Chamber of Commerce, NAM File in FCA Case Over Unpaid Antidumping Duties

The U.S. Chamber of Commerce and the National Association of Manufacturers filed an amicus brief at the U.S. Court of Appeals for the 9th Circuit in a case over whether Japanese manufacturer Sigma Corporation, along with other companies, is guilty of violating the False Claims Act for not paying antidumping duties. The two trade groups argued that businesses that act consistently with a reasonable interpretation of an ambiguous regulation lack the "requisite False Claims Act scienter" and that the district court should have said there was no obligation to pay the duties given that the duties are not owed on the imports at issue (Island Industries, et al. v. Sigma Corporation, 9th Cir. # 22-55063).

In 2017, Island Industries accused Sigma and others of failing to pay antidumping duties on welded outlet imports from China while also alleging that they submitted false information to the U.S. relating to the applicability and amount of duties owed. Many of the other defendants, including Smith Cooper International Inc. and Allied Rubber and Gasket Co., were dismissed from the action (see 2103310033). The U.S. District Court for the Central District of California, though, found Sigma and other companies guilty of violating the FCA (see 2202090071). The court found Sigma liable for over $24.2 million in damages and over $1.8 million in civil monetary penalties.

The Chamber and NAM made various arguments against the district court's judgment. One such argument said that under the Supreme Court case Safeco Insurance Co. of America v. Burr, a person can't be sued when their actions are consistent with an "objectively reasonable interpretation" of the relevant law and the government has not issued "authoritative guidance contrary to that interpretation."

The amici also said that the FCA clearly defines an obligation as an "established duty" to pay the government and that where the application of an AD order is ambiguous, there is no "established duty" for the purposes of the FCA. "While there was an antidumping order at the time of the imports in question, which imposed an import tax to liquidate covered imports, it was not clear that the Defendant-Appellant’s products were covered by the antidumping order," the brief said. "The Commerce Department did not clarify the scope of the order until 2020 through a scope ruling. Under these circumstances, a defendant cannot be liable for a reverse false claim.

"This is because FCA liability requires that the obligation -- the duty -- be an established duty at the time of the violation. Here, precisely because the scope of the order was unclear with respect to its application to the products in question before 2020, and because the agency itself has determined that no import taxes are due for this product for entries that occurred prior to the agency’s clarification, no obligation to pay the import tax ever arose with respect to the imports in question. It is anathema to the law, and to commonsense, to hold otherwise."