. argued in the U.S. District Court for the District of Columbia. Resuming litigation after talks between Commerce and CJE broke down (see 2108300058), the Department of Justice said CJE is unlikely to succeed in its case and that the company has not established certain and imminent irreparable harm (Changji Esquel Textile Co. Ltd., et al. v. Gina M. Raimondo, et al., D.D.C. #21-1798).

The Trump administration placed CJE on the entity list for allegedly using forced labor from the Muslim Uyghur minority population in China's Xinjiang region. Arguing it was erroneously placed on the list, CJE launched its suit in the U.S. District Court for the District of Columbia (see 2107070022).

DOJ said CJE's preliminary injunction motion used an improper interpretation of the law. The apparel company said that Commerce can put a company on the Entity List only if it is engaging in five specific types of behavior, which do not include human rights violations. DOJ disagreed, saying the law does not limit the type of behavior warranting of placement on the Entity List to just these five categories.

“To the contrary, section 4813(a)(2) states only that the Secretary must maintain lists of foreign persons involved in [the five groups of] activities -- not that the Secretary is prohibited from maintaining lists of other foreign persons in connection with activities that are not specified in section 4811(2)(A),” the brief said. “The negative-implication canon does not apply here. For starters, this case involves the scope of an agency’s statutory authority -- a context in which Congress routinely leaves questions unresolved as a way to delegate authority to the agency.”

CJE also said it would suffer imminent irreparable harm, stemming from damage to its reputation, lost business and the closure of two of its factories. “But economic harm is only considered irreparable 'where the loss threatens the very existence of the movant’s business,'” DOJ said, a standard that CJE has failed to clear.

The apparel company relied on two of the court's recent rulings granting a preliminary injunction to two companies, Xiaomi and Luokung Technology, also placed on the Entity List for human rights concerns (see 2105070015). But, CJE's case differs from Xiaomi's and Luokung's in important ways, DOJ said. CJE's case does not show the same degree of “enormity” of potential financial loss absent an injunction as Xiaomi showed in its loss of $10 billion in market capitalization, nor does it show the same level of imminent harm that Luokung expressed, when the company showed the loss of any public market for trading its securities, DOJ said.

It is telling that CJE doesn't rely on its procedural due process or Administrative Procedure Act claims when seeking the injunction, DOJ said. Since the company has taken advantage of Commerce's regulations that lay out a process for making a request for removal from the Entity List and the Reform Act precludes APA challenges to all “functions” exercised under APA, CJE relies “solely on [its] claim for 'ultra vires' review, arguing the defendants have acted 'beyond' their delegated authority,” DOJ said. Yet, this review is “extraordinarily narrow,” meaning that “it is not enough that an agency merely misinterpret a law or misapply facts,” the brief said.