The Customs process for determining whether importers are evading antidumping and/or countervailing duties is conducted under the Enforce and Protect Act (“EAPA”). Companies under investigation under EAPA for evasion are not informed they are under investigation until Customs completes at least a preliminary investigation. Diamond Tools Technology LLC (“Diamond Tools”) received an affirmative final determination of evasion of the antidumping duty order issued by U.S. Customs and Border Protection and sued, claiming the process violated their due process rights.
Diamond Tools imports diamond sawblades, a circular cutting tool. On November 4, 2009, the Department of Commerce issued an antidumping duty order on imports of diamond sawblades and parts thereof from China. On February 24, 2017, DSMC, a group of U.S. producers of diamond sawblades, filed an EAPA allegation that Diamond Tools was evading the 2009 Order by transshipping Chinese diamond sawblades through Thailand. On March 22, 2017, Customs initiated an investigation under the EAPA in response to DSMC’s allegation. As part of their investigation, Customs visited Diamond Tools Thailand’s operation and concluded that the company “does not have sufficient capacity to produce to the amount needed to export to the [United States].” On June 23, 2017, Customs imposed interim measures.
Diamond Tools Thailand responded that the company manufactured diamond sawblades onsite at its facility in Thailand; however, some of the components used were sourced from China. Customs concluded that it was “unable to determine whether the merchandise at issue [diamond sawblade components sourced from China and joined in Thailand] is covered merchandise” under the 2009 Order and referred the matter to Commerce. In July 2019, Commerce made a final determination that diamond sawblades made with certain Chinese components were circumventing the 2009 Order. On September 17, 2019, Customs issued its final affirmative evasion determination agreeing with Commerce and stating, “Because Commerce did not place any temporal limitation or provide liquidation instructions to [Customs] with respect to entries covered by the EAPA investigation, we find that Commerce’s response to the covered merchandise referral applies to all entries covered by the EAPA investigation.
Diamond Tools challenged Customs’ Final Determination on four grounds.
Customs’ suspension of liquidation on entries that pre-dated December 1, 2017, was a retroactive application of Commerce’s circumvention determination and not in accordance with law;
Customs’ evasion determination related to Diamond Tools USA’s entries before December 1, 2017, was arbitrary, capricious and an abuse of discretion, and otherwise not in accordance with law;
Customs’ conduct during the EAPA proceeding deprived Diamond Tools USA of its due process rights; and,
Customs’ imposition of interim measures was not in accordance with law because Customs failed to make a “reasonable suspicion” determination by the statutory deadline.
Diamond Tools was unsuccessful in all four arguments; however, the due process claim is noteworthy. Diamond Tools claimed that Customs’ conduct during the investigation deprived the company of its due process rights to be heard and to defend itself. The company based this claim on the fact that Customs imposed interim measures without notice and the opportunity to comment and Customs denied the company the opportunity to review or comment on proprietary evidence during the EAPA proceeding.
Ultimately, the court found that Diamond Tools had not properly established that it had a protected interest under the Constitution to be protected. However, with respect to the ability to view the proprietary evidence against the company the court found Diamond Tools failed to demonstrate how access to the proprietary information would have helped the company during the administrative proceeding. In fact, the language used by the company did not suggest that they were denied 'a meaningful opportunity to participate in the administrative proceeding.’ The court found that Customs complied with its regulation concerning public summarization of confidential information, and as a result, did not violate Diamond Tool’s due process rights.
Despite losing on the due process issue, Judge Timothy Reif remanded the case to CBP ruling that the actual finding of evasion was not supported because there was no "material and false statement" made by Diamond Tools. Although the judge did uphold CBP's authority to find that Diamond Tool's entries made before the related anti-circumvention inquiry were "covered merchandise."
Royal Brush I and Royal Brush II address similar arguments with similar outcomes. If you have any questions about antidumping or countervailing duties or EAPA please contact any Barnes, Richardson & Colburn attorney.