The saga began last summer, when the digital imaging industry was stunned to learn the Forced Labor Enforcement Task Force (FLETF), an interagency group led by DHS, determined that the Ninestar companies had violated the UFLPA. The Act prohibits goods from being imported into the U.S. if they\u2019re produced in the Xinjiang Uyghur Autonomous Region (XUAR) or made with forced labor by minority workers from Xinjiang or other regions. As a result, the firms were placed on the UFLPA Entity List. Ninestar and its subsidiaries immediately denounced the move and demanded removal from the list.<\/p>\n\n\n\n
By filing a formal removal request with the FLETF and submitting supporting information that they didn\u2019t violate the UFLPA, Ninestar could have asked to be taken off the list. After a review of the submitted materials, they could be dropped if a majority of the FLETF member agencies vote for removal.<\/p>\n\n\n\n
Ninestar chose a different route, however. Rather than work with the FLETF, the company filed the earlier-noted suit accusing the U.S. government entities of violating the \u201creasoned decision-making requirement\u201d of the Administrative Procedures Act (APA). The APA requires courts to hold unlawful and set aside agency actions, findings and conclusions that are \u201carbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.\u201d In addition to challenging the U.S. government\u2019s actions as being counter to the mandates of the APA, the plaintiffs asked the CIT to issue a preliminary injunction to stay their placement on the UFLPA Entity List.<\/p>\n\n\n\n
The suit triggered a series of hearings and other activities at the CIT in the second half of 2023. Arguing that Ninestar companies\u2019 placement on the UFLPA Entity List wasn\u2019t a violation of the APA, the U.S. filed a motion with the court to dismiss Ninestar\u2019s complaint and deny the plaintiff\u2019s request for a preliminary injunction. After a couple delays and some legal jostling between the parties at the end of last year, the CIT held a hearing on Ninestar\u2019s motion and other matters Jan. 18 of this year.<\/p>\n\n\n\n
The Ruling<\/strong><\/p>\n\n\n\n As noted earlier, Judge Katzmann ultimately denied Ninestar\u2019s request for the preliminary injunction. In his 58-page opinion denying the motion, Katzmann addressed many of the case\u2019s weighty issues and left open the door to the plaintiffs pursuing further litigation. While he didn\u2019t side with the plaintiffs, he wasn\u2019t totally aligned with the attorneys for the United States, either. The defendants, for example, argued that Ninestar\u2019s suit should be dismissed because plaintiffs had not exhausted the administrative remedies offered to them by not pursuing the FLETF removal process. Katzmann ruled that, given the facts in this case, the plaintiffs weren\u2019t required to exhaust the administrative remedies.<\/p>\n\n\n\n One area the judge addressed was the oft-mentioned notion that the Chinese firms were placed on the UFLPA Entity List without due process. Indeed, when announcing its legal action against the defendants, Ninestar accused DHS of creating \u201ca \u2018guilty until proven innocent\u2019 business environment\u201d in the U.S. that undermined fair completion and limited consumer choices. Since the ban was announced, various pro-China industry commentators have echoed Ninestar\u2019s claim and accused the U.S. as being hypocritical in the way it placed the Ninestar companies on the UFLPA Entity List.<\/p>\n\n\n\n Katzmann explained that the UFLPA doesn\u2019t specify a burden of proof for the FLETF to use in making decisions about whether a company has violated the law. He added, \u201cNor does the APA, which establishes a preponderance-of-the-evidence standard for formal agency adjudications but does not mandate a particular burden of proof for informal agency adjudications like the one at issue here.\u201d He went on to say that while federal courts have held that the preponderance of evidence standard is the traditional burden of proof in civil administrative proceedings, there are exceptional circumstances in which a lower burden of proof could legitimately be applied.\u00a0<\/p>\n\n\n\n The judge found that \u201ca preponderance standard in the UFLPA would not cohere with Congress\u2019s concern with the difficulty of obtaining information regarding forced labor in China.