Trade Court Says EAPA's Definition of 'Evasion' Does Not Establish Culpability Requirement

There is no requirement that an importer intentionally evade duties to be hit by an Enforce and Protect Act investigation, the Court of International Trade ruled in a June 13 opinion. Upholding CBP's finding that importers Ikadan System USA and Weihai Gaosai Metal Product Co. evaded the antidumping and countervailing duty orders on steel grating from China, Judge Leo Gordon rejected the importers' claim that the definition of "evasion" requires a finding of some level of culpability.

The statutory definition of "evasion" as set in the Enforce and Protect Act "does not express clear Congressional intent to establish a culpability requirement," Gordon said, finding that the question of how culpability plays into definition is settled under the first step of Chevron.

Gordon ruled that Ikadan and Gaosai "have not pointed to any authority or broader statutory context defining the specific words on which they rely to indicate culpability." The judge looked to a dictionary definition of "false," which says that a false statement is one that is untrue, deceitful, not genuine or inauthentic and can be false by "intent, by accident, or by mistake," and found no culpability requirement exists.

The judge added that the EAPA statute as a whole backs CBP's "strict liability interpretation of the definition of evasion." The court ruled that the statute has an explicit exception for clerical errors that says that "'evasion' does not include entering covered merchandise" by way of false or omissive documents due to a clerical error unless the error is part of a pattern of negligent conduct. "The inclusion of language assessing an importer’s state of mind in one subsection of the definition shows that Congress could have incorporated the same wording in the general definition, if it had intended culpability as a prerequisite for an affirmative determination of evasion," the opinion said. "It did not."

In the investigation, CBP said that Ikadan and Gaosai failed to declare that their goods were subject to the AD/CVD orders and that the importers entered steel grating in the form of tribar floors from China via South Korea. The agency said Ikadan's entries had steel tribar floors that are part of the crate unit, making them subject to the duties, also finding that a greater number of Gaosai's entries it reported as having either farrowing crates or tribar floors actually had features that rendered them subject to AD/CV duties.

During the investigation, no scope referral to the Commerce Department was made, though the agency still initiated a scope review concurrent with the EAPA proceeding. The scope ruling eventually found that the decking of the tribal flooring is covered by the scope of the orders, but that the other parts of the tribar flooring are outside the orders' scope. Ultimately, CBP did not rely on the scope ruling, instead relying on its own interpretation of the orders to include Ikadan and Gaosai's goods.

The importers challenged this finding at the trade court, claiming that CBP must justify its covered merchandise finding under the same legal framework CIT would use to review a Commerce scope ruling. Gordon ruled that as an initial matter, the companies had the wrong legal standard. Under EAPA, the court reviews whether any finding made by CBP is arbitrary, capricious, an abuse of discretion or otherwise illegal. "Arbitrariness review is distinct from reasonableness review," the judge said.

Gordon further found that Ikadan and Gaosai failed to show that CBP's covered merchandise finding was arbitrary and capricious. In the proceeding, CBP found that since the importers' tribar floors were made of "two or more pieces of steel jointed together by welding," they were covered by the orders, which encompass "certain steel grating, consisting of two or more pieces of steel" jointed via assembly process. The companies' claims to the contrary "are a misguided attempt to reframe the standard of review and would require Customs to withstand a higher level of scrutiny than that set forth in EAPA," the judge said.

(Ikadan System USA v. United States, Slip Op. 23-88, CIT # 21-00592, dated 06/13/23; Judge: Leo Gordon; Attorneys: Richard Ferrin of Faegre Drinker for plaintiffs Ikadan and Gaosai; Ashley Akers for defendant U.S. government; and Zachary Simmons of Steptoe & Johnson for defendant-intervenor Hog Slat)