'Good Faith' Scope Disagreement Can't Serve as Grounds for Evasion Finding, Importers Tell CIT

A good faith disagreement over the scope of antidumping duty and countervailing duty orders cannot be construed as a "material and false statement," needed to find evasion under the Enforce and Protect Act, importers Ikadan System USA and Weihai Gaosai Metal Product Co. argued in an April 26 brief at the Court of International Trade. As such, CBP's evasion finding is illegal, as it fails to make a proper finding of evasion, the brief said (Ikadan System USA v. United States, CIT #21-00592).

In the EAPA case, CBP found Ikadan and Gaosai guilty of evading the AD/CVD orders on steel grating from China by transshipping their grates through South Korea and also misclassifying the entries. Both Ikadan and Gaosai filed scope requests with the Commerce Department on the AD/CVD orders to clear things up, with Ikadan's concerning ductile cast iron flooring for pig farrowing crates and Gaosai's dealing with pig farrowing crates and farrowing flooring systems.

In its first scope ruling, Commerce said that Gaosai's pig farrowing crates and farrowing floor systems that contained steel decking on Tri-Bar Floor products are covered by the orders but that the other components of the systems are not covered. In Ikadan's scope ruling, Commerce said that imports of ductile cast iron flooring are not covered by the orders. However, these scope rulings were not placed on the EAPA investigation record due to "regulatory timeframes for considering new factual information" not allowing for the normal amount of time for comments.

So the importers took their case to the trade court, arguing that it is clear that the pig farrowing crates themselves are not in the scope of the orders (see 2111230085). In the motion for judgment, the importers further argue that the scope clearly only includes steel grating and not "further manufactured downstream products made with steel grating as an input." The brief then launched into an explanation of what constitutes evasion under the law and the trade court's recent rulings.

Per a recent court ruling, an evasion finding must be coupled with some level of culpability -- something the importers accuse CBP of skirting given that the evasion finding was predicated on a scope disagreement. "Transshipment and/or intentional misclassification of merchandise certainly could constitute a 'material and false statement or act' or a 'material omission,' and if CBP had found merit in either of those allegations, a finding of 'evasion' within the meaning of EAPA would be justified," the brief said. "But here, all that CBP found was, at most, a situation where Ikadan and Gaosai interpreted the scope of the Orders to cover only steel grating, and not further manufactured downstream products that include steel grating as an input.

"At most, the situation here is that Plaintiffs and CBP appear to have a reasonable disagreement regarding the scope of the AD/CVD Orders."

The importers said that since they had no notice of the fact that the orders included their imports, any so-called omission by either company relating to a "good faith dispute" over the orders' scope cannot be considered a materially false statement, the companies argued. Ikadan and Gaosai further said that the "proper forum" to resolve the issue is at Commerce through a scope ruling. "The improper way to address such an issue is to stretch EAPA beyond the limits that the statutory language will bear, converting a statute that is designed to address evasion into an alternative forum to usurp Commerce’s exclusive role of resolving issues concerning the scope of AD/CVD orders that it implements," the brief said. "CBP’s attempt to do so here is not in accordance with law."