Wire Hanger Importer Rails Against CBP's Alleged Use of AFA, Due Process Violations in EAPA Case

The U.S., in defending its affirmative evasion finding in an Enforce and Protect Act case against Leco Supply, unlawfully seeks to rely on adverse inferences that CBP did not make while also conflating CBP's error in failing to follow its own regulations over the redaction of non-business confidential information with the due process violations that stem from its failure to follow those regulations, Leco argued. Submitting a reply brief at the Court of International Trade, Leco continues to pursue its constitutional claims against CBP's evasion proceeding while tackling the agency's evidentiary basis for the evasion finding and its use of adverse inferences (Leco Supply v. U.S., CIT #21-00136).

At the conclusion of the EAPA investigation into Leco's alleged evasion of the antidumping and countervailing duty orders on wire hangers from Vietnam, the CBP Office of Trade's Trade Remedy Law Enforcement Directorate found that Leco was guilty of evasion by falsely claiming the country of origin as Laos. After litigation started, though, CBP was alerted that certain documents weren't transmitted from one key CBP branch to another, leading the agency not to consider the entire record. At CIT, CBP requested a voluntary remand to reconsider this along with the state of its public summaries of the business confidential information given the court's Royal Brush v. U.S. decision.

After returning with the voluntary remand results, CBP said that it accomplished its twin goals of not releasing BCI to parties not authorized to see it while ensuring proper levels of transparency in the investigation (see 2111120064). The agency required all parties, including Leco, to submit a public summary of its BCI as part of the remand. After reviewing them, CBP said the summaries satisfy the requirements of the law and don't violate the importer's due process rights.

Leco, in response, blasted CBP's remand results as still in violation of the law. The U.S. argued that Leco's arguments ignore CBP's application of adverse facts available against Truong Hong, the Laotian producer of the hangers, and the resulting finding that the company did not have enough capacity to make the hangers. The use of AFA also meant that CBP found all documents from Truong Hong to be unreliable, CBP said.

In its reply, Leco said that CBP did not even apply AFA against Truong Hong during the investigation, and that even if it intended to do so, it failed to do it in a legal way. The plaintiff said that CBP can only use AFA if a party fails to participate. The U.S. said that rejection of documentation submitted by Leco constitutes an adverse inference against Truong Hong even though Leco is the one that will experience any adverse consequences of the decision.

"Given that in an evasion investigation virtually all evidence of production in a given company must come from the producer, Defendant’s interpretation of adverse inferences would ensure that no importer has any hope of prevailing in an evasion investigation unless the producer -- who is not the target of the investigation and will not be liable for duties or penalties regardless of whether it participates -- cooperates fully with every request for information, no matter how onerous," the brief said.

In the reply brief, Leco further railed against the U.S.'s defense of its claims that it did not violate Leco's due process rights. The plaintiff argued that it made two claims in the case: that CBP improperly redacted substantive information from the record that is not entitled to BC treatment and that the EAPA process violated Leco's Fifth Amendment rights by failing to provide a mechanism to view and respond to information that was entitled to BC treatment. Leco argued that CBP combined and conflated these two separate issues and that its "logic is difficult to follow."

DOJ justified CBP's redaction practices by saying that the only redacted information is the sources of the information underlying the allegation and production capacity specifics. "This is obviously untrue," Leco replied, arguing that the U.S. redacted "copious amounts of substantive information." Leco further argued that these errors caused "substantial harm to Leco," and the fact that the company could submit arguments to some of the redacted information as a result of it being made public elsewhere does not make the error harmless.

Leco said that much of the information was actually not made public elsewhere, and that the redactions "circumscribed" its ability to present arguments over the reliability of the documents on which CBP relied. "The unlawful erasure of large amounts of information from the public record concealed from Leco without justification the full nature of M&B’s allegations and CBP’s understanding and attitude towards the record evidence, and materially impacted its ability to identify and respond effectively to the particular arguments being marshalled against it," the brief said.