CIT Tosses Case Over Goods Excluded Due to Forced Labor Concerns, Denies Stipulation for Re-Export

The Court of International Trade on Dec. 15 dismissed a case seeking the release of goods excluded over forced labor concerns without plaintiff Virtus Nutrition's proposed condition that CBP allow the goods to be reexported. Judge Timothy Reif said the temporary storage agreement under which the goods are currently being held does not give a basis to include the proposed stipulation. Virtus "retains recourse" to address its concern that CBP can seize the goods rather than allow their exportation, Reif said.

Virtus imported palm fatty acid distillate and palm stearin from Malaysia. CBP barred the imports from entry while it examined Virtus' supply chain for signs of forced labor (see 2105130055). The products were held under a Withhold Release Order that bars the entry of palm oil products made in Malaysia by Sime Darby Plantation Bhd.

After the goods were entered but not yet excluded, Virtus and CBP entered into the storage agreement to determine where to keep the merchandise during the administrative and judicial proceedings. Under the agreement, Virtus had to secure the goods and ensure CBP inspectors could access them. It also allows Virtus to export the goods if they are not released. The goods were then excluded from entry.

After the manufacturer declined to participate in its eventual legal challenge, Virtus turned to re-export options for its merchandise. Two options included talks with Mitsui & Co. to take back the detained palm fatty acid distillate and, with another buyer, purchase the palm stearin. The importer then filed for a voluntary dismissal of the case on the condition that it be allowed to re-export the goods (see 2210030067).

But according to Reif, the storage agreement doesn't provide a basis for the re-export stipulation because the agreement doesn't guarantee Virtus the right to export its merchandise, but rather says that if the shipments are excluded, the plaintiff is responsible for re-export or destruction, Reif said. "This provision also does not require that the Temporary Storage Agreement remain in effect beyond the conclusion of this litigation until the point at which plaintiff may 're-export or destr[oy]' the merchandise," the opinion said. "The Agreement provides instead that it will remain in effect 'pending final decision regarding the admissibility of the shipments.' Consequently, the terms of the Temporary Storage Agreement neither require nor are consistent with plaintiff’s request to include its proposed stipulation in the order of dismissal."

Reif also held that plaintiff has recourse to address its concern that CBP may seize the goods rather then let them be re-exported since the plaintiff would be able to challenge the potential seizure of the merchandise under 28 U.S.C. Section 1356. "Plaintiff recognizes the availability of this recourse but argues for the inclusion of the proposed stipulation on the basis that 'there is no need to expose plaintiff to ... a second lawsuit,'" the opinion said. "The possibility of future litigation does not provide a basis to include plaintiff’s proposed stipulation in the court’s order of dismissal, particularly in view of the purpose of USCIT Rule 41(a)(2) -- to protect the defendant from '[c]lear legal prejudice' that may result from the voluntary dismissal of an action."

(Virtus Nutrition v. United States, Slip Op. 22-142, CIT #21-00165, dated 12/15/22, Judge Timothy Reif. Attorneys: John Peterson of Neville Peterson for plaintiff Virtus; Marcella Powell for defendant U.S. government)