WASHINGTON — The U.S. Justice Department has filed an appeal seeking to overturn an injunction barring the government from reviewing or accepting China safeguard petitions based on the threat of market disruption.

Government lawyers asked the U.S. Court of Appeals for the Federal Circuit to send the case back to the Court of International Trade in Manhattan, which imposed the injunction, with instructions to dismiss the lawsuit filed by importers. The suit challenges federal authority to impose limits on Chinese textile and apparel imports.

The legal drama playing out in courtrooms in New York and Washington stems from an action brought by the U.S. Association of Importers of Textiles & Apparel, which 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 safeguard petitions based on the threat of market disruption as opposed to actual market disruption.

At the center of the debate is a safeguard mechanism China agreed to when it joined the World Trade Organization. The provision allows an importing nation to impose one-year quotas when it determines Chinese textile and apparel exports are threatening to cause or are causing market disruption.

In the U.S., a coalition of domestic textile, fiber, apparel and labor groups filed 12 safeguard petitions targeting $1.9 billion in Chinese imports for further quota restraints. The timing of the petitions and lawsuit is linked to the elimination of global textile and apparel quotas on Jan. 1, which has stirred worldwide concern over China’s potential to monopolize production and displace millions of workers.

The preliminary injunction has suspended the government’s review process for seven weeks and created uncertainty about the timing of safeguard quotas. The domestic coalition behind the safeguard petitions is concerned it may be forced to refile its threat-based safeguard petitions as actual market disruption cases if the court cases drag on too long.

Imports from China have now been streaming in quota-free, but the trade data for January from the U.S. Commerce Department won’t be released until March.

The Justice Department, in the appeal filed Monday night, said: “The U.S. Association of Importers of Textiles & Apparel has no rights under the Constitution, any international agreement, or any statute or regulation to contest the Executive’s acceptance of requests from domestic industry representatives to consider whether to invoke…a key multilaterally agreed mechanism specifically designed to address threats of market disruption from imports of Chinese textile and apparel products.

This story first appeared in the February 16, 2005 issue of WWD. Subscribe Today.

“Nevertheless, in response to the complaint and request for preliminary injunction, without permitting us to examine USA-ITA’s declarants, the trial court issued a sweeping injunction effectively barring United States trade officials from implementing [the safeguard mechanism] during a critical period for textile trade and from taking steps to protect our domestic markets from threatened harm.”

In its appeal, the government also focused on these key points:

  • The trial court “erred” in barring the U.S. from self-initiating safeguards because USA-ITA did not request such relief. U.S. lawyers also said the injunction “improperly encroaches upon the constitutional power of the President” because it impedes discussions between the U.S. and China.
  • The trial court “misapplied” the standard for USA-ITA to win the case.
  • The CIT employed an “erroneous standard for irreparable harm” by identifying the government’s “mere acceptance” of threat-based petitions as causing importers harm, even though importers themselves have declared to the court that the harm has already occurred.
  • The trial court “erred by completely disregarding the interests of third parties,” primarily domestic fiber, textile and apparel producers, and workers.

Justice Department lawyers argued that USA-ITA does not have the right to challenge the government’s deliberations and the CIT does not have jurisdiction to consider the lawsuit. The government also said the interagency Committee for the Implementation of Textile Agreements, the target of the lawsuit, is exempt from the procedural requirements of the Administrative Procedures Act because its decisions involve foreign policy.