U.S. Seeks Stay of Safeguard Injunction

The Justice Department has turned to an appeals court to overturn a ruling that has stymied the government's review of China safeguard petitions.

WASHINGTON — The U.S. Justice Department has turned to the appeals process to overturn a ruling that has stymied the government’s review of petitions that seek to limit Chinese imports, arguing that they threaten to disrupt domestic markets.

The Justice Department asked the U.S. Court of Appeals for the Federal Circuit on Monday night to stay a preliminary injunction barring it from accepting or reviewing the safeguard petitions, pending a formal appeal. The U.S. Court of International Trade in New York issued the injunction.

The government also asked the Court of Appeals in Washington for an expedited schedule regarding an appeal it said it would file by Monday. Justice Department lawyers asked that the U.S. Association of Importers of Apparel & Textiles, which brought the original lawsuit at the Court of International Trade, be instructed to respond to the appeal by Feb. 28.

It is the second time the Justice Department has asked a court to stay the preliminary injunction that bars it from accepting or reviewing safeguard petitions that seek to impose fresh quotas on Chinese apparel and textile imports. A trade court judge turned down the government’s request to delay the injunction on Jan. 31.

The legal maneuvering stems from a case filed by U.S. importers that challenges the government’s authority to impose limits on Chinese textile and apparel imports based solely on threat rather than actual market disruption.

China agreed to a safeguard mechanism, or temporary quotas, when it joined the World Trade Organization in December 2001. The provision allows importing nations to impose one-year quotas on Chinese apparel and textile imports that are threatening to cause, or are causing, market disruption.

A coalition of U.S. domestic textile, fiber and apparel groups and the union UNITE HERE filed 12 safeguard petitions, beginning in October, in an effort to curb the flow of Chinese imports. The injunction has forced the coalition to consider whether it will have to file new petitions based on actual market disruption, depending on how long the court case and appeal drag on.

In its motion to lift the injunction, the government argued: “A stay is necessary to remove any impediment to our ability to exercise rights pursuant to China’s Accession Agreement to the World Trade Organization.”

This story first appeared in the February 9, 2005 issue of WWD.  Subscribe Today.

Justice Department lawyers also argued a stay would help the U.S. protect domestic textile producers “from the irreparable harm they could suffer as a result of the preliminary injunction’s bar against even considering whether to invoke the safeguard provision, pursuant to existing procedures, until imports of textiles from China have caused actual market disruption.”

The government also contended that the injunction, which bars “self-initiation” of the safeguards, exceeds the relief requested by importers. Lawyers also said the U.S. will suffer irreparable harm if the court denies the stay of the injunction because it has “impeded communications and created uncertainty” between the U.S. and China.

“By delaying even mere analysis, the injunction could result in higher safeguard limits, thereby diminishing the effectiveness of any quantitative restraints imposed pursuant to the Accession Agreement,” the brief stated.

Justice Department lawyers also wrote that a stay will not “substantially harm” importers. The government’s brief stated, “The United States cannot cause USA-ITA’s members any harm — whether it be the cancellation of orders, the inability to stock shelves or the inability to find alternative sources of supply for specialized products — by merely thinking about and discussing information in connection with those requests.”

Grant Aldonas, undersecretary of commerce for international trade at the U.S. Commerce Department; Josette Sheeran Shiner, deputy U.S. Trade Representative, and John B. Taylor, undersecretary for international affairs of the Treasury Department, submitted declarations outlining how the injunction has impeded their actions and supporting the government’s motion for a stay.