\u201d To make the point\u2014and underscore the gravity of the issue\u2014Katzmann cited U.S. Representative Christopher Smith, who explained to Congress the challenges of addressing issues related to forced labor in China. \u201cWe have no access\u2026to the concentration camps in Xinjiang,\u201d he said and observed that China is \u201cclosed.\u201d Representative Smith continued, \u201cIt is a dictatorship. There are no onsite inspections. Again, we are talking genocide against these Muslims who are being wiped off the face of the Earth.\u201d The judge ruled that a so-called reasonable-cause burden of proof would suffice for the UFLPA. \u201cReasonable cause avoids the statutory asymmetry that would follow from a preponderance standard and reflects the unique challenges to forced labor enforcement involving Xinjiang,\u201d he wrote in his opinion.<\/p>\n\n\n\n Along the same lines, much of the evidence the FLETF used to establish the Ninestar company\u2019s offenses thus far hasn\u2019t been made public. Additionally, what has been shared publicly is heavily redacted, which the plaintiffs objected to in their suit claiming they haven\u2019t violated the UFLPA since it was enacted in December 2021. The judge disagreed, saying he had reviewed \u201cthe unredacted Confidential Administrative Record\u201d and concluded that there have been \u201cviolations of the UFLPA at Ninestar\u2019s Zhuhai facilities.\u201d He also indicated, however, that Ninestar could hypothetically challenge \u201cthe weight of the informant evidence\u201d at a later stage of the proceeding, which might breathe new life into Ninestar\u2019s retroactivity claim.<\/p>\n\n\n\n Katzmann also ruled against several other issues the plaintiffs raised in their suit. One key reason given by the plaintiffs for seeking a preliminary injunction was they had suffered irreparable harm, economic losses and reputational damage. In his ruling, Katzmann indicated that Ninestar didn\u2019t offer enough evidence to support the claim, faulting the plaintiffs for not submitting financial statements and other evidence detailing the actual harm. Regarding its reputation, the judge wrote, Ninestar didn\u2019t provide enough \u201cevidence here to show that the loss of its reputation is irreparable absent a preliminary injunction.\u201d The judge further elaborated on the issue of irreparable harm, saying if he sided with Ninestar, it would make enforcing the UFLPA impossible. \u201cThe decline of all U.S. sales to zero, as well as the deterioration of international business opportunities and corporate reputation, are obvious consequences that would be true for any entity on the UFLPA\u2019s Entity List,\u201d he explained.<\/p>\n\n\n\n The Aftermath<\/strong><\/p>\n\n\n\n Ninestar was quick to respond to Katzmann\u2019s decision, saying it \u201cdoes not tolerate forced labor\u201d and was \u201cdisappointed by the decision of the U.S. Court of International Trade denying our motion for a preliminary injunction.\u201d The company vowed to continue litigating the matter \u201cto clear our name and remove Ninestar from the UFLPA Entity List.\u201d<\/p>\n\n\n\n While Katzmann found that the Ninestar companies didn\u2019t provide enough evidence of irreparable harm from their placement on the UFLPA Entity List, the firm has released numbers indicating that last year wasn\u2019t a good one. Although Chinese firms don\u2019t typically release actual year-end numbers until April, most offer a preview prior to that. On Jan. 30, Ninestar shared its fiscal-year 2023 forecast and it wasn\u2019t pretty. Ninestar said that for FY 2023, it expects to post a net loss of anywhere from CNY 4.5 billion to CNY 6.5 billion as compared to a robust net profit of CNY 1.862 billion in FY 2022.<\/p>\n\n\n\n Forecasting a bottom line dipped in red, Ninestar didn\u2019t offer a top-line forecast for the company as a whole, but it did indicate sales were down in certain key business units. For Lexmark, Ninestar\u2019s biggest business, revenue for FY 2023 is expected to be $2.07 billion, an 11.4 percent year-on-year decline by Actionable Intelligence\u2019s calculations. Likewise, its Pantum printer subsidiary, which is on the UFLPA Entity List, is expected to deliver net sales of CNY 3.9 billion in FY 2023, a drop of approximately 18.1 percent by our calculations from FY 2022.