Court Lifts China Safeguard Injunction

A federal appeals court lifted an injunction against government review of threat-based China safeguard petitions, setting the stage for fresh quotas.

WASHINGTON — The U.S. Court of Appeals for the Federal Circuit lifted a four-month-old preliminary injunction on Wednesday, freeing the government to review threat-based safeguard petitions and setting the stage for fresh quotas on China’s apparel and textile exports.

The decision was a procedural victory for the government, which was forced to halt the review of safeguard petitions at the end of December, as well as a coalition of domestic fiber and textile producers and organized labor. The coalition filed the threat-based petitions and then saw imports from China surge into the U.S. in the first two months of the year. (For the latest figures, see story, page 9.)

The U.S. Association of Importers of Textiles & Apparel sued five federal agencies on Dec. 1 alleging that the government violated its own published regulations, as well as the Administrative Procedures Act, when it agreed to accept threat-based safeguard petitions. The underlying lawsuit is pending in the U.S. Court of International Trade, which issued the injunction, and the appeals court, set to hear oral arguments on the preliminary injunction May 5.

A three-judge panel ruled the “government has made a strong showing that it is likely to succeed on this appeal.” The panel based its ruling on four factors, including the government’s “strong showing it is likely to succeed on the merits,” whether the government will be “irreparably injured absent a stay,” whether the stay would “substantially injure” the other parties and where the public interest lies.

The panel ruled that USA-ITA’s claim “will likely fail on the merits” and that the government’s own procedures allow for consideration of threat-based petitions.

“Because we find that the government has made a strong showing that USA-ITA is not likely to succeed on the merits of the complaint, it follows that much of the trade court’s analysis as to harms is unpersuasive,” the judges wrote. “Nor do USA-ITA’s assertions of irreparable harm advanced in this court persuade us.”

The removal of the injunction means the government can pick up where it left off reviewing 12 threat-based China safeguard petitions filed from October to December. The Committee for the Implementation of Textile Agreements, the federal interagency group that administers the safeguards, had begun the final 60-day review of the merits on seven of the 12 petitions. That means CITA could possibly make quick determinations on those seven petitions because it now has actual import data for the first two months of the year.

This story first appeared in the April 28, 2005 issue of WWD.  Subscribe Today.

It is more uncertain where the government will resume with five petitions, which were still in a 30-day public comment period.

“CITA is reviewing the court’s decision and its impact on the time line for the 12 threat petitions,” a Commerce spokeswoman said.

Laura Jones, executive director of USA-ITA said: “We are certainly disappointed by the appeals court’s decision, but we knew going into this that it is very unusual for the courts to take the extreme step of stopping the government from proceeding while the merits of a lawsuit are still under consideration.”

In the meantime, the domestic coalition filed seven market-disruption cases last month based on actual import data and targeting $1.45 billion worth of shipments for further quota restraints. The Bush administration also self-initiated a review of three China safeguard cases, targeting $624.5 million worth of imported cotton knit shirts and blouses, cotton trousers, and cotton and man-made fiber underwear.

There is an overlap between the domestic coalition’s threat-based petitions and market disruption cases. CITA was set to issue a ruling on whether it would accept the seven market-disruption cases for further review on Wednesday, but no announcement was made at press time.

The court action comes in the face of mounting complaints that imports from China, which have been unrestrained since the nations of the World Trade Organization dropped quotas on Jan. 1, are taking a heavy toll on manufacturers in the U.S. and developing world.

Lawmakers and trade groups have been ratcheting up the pressure on the Bush administration to restrain China’s growing economic dominance. There are several pending bills in the House and Senate targeting alleged unfair trade practices against China.

“The market has been flooded with cheap and illegal, and unfair imports,” said Rep. Robin Hayes (R. N.C.). “There is no excuse for not moving on what is absolutely an obvious case of dumping.”

He said 17,000 jobs have been lost in the textile and apparel industry since the beginning of the year and it is critical the administration send a message to China and other countries that the U.S. is serious about protecting jobs and the economy.

Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition, one of the associations that has filed the safeguard petitions, said: “There is absolutely no need for further delay.”