Trade Court Upholds AD Evasion Case After Initial Remand Over Insufficient Public Summaries of BCI

CBP properly found that pencil importer Royal Brush Manufacturing evaded antidumping duties on cased pencils from China, the Court of International Trade held in an Oct. 29 opinion. Chief Judge Mark Barnett upheld CBP's determination after initially remanding the case for not having provided adequate public summaries of business confidential information. Finding that on remand, CBP cleared this hurdle and that the summaries did not violate Royal Brush's due process rights, Barnett upheld the evasion finding.

CBP issued its final determination in the case in 2019, after making an initial determination to impose AD duties on Royal Brush a year earlier (see 1807020031). Crucially, CBP determined during an unannounced site visit and a subsequent on-site verification that Royal Brush’s supplier in the Philippines was incapable of manufacturing pencils in the amounts imported. CBP officials also found evidence that the supplier was repackaging Chinese-origin pencils into boxes marked, “Made in Philippines.”

Royal Brush sued, arguing that its due process rights were violated. The importer said it was unable to properly defend itself because of extensive redactions to the original allegation of evasion and reports on the agency’s visits to its supplier’s facility. Royal Brush also cited CBP’s rejection of a brief filed to contest the verification report, which the agency said could not be rebutted because it included no new factual information.

In its first decision in the case, CIT stopped short of a finding that CBP should have shared confidential information with Royal Brush, as the Commerce Department does during antidumping and countervailing duty proceedings. But it found CBP failed to abide by even the less forthright standard in its own EAPA regulations (see 2012020050). Under 19 CFR 165.4, confidential business information placed on the record of an EAPA proceeding must, where possible, include a summary of the redacted information made available to the public.

On remand, all parties to the investigation and case -- Royal Brush, the Philippine Shipper, CBP and the evasion alleger Dixon Ticonderoga -- submitted public summaries of their BCI. Royal Brush, however, continued to attack the adequacy of these summaries, arguing that CBP violated its due process rights by relying on "secret" information to reach its decision.

For instance, Royal Brush attacked CBP's refusal “to disclose the numerical data it used to calculate the Philippine [Shipper’s] overall production capacity or the results of its calculation," as this made Royal Brush unable to respond to this "critical quantitative evidence." The importer said that CBP used an "unrepresentative sample" of the data to build the equation it used to calculate the shipper's overall production capacity, and the public summaries didn't give Royal Brush a chance to rebut this argument.

Barnett, though, sided with CBP on this issue, since Royal Brush failed to identify how CBP could convey the substance of the information. "Instead, Royal Brush simply complains that it needed the actual figures," Barnett said. "However, as previously noted, Royal Brush has not demonstrated that due process requires such access. It requires notice and a meaningful opportunity to be heard, which were provided here in the form of public summaries and comment procedures." In fact, the public verification report revealed that CBP relied on Royal Brush's specific invoices to calculate the Philippine company's overall production capacity, so the importer actually could make an argument against the unrepresentativeness of the data used, the judge said.

Royal Brush also contested CBP's decision to reject its post-verification brief intended to correct alleged discrepancies in the verification report. Barnett had originally remanded CBP's rejection of this brief since CBP didn't articulate a complete explanation as to why it found this brief had no new actual information, which would then require the agency to place it on the record. On remand, CBP again found that the report contained new information, and backed its practice of denying such briefs, since doing so would lead to “an endless cycle of attempts to verify those post-verification submissions.”

"The court finds that CBP’s interpretation of its regulations with regard to 'new factual information,' in a manner consistent with completing its investigation and meeting its statutory deadlines, is reasonable," the opinion said. "In view of the foregoing, the court finds that CBP has provided 'a reasoned analysis [and] explanation' for its decision to reject Royal Brush’s rebuttal submission."

(Royal Brush Manufacturing, Inc. v. United States, Slip Op. 21-152, CIT #19-00198, date 10/29/21, Judge Mark Barnett. Attorneys: Ronald Oleynik of Holland & Knight for plaintiff Royal Brush; Ashley Akers for defendant U.S. government)