\u00a0Sales were also down, albeit not as dramatically, in Ninestar\u2019s general consumables business segment, which consists of various companies that make up Ninestar\u2019s third-party supplies business. Ninestar projected this segment\u2019s FY 2023 revenue will be approximately CNY 5 billion, a decline of 7.2 percent from the CNY 6.122 billion Ninestar reported for this group in FY 2022.<\/p>\n\n\n\n Because of a \u201cserious decline\u201d in business, Ninestar said it\u2019s taking a goodwill impairment in the fourth quarter. An English translation of the firm\u2019s announcement states, \u201cIn view of the decline in performance and liquidity of some important subsidiaries, the company plans to accrue impairment losses on long-term assets (mainly impairment of goodwill).\u201d The final amount of impairment is yet to be determined. Ninestar went on to say that \u201cexcept for non-cash losses such as goodwill and other asset impairment provisions, the company\u2019s operating profits from its main business remained positive and its cash flow was stable.\u201d<\/p>\n\n\n\n While it hasn\u2019t quite been a year since Ninestar and its Zhuhai-based subsidiaries first appeared on the UFLPA Entity List, it seems pretty clear that some damage has been done. Ninestar seems determined, however, to continue to fight on in hopes of salvaging its U.S. business and reputation. But Katzmann\u2019s ruling shows the fight won\u2019t be easy. <\/p>\n","protected":false},"excerpt":{"rendered":" \u201cThe embargo remains in force.\u201d So declared Judge Gary S. Katzmann in his Feb. 27 ruling to deny Ninestar Corporation\u2019s motion for a preliminary injunction that would lift a ban to keep its products from entering the U.S. Ninestar sought the injunction to stay the United States\u2019 decision to place the company and certain of its Chinese-based subsidiaries on the Uyghur Forced Labor Prevention Act (UFLPA) Entity List. Judge Katzmann\u2019s ruling came as part of an ongoing case filed last August at the U.S. Court of International Trade (CIT) by Ninestar, which markets printers and consumables worldwide under various brands, including Lexmark. The Chinese firm and several of its subsidiaries sued the U.S. government and certain agencies and administrators after the U.S. Department of Homeland Security (DHS) announced the Ninestar companies had been placed on the UFLPA Entity List. This meant that goods manufactured by the companies had been embargoed from U.S. markets.\u017e Some Background The saga began last summer, when the digital imaging industry was stunned to learn the Forced Labor Enforcement Task Force (FLETF), an interagency group led by DHS, determined that the Ninestar companies had violated the UFLPA. The Act prohibits goods from being imported into the U.S. if they\u2019re produced in the Xinjiang Uyghur Autonomous Region (XUAR) or made with forced labor by minority workers from Xinjiang or other regions. As a result, the firms were placed on the UFLPA Entity List. Ninestar and its subsidiaries immediately denounced the move and demanded removal from the list. By filing a formal removal request with the FLETF and submitting supporting information that they didn\u2019t violate the UFLPA, Ninestar could have asked to be taken off the list. After a review of the submitted materials, they could be dropped if a majority of the FLETF member agencies vote for removal. Ninestar chose a different route, however. Rather than work with the FLETF, the company filed the earlier-noted suit accusing the U.S. government entities of violating the \u201creasoned decision-making requirement\u201d of the Administrative Procedures Act (APA). The APA requires courts to hold unlawful and set aside agency actions, findings and conclusions that are \u201carbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.\u201d In addition to challenging the U.S. government\u2019s actions as being counter to the mandates of the APA, the plaintiffs asked the CIT to issue a preliminary injunction to stay their placement on the UFLPA Entity List. The suit triggered a series of hearings and other activities at the CIT in the second half of 2023. Arguing that Ninestar companies\u2019 placement on the UFLPA Entity List wasn\u2019t a violation of the APA, the U.S. filed a motion with the court to dismiss Ninestar\u2019s complaint and deny the plaintiff\u2019s request for a preliminary injunction. After a couple delays and some legal jostling between the parties at the end of last year, the CIT held a hearing on Ninestar\u2019s motion and other matters Jan. 18 of this year. The Ruling As noted