Full Court Rehearing Needed in Jurisdictional Challenge of AD Penalties Case, Importer Tells CAFC

The entire U.S. Court of Appeals for the Federal Circuit should hear a case over whether tapered roller bearing importer Wanxiang America Corp. has jurisdiction to challenge guidance issued from the Commerce Department to CBP on the assessment of antidumping duties, the importer argued in an Oct. 18 petition at the Federal Circuit. Arguing that a panel at the appellate court's decision will force importers subject to customs penalty claims into a "Hobbesian choice," that will "eviscerate their right to judicial review," the entire court should reverse the panel's ruling, WAC argued (Wanxiang America Corporation v. United States, Fed. Cir. #20-1044).

From 1994 to 2001, Wanxiang Group Corp., an automobile parts manufacturer based in China, and its exporting wing, Wanxiang Import and Export Co., participated in administrative reviews for first-generation wheel hub assemblies subject to a 1987 antidumping order on tapered roller bearings from China. The pair got company-specific dumping rates of zero percent, but Wanxiang Qianchao, another subsidiary of Wanxiang Group's, did not get the company-specific rate.

Wanxiang America, the Group's importer, then brought in second- and third-generation wheel hubs from Wanxiang Qianchao that Commerce said were within the order's scope via a scope ruling. During a CBP audit of Wanxiang America's wheel hub assemblies, the agency said that Wanxiang Qianchao did not get Wanxiang Group's zero percent dumping rate since it didn't participate in the administrative review. The agency sought penalties in addition to the unpaid AD duties. In making this decision, CBP issued a memorandum that included guidance from Commerce to CBP.

Wanxiang America then filed its suit in CIT challenging the guidance that Commerce gave to CBP, arguing that it violated the company's due process rights. In particular, Wanxiang said that Commerce's memo was issued without giving the importer a chance to comment on or review the decision before it was finalized (see Ref:1908190030]). The trade court dismissed the case for lack of jurisdiction, declaring that the importer had other means to challenge the decision. The decision was based on the concept that a plaintiff must show that other jurisdictional grounds are "manifestly inadequate" before being awarded CIT's "residual" Section 1581(i) jurisdiction.

The Federal Circuit upheld this decision, finding that Wanxiang America did not even argue that the other sections of the law were inadequate to provide relief (see 2109020039). In fact, the court ruled that the importer could have sought relief elsewhere under Section 1581, including Section 1581(a) to challenge a denied CBP protest and Section 1581(c) to challenge the administrative review results.

WXA pushed back in its bid for a full panel rehearing, saying that what it actually argued was that none of the specific jurisdictional grounds in the law applied to its case, leaving only Section 1581(i) jurisdiction. What the court said instead was that WXA could have pursued a protest with CBP. However, this stands directly contrary to prior court precedent, WXA argued. For instance, in the 1993 case Trayco, Inc. v. United States, the Federal Circuit said that the district court had jurisdiction over a case filed by an importer to get a refund of a penalty improperly assessed and exacted under 19 U.S.C. Section 1592, since Congress didn't explicitly give CIT jurisdiction over this case.

"Because Trayco held the CIT lacks jurisdiction under Section 1581 jurisdiction to hear an importer-initiated case for refund of a penalty, WXA could not have challenged the assessment of a penalty against it by filing a protest under 19 U.S.C. § 1514 and then filing suit against the denial of that protest in the CIT under Section § 1581(a). Trayco and Wanxiang II are wholly irreconcilable," the brief said.

Beyond these precedential concerns, a full court rehearing is essential for this case due to overriding policy considerations, the brief said. As it stands now, the CBP administrative penalty process involves importers submitting facts and arguments to the agency explaining why a penalty shouldn't be assessed. If an importer doesn't like the outcome of this process, it can defend against attempts to collect the penalties if the government brings a lawsuit, the brief said.

"After Wanxiang II, importers must now guess whether to file a protest under 19 CFR Part 174 (per the panel decision and contrary to the holding in Trayco), or follow the Customs administrative penalty procedures set forth in 19 CFR Part 171 (per Trayco but contrary to the panel decision here)," the brief said. "Moreover, some importers may not be able to seek judicial review under the protest route. Under the process set forth in 19 CFR Part 171, an importer can defend its position in court without first having to pay the amounts the government believes are owed. ...

"Given the astronomical level of many customs penalties, the holding in Wanxiang II will force importers subject to customs penalty claims into a Hobbesian choice that will effectively eviscerate their right to judicial review."