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U.S. trade court bars limits on textile imports from China

U.S. trade court bars limits on textile imports from China

The U.S. Court of International Trade in New York has temporarily barred the Bush administration from imposing new limits on imported textile and apparel products entering the U.S. from China.

   Senior Judge Richard W. Goldberg of the trade court granted preliminary injunction Dec. 30 that had been requested by the United States Association of Importers of Textiles and Apparel (USA-ITA) and opposed by the U.S. Justice Department, along with five federal entities whose representatives form the Committee for the Implementation of Textile Agreements (CITA).

   The CITA constituents are the departments of State, Treasury, Commerce, Labor, and the Office of the U.S. Trade Representative. USA-ITA's members include J.C. Penney, Liz Claiborne and other prominent textile and apparel importing retailers.

   In October, CITA began accepting safeguard petitions from U.S. domestic textile manufacturers on apparel products from China that were under quota, an action that contravened rules published by CITA in May 2003. CITA's rationale for accepting such petitions was based on predicted, if unproven, threats of U.S. market disruption from Chinese products after most textile quotas ended Dec. 31.

   Goldberg, in his ruling, noted that USA-ITA had asked that the International Trade Court prohibit CITA 'during the pendency of this action from accepting, considering or taking any further action on requests ' based on the threat of market disruption upon the elimination of quotas or safeguards on textiles or textile products from the People's Republic of China.

   'Plaintiff alleges that, unless a preliminary injunction is issued, its members have been, and will continue to be, irreparably harmed by CITA's consideration of threat-based requests (which) is unsupported by the text of the China Textile Safeguard Regulations, and represents an impermissible departure from CITA's precedent and public statements,' Goldberg said.

   Showing mere economic loss, as government attorneys pointed out, is 'insufficient to justify preliminary injunctive relief,' Goldberg explained in his ruling. 'However, the court also finds that plaintiff has shown much more than just economic loss. Because of CITA's mere acceptance of threat-based requests, plaintiff's members have found it prudent to cancel or consider canceling orders in China and move them to other countries where possible.'

   Because other importers are also scrambling to secure alternative production facilities, 'it has been difficult for plaintiff's members to find substitute factories. This difficulty is exacerbated by the unrefuted fact that Chinese factories generally have fewer audit failures, ensure more on-time deliveries, employ highly skilled workers, and operate as some of the most efficient production facilities in the world,' the trade court noted.

   'By being forced to move production to less efficient factories in other countries, plaintiff's members face the real possibility that they may not be able to deliver products to their customers in a timely manner, which will impair their goodwill and business reputation. This constitutes irreparable injury,' Goldberg said.

   'In addition, plaintiff's members' inability to stock shelves in a timely manner will create an unquantifiable ripple effect, as shortages of merchandise in one category can affect sales in other categories. This, in turn, inhibits the member companies' ability to respond to trend-specific demand, thereby creating an unquantifiable inventory risk,' the trade court explained.

   USA-ITA also 'provided affidavits indicating that China is the only country from which some of its members are able to obtain certain goods. For instance, one of the plaintiff's members is only able to obtain fine gauge knit sweaters from China. However, these sweaters are the subject of threat-based requests that CITA has already accepted for consideration. Thus, the member company has been unable to place its full commitment of orders in China for fear that a quota may be filled before it receives the sweaters,' Goldberg said.

   The government had argued that assertions of irreparable injury were speculative 'because it is unknown whether CITA will actually impose safeguards. The court disagrees. The irreparable harm suffered by plaintiff arises directly from CITA's mere acceptance of threat-based requests, since such acceptance makes it necessary for plaintiff's members to detrimentally alter their 2005 business plans,' the trade court said.

   'Moreover, contrary to (the government's) assertion, this irreparable harm is ongoing because plaintiff's members typically place about 30 percent of their orders for the second half of 2005 by January 2005. Thus, a full 70 percent of plaintiff's members' orders for this period remain in limbo as a result of CITA's actions,' Goldberg explained.

   The International Trade Court then suggested how USA-ITA's allegation of CITA's overstepping its mandate might play out. 'The scope of the plaintiff's complaint clearly exceeds that of the requested preliminary injunction. In its complaint, plaintiff has raised an important question as to whether CITA's delegated authority to administer textile agreements includes the authority to issue regulations pursuant to China's Accession Agreement (to the World Trade Organization). Whether a WTO accession agreement is a 'textile agreement' within the meaning of 7 U.S.C. 1854 is a question of first impression. If plaintiff is fully successful on the merits of the case, CITA's China Textile Safeguard Regulations will be invalidated in toto,' Goldberg warned.

   'Such an order would far exceed the more limited scope of the requested preliminary injunction. As such, the balance of the (apparel importers') hardships tips in favor of granting preliminary injunction relief,' the trade court said.

   'CITA's ability to administer the terms of a WTO accession agreement is a novel question,' Goldberg added. Before that issue can be considered by the trade court, 'injunctive relief in this case will not impede CITA's ability to impose textile-specific safeguards ' accordingly, the public interest will be served by issuance of the requested injunction,' he said.

   Goldberg's ruling made immediate headlines around the world. The Telegraph, a newspaper in Calcutta, India, quoted unnamed U.S. textile manufacturers as saying the trade court's injunction 'could further hurt beleaguered U.S. factory jobs.'

   The Taipei Times Sunday said, 'the action by a federal court in New York comes as U.S. textile makers brace for an even greater surge of Chinese apparel imports when decades-old, worldwide quotas expired yesterday.'

   TurkishPress.com reported: 'the ruling leaves the door open to an unchecked increase in Chinese goods' and 'dashes hopes for an immediate move by Washington to allow for only gradual increases in Chinese imports.'

   One trade group representing U.S. textile manufacturers lost no time in publicly opposing Goldberg's granting of an injunction. 'It is imperative that the U.S. government appeal this flawed decision as soon as possible,' and that 'the appellate process be expeditious so that the U.S. government's consideration of the threat-based petitions already filed will not be delayed,' said the American Manufacturing Trade Action Coalition (AMTAC).

   If not overturned on appeal, the ruling by the International Trade Court 'could open the door to allowing China to gain a monopoly share of the U.S. textile and apparel market in short order, threatening the economic livelihood of nearly 700,000 U.S. workers,' AMTAC asserted.

   For the full text of Judge Goldberg's ruling, see Slip Opinion 04-162, Court Docket No. 04-00598, on the Web site of the U.S. Court of International Trade, http://www.cit.uscourts.gov.

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