The First UFLPA Legal Challenge

Ninestar has a go at obtaining judicial review.

You can add Ninestar Corporation to the list.

The list of persons who claim to have no certain understanding as to why Ninestar Corporation was added to the UFLPA Entity List, that is. That list includes a number of folks whom I consider to be the best in the business at tracking public evidence of participation in the assorted Chinese social programs that the U.S. government has come to associate with forced labor.

In my post on July 7, I walked through some of the publicly available information about Ninestar’s involvement with poverty alleviation programs (drawn from the company’s prospectus), and separately, the involvement of Zhuhai City in poverty alleviation initiatives (from local news reports). But as I noted then, and continue to reiterate now—this information alone does not appear sufficient to satisfy a fair and objective read of the criteria for UFLPA Entity Listing. I am unaware of publicly available evidence (let alone facts) that would justify UFLPA Entity Listing of Ninestar.

Ninestar is in the same boat, apparently. On Tuesday, August 22, Ninestar Corporation and *seven* of its subsidiaries (more on that in a moment) filed suit¹ at the U.S. Court of International Trade challenging the UFLPA Entity Listing by FLETF, and seeking a preliminary injunction against its continued inclusion on the UFLPA Entity List.

According to the Complaint:

Plaintiffs are unaware of any facts relating to their respective businesses or otherwise supporting such an allegation.

Compl. Para. 45.

If you have a stake in UFLPA enforcement—and, if you’re subscribing to FLT that probably includes most of you—here are a three things you’ll want to be on the watch for as this litigation unfolds.

1. What conduct is actionable by the UFLPA Entity List?

The New York Times magazine had a great interview this weekend with prominent philosopher and atheist Daniel C. Dennett. In it, Dennett makes a really important point about epistemology, and the conditions of knowledge. Just go with me for a second. Even in the NYT interview, Dennett prefaces his story with the caveat that “This will look off track for a moment, but we’ll come around.” Same here.

In the 1990’s, British mathematician Andrew Wiles proved a mathematical theorem that had been proposed by Pierre de Fermat in 1637, but that had stumped mathematicians for centuries. Per Dennett:

It was one of the great triumphs of mathematics in my lifetime. Why do we know that he did it? Don’t ask me to explain complex mathematics. It’s beyond me. What convinces me that he proved it is that the community of mathematicians of which he’s a part put it under scrutiny and said, “Yep, he’s got it.” That model of constructive and competitive interaction is the key to knowledge. I think we know that the most reliable path to truth is through communication of like-minded and disparate thinkers who devote serious time to trying to get the truth — and there’s no algorithm for that.

Score one for Doctor D. This is how I think most people with a stake in UFLPA enforcement should be able to think about Entity Listing.

Just as Dennett didn’t need to be a mathematician to accept that the proof of Fermat’s theorem was valid, you shouldn’t have to know the GPS coordinates of reeducation camps, or sweat the differences between labor transfer activity, poverty alleviation programs, and partnerships or investments pursuant to Xinjiang Aid. But there is a community of experts in conducting Mandarin-language open source intelligence (OSINT) who should be able to reach consensus on the legitimacy of listing activity.

This community of “like-minded and disparate thinkers” would like to understand exactly what FLETF regards as actionable conduct under each of the Entity Lists. This community is marked by “constructive and competitive interaction” (some folks want to score entity listings; others want to avoid them; still others just want to be able to predict balls and strikes). Within this community, a consensus does not yet exist on the question what sort of affiliations are actionable by UFLPA Entity Listing.

And this is not an idle question! Especially not for Ninestar. Pages of the Ninestar complaint are dedicated to describing in stark (if redacted) terms exactly how damaging the UFLPA Entity Listing has been to its business. Lost business relationships. Cancelled purchase orders. A reputation that may never recover. Per the Complaint:

FLETF has effectively accused Plaintiffs of aiding and abetting human trafficking, which harms Plaintiffs in the eyes of their investors and business partners, and of the consuming public. Even after Plaintiffs clear their name, this taint will persist.

Compl. Para. 53.

UFLPA Entity Listing is the closest thing to a per se death knell in U.S. import trade. Functionally, it may as well be an SDN listing. The listing is so high stakes because Congress drafted the UFLPA to contain a rebuttable presumption that is rebuttable in name only. The statutory criteria for rebutting the presumption are so difficult to satisfy (not to mention subjective, and subject to political interference), that for most companies, Entity Listing will be the end of the story.

In theory, it would be possible for an entity listing to serve as a sort of warning shot, after which affected parties could scrutinize the business practices and supply chain of the company in question, and evidence of the condition of labor in the supply chain could dictate the outcome. But that’s not how the UFLPA is designed.