earlier, Judge Katzmann ultimately denied Ninestar\u2019s request for the preliminary injunction. In his 58-page opinion denying the motion, Katzmann addressed many of the case\u2019s weighty issues and left open the door to the plaintiffs pursuing further litigation. While he didn\u2019t side with the plaintiffs, he wasn\u2019t totally aligned with the attorneys for the United States, either. The defendants, for example, argued that Ninestar\u2019s suit should be dismissed because plaintiffs had not exhausted the administrative remedies offered to them by not pursuing the FLETF removal process. Katzmann ruled that, given the facts in this case, the plaintiffs weren\u2019t required to exhaust the administrative remedies. One area the judge addressed was the oft-mentioned notion that the Chinese firms were placed on the UFLPA Entity List without due process. Indeed, when announcing its legal action against the defendants, Ninestar accused DHS of creating \u201ca \u2018guilty until proven innocent\u2019 business environment\u201d in the U.S. that undermined fair completion and limited consumer choices. Since the ban was announced, various pro-China industry commentators have echoed Ninestar\u2019s claim and accused the U.S. as being hypocritical in the way it placed the Ninestar companies on the UFLPA Entity List. Katzmann explained that the UFLPA doesn\u2019t specify a burden of proof for the FLETF to use in making decisions about whether a company has violated the law. He added, \u201cNor does the APA, which establishes a preponderance-of-the-evidence standard for formal agency adjudications but does not mandate a particular burden of proof for informal agency adjudications like the one at issue here.\u201d He went on to say that while federal courts have held that the preponderance of evidence standard is the traditional burden of proof in civil administrative proceedings, there are exceptional circumstances in which a lower burden of proof could legitimately be applied.\u00a0 The judge found that \u201ca preponderance standard in the UFLPA would not cohere with Congress\u2019s concern with the difficulty of obtaining information regarding forced labor in China.\u201d To make the point\u2014and underscore the gravity of the issue\u2014Katzmann cited U.S. Representative Christopher Smith, who explained to Congress the challenges of addressing issues related to forced labor in China. \u201cWe have no access\u2026to the concentration camps in Xinjiang,\u201d he said and observed that China is \u201cclosed.\u201d Representative Smith continued, \u201cIt is a dictatorship. There are no onsite inspections. Again, we are talking genocide against these Muslims who are being wiped off the face of the Earth.\u201d The judge ruled that a so-called reasonable-cause burden of proof would suffice for the UFLPA. \u201cReasonable cause avoids the statutory asymmetry that would follow from a preponderance standard and reflects the unique challenges to forced labor enforcement involving Xinjiang,\u201d he wrote in his opinion. Along the same lines, much of the evidence the FLETF used to establish the Ninestar company\u2019s offenses thus far hasn\u2019t been made public. Additionally, what has been shared publicly is heavily redacted, which the plaintiffs objected to in their suit claiming they haven\u2019t violated the UFLPA since it was enacted in December 2021. The judge disagreed, saying he had reviewed \u201cthe unredacted Confidential […]<\/p>\n","protected":false},"author":58,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4438],"tags":[],"_links":{"self":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/59710"}],"collection":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/users\/58"}],"replies":[{"embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/comments?post=59710"}],"version-history":[{"count":2,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/59710\/revisions"}],"predecessor-version":[{"id":59713,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/posts\/59710\/revisions\/59713"}],"wp:attachment":[{"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/media?parent=59710"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/categories?post=59710"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.enxmag.com\/twii\/wp-json\/wp\/v2\/tags?post=59710"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.enxmag.com\/twii\/wp-content\/uploads\/2024\/03\/Ninestar.jpg\")
<\/figure>\n\n\n\n