DC Circuit Rejects Hong Kong Textile Co.'s 'Hail Mary' Injunction Bid Against Placement on Entity List

“The D.C. Circuit correctly refused to second-guess Changji Esquel’s designation on the Entity List. In denying the injunction, the circuit affirmed that the fight to end forced labor is no second-class priority. The Entity List can and should be used to pursue the abolition of forced labor,” said Spencer Nelson, staff attorney at Global Labor Justice-International Labor Rights Forum, amicus in the case. “The ruling puts companies on notice that profiting from forced labor endangers their access to U.S. markets, goods, and technologies.”

The Donald Trump administration had placed CJE on the Entity List for allegedly using forced labor from the Muslim Uyghur minority population in China's Xinjiang region. CJE filed suit in the U.S. District Court for the District of Columbia, arguing that Commerce acted ultra vires and in excess of its authority under the Export Control Reform Act of 2018 (ECRA) (see 2107070022).

The appellate court first said that to succeed on an ultra vires claim, the plaintiff must prove three things, the third of which states that the agency plainly acted in excess of its delegated powers and contrary to a specific restriction in the statute. This point is "especially demanding," the opinion said. CJE argued that since the statute bans reviews under the Administrative Procedures Act but does not bar judicial review generally, the court should relax the stringent requirements for an ultra vires challenge by applying the "traditional tools of textual analysis," as it would in a challenge under the APA.

Katsas, the author of the opinion, pointed out that the court "rejected this very argument," in the court's recent decision in the FedEx Corp. v. U.S. Department of Commerce case (see 2207110034). In that decision, the court held that ultra vires review imposes the same standard for judicial intervention even when Congress has only withdrawn APA review, rather than bar all judicial review. This means that an ECRA case requires challengers to “'show more than the type of routine error in statutory interpretation or challenged findings of fact that would apply if Congress had allowed APA review' or something like it."

With this standard in mind, Katsas addressed CJE's claims that human rights violations were not proper grounds to place a party on the Entity List since the statute permits Commerce to place an entity on the list only to advance the policy goals laid out in the statute, which does not mention human rights. The court held that this "overlooks another important ECRA provision," -- Section 4813(a)(16) -- which gives the Commerce Secretary the power to undertake any action needed to carry out the ECRA's mandate. "Adding human-rights violators to the Entity List falls comfortably within this provision," the opinion said.

Katsas also noted the "substantial deference" given to the Executive Branch in matters of national security. Again citing the recent FedEx decision, the court said it confirmed this principle, making it more difficult to satisfy the ultra vires standard based on the deference shown to the executive on national security issues. "Thus, we would be 'hard-pressed' to set aside the Secretary’s understanding of how section 4813(a)(16) interacts with the rest of ECRA."

The court addressed the plaintiff's negative-implication argument as well, which says that Commerce may not list entities for any other reason than those listed in the statute. "Yet even under Chevron, we do not lightly apply the expressio unius canon," the opinion said. "Instead, we repeatedly have described the canon as 'a feeble helper in an administrative setting, where Congress is presumed to have left to reasonable agency discretion questions that it has not directly resolved.' ... So the canon is even more enfeebled under ultra vires review, which is more deferential to the agency than is Chevron."

CJE also argued that since the recent U.S. Innovation and Competition Act of 2021, which was passed by both houses of Congress, adds "serious human rights abuses," to the list of reasons to add a party to the Entity List, Commerce should not now be allowed to add human rights violators to the list. The court held that this amendment would "do meaningful work" by resolving the dispute litigated here. "Moreover, the amendment would require the Secretary to list human-rights abusers without further inquiry, whereas the existing statutory scheme merely permits the Secretary to do so based on her discretionary judgment about what is necessary to carry out ECRA," the opinion said. "In any event, the plaintiffs’ argument depends on post-enactment legislative history, which 'is not a legitimate tool of statutory interpretation' even under de novo review."

“In denying the appeal of the motion to dismiss, the DC Circuit upheld the government’s use of the Entity List for human rights reasons, including forced labor," said Allison Gill, Forced Labor Program Director at Global Labor Justice-International Labor Rights Forum. "Esquel’s attempt to undermine the use of the Entity List for this fundamental purpose would harm the US government’s whole of government approach to combatting the egregious, state-sponsored forced labor of Uyghurs and other Turkic and Muslim people, which we point to in our brief. Esquel faces a clear choice: cut ties to Xinjiang or lose access to US markets and technology.”

(Changji Esquel Textile Co. v. Gina M. Raimondo, D.C. Cir. #21-5219, dated 07/19/22, Judges Judith Rogers, Patricia Millett and Gregory Katsas. Attorneys: James Tysse of Akin Gump for plaintiff-appellants; Daniel Aguilar for defendant U.S. government)