And so, that brings us back to the act of entity listing itself, and what sort of intel is ultimately actionable. There is a compelling case to be made that FLETF should exercise restraint in entity listing, and focus only on such companies as are clearly implicated in forced labor, or are employing Uyghur workers who were forcibly transferred out of Xinjiang, and the like. There are enough other avenues for enforcement activity to probe companies that present more of a “borderline” case.

Should mere participation in ethnically-oriented social programing merit listing? What if that social programing involves individuals from Xinjiang? What if a company is connected to a social program that involves providing lessons to ethnic minorities on being Chinese, learning Chinese history, or loving the “mother country”?

The point is, the real world contains real shades of gray. And if gray-shaded intel is the sort that FLETF regards as actionable under the UFLPA Entity Listing process, the public (or at least the community of experts in Mandarin OSINT) deserves to know that.

On the other hand, if FLETF relied on some source of classified information to initiate the Ninestar listing, including information that might be dispositive of the listing criteria, FLETF should assert as much publicly (even if it cannot reveal the substance of such classified information).

Either way, we’ll be watching the proceedings closely to see what can be gleaned.

2. Ninestar’s “eight Zhuhai-based subsidiaries”

In what appears to be a stumble out of the gate by FLETF, Ninestar filed suit along with only seven of its subsidiaries, rather than the eight named by FLETF in the Federal Register notice announcing the listing. What accounts for the difference? Per the complaint:

One of these [purported subsidiaries], Zhuhai Pu-Tech Industrial Co., Ltd., is not affiliated with Ninestar Corporation and is therefore not a party to this action.

Compl. Para. 39.

Hey, we all make mistakes. This one brings to mind an experience I had with one of the earliest withhold release orders (WROs) in the modern era of Section 307 enforcement. CBP issued a WRO against a company for producing three products with forced labor. Only problem was, the company in question had never—never had they ever—produced two of the three products in question. We all make mistakes.

It will be interesting to see if FLETF walks back the listing of Zhuhai Pu-Tech Industrial Co., Ltd., or if it at the very least corrects the Federal Register notice.

3. Is Ninestar’s Case Ripe for Judicial Review?

Here’s a crash course on the litigation itself. Ninestar has filed suit at the Court of International Trade, under the Administrative Procedure Act (APA). The APA is New Deal-era legislation that, among many other purposes, constitutes a waiver of sovereign immunity (i.e., an agreement by the United States government of the conditions under which it consents to be sued) for certain types of harms stemming from final action by an agency in the Executive Branch of the U.S. government.

Isn’t America incredible? I mean, what other hegemonic power in world history asserts its will, and then permits—even encourages—aggrieved foreign parties to drag the hegemonic power into court, in front of a truly independent tribunal (over which said hegemonic power has no power or capacity to influence), in order to have independent review of whether the power’s actions were arbitrary and capricious? Only in America, baby! We’re # 1!

Where was I. Oh right, APA, and the consent to be sued. As with any consent to be sued, there are conditions. And historically, courts have been pretty finnicky about allowing litigation to proceed without satisfying all the preconditions. One such obligation is known as the need to “exhaust administrative remedies”.

The theory is pretty simple. If an administrative agency takes final action that causes harm to a party, but provides for a mechanism for review of that decision administratively, a party will generally be required to seek such review and exhaust the administrative process before they’ll make it anywhere in court.

Exceptions to this rule do exist, but they’re not frequently recognized. In this case, it will be interesting to see whether the Court of International Trade regards FLETF’s provisions allowing a listed party to petition for removal to be an “administrative remedy”, whether it will require Ninestar and its *seven* subsidiaries to complete that administrative process before allowing the lawsuit to proceed, or whether an exception applies.

One interesting wrinkle to monitor here is that in the Federal Register notice where FLETF spelled out its process for administrative review of UFLPA Entity Listing, it slipped into the very last sentence of the FR notice a disclaimer that “FLETF’s decision on a removal request is not appealable”, which, as they used to say on Twitter: “huge, if true”.

With a quick flick of the wrist, FLETF tried to yank the entire APA tablecloth out from under the UFLPA Entity Listing place-setting. It’s trying to protect itself from judicial accountability for its decision-making, and as I explained above, undermining a good piece of what makes this country great in the process. It’s possible that Ninestar’s decision to go straight to court is related to this effort by FLETF to sidestep judicial review.

It will be interesting to see how Ninestar litigates its case, and what the court decides. First up will be action on Ninestar’s requested preliminary injunction. We’ll keep you updated on relevant developments.

1. Link requires PACER account; or email me for a copy of the complaint.