CIT Says Plaintiff May Possibly Establish Due Process Claim for Lack of Notice of EAPA Interim Measures

The Court of International Trade on June 10 signaled that CBP's practice of not notifying companies when they become subject to interim Enforce and Protect Act investigations could give rise to a due process claim should the company sufficiently allege that it suffered "specific enough harm." However, the court found that importer Phoenix Metal failed to allege that harm with enough specificity.

Judge Jane Restani rejected Phoenix's due process claims in the company's EAPA suit but left the door open for future due process challenges. The judge said the "lack of notice and opportunity to be heard prior to the sudden imposition of interim measures on goods already imported" might be an interest that "could trigger due process rights."

It's feasible that a plaintiff could present facts that show these interim measures can cause lasting harm in the form of cash deposits and live entry requirements, which have been likened to sanctions, the opinion said. However, Phoenix only "vaguely" claimed it had to "fundamentally alter" its business operations and was unable to "mitigate its injury" due to the lack of notice that it could face interim measures. The company failed to explain "what cognizable injury it suffered" or "any actual damages stemming from" the due process claim.

Restani added that due process claims are about lowering the risk of an "erroneous deprivation," which in this case was "extremely low" because Phoenix's owner, "Ms. Li," was on notice of all the information CBP used to reach its evasion finding because of prior EAPA cases settled against other companies owned by her.

The court noted that CBP frequently uses a CF-28 form, which gathers additional information from the importer, prior to the imposition of interim measures, though it didn't issue the form here. Restani said the form doesn't always give notice of an EAPA investigation, but its absence may trigger a due process claim.

The EAPA case, where CBP found Phoenix transshipped Chinese cast iron soil pipe via Cambodia, is one in a "series of allegations of transshipping" involving Li. The company's owner also runs a series of companies dubbed "the Lino Group." In a separate EAPA case, two of Li's companies, DLNL Trading and Lino, were found to have been transshipping Chinese soil pipe through importer HiCreek, which was then shuttered after the EAPA case. Yet another EAPA case found that Granite Plumbing Products and Little Fireflies International, a company owned by Li's relative, transshipped Chinese soil pipe into the U.S.

CBP combined the proceeding against Granite Plumbing and Little Fireflies with Phoenix's case and subsequently found that Phoenix took over for Little Fireflies as the importer of the pipe to evade the interim measures set on Little Fireflies. Restani noted that in her communications with CBP, Li "implicitly admitted to at least some part" of this scheme.

Addressing CBP's claim that Li was evading CBP revenue collection measures, Li said "CBP had no right to such revenue" because it violated process protections. But the court said "moving shipments from the earlier companies to the later ones" means the later companies can also be found to be engaged in transshipping.

Restani said CBP adequately supported its evasion finding. Phoenix's evidentiary claims centered on CBP's verification report from a visit to the Cambodian manufacturing facility, which showed some ability to make pipe. The judge said a showing of some production capacity "does not prove that transshipment did not occur," particularly in light of the substantial evidence proffered by the agency. CBP relied on "the fact that Phoenix has no domestic sales," its "omissions in communicating with CBP," materially false statements Li made to CBP, Li's "non-cooperation at verification" and more.

Phoenix also advanced a host of due process claims, all of which fell short. For instance, the importer said CBP's verification process, in which the agency sent seven agents to conduct verification, was an abuse of discretion, creating "chaos." The court noted that Phoenix failed to cite any law "restricting the number of investigators or employees that CBP may send to conduct verification." The agency sent notice to expect eight agents and appeared "to have engaged in the normal actions of a verification team."

Restani upheld CBP's use of adverse inferences against the importer due to its failure to "provide requested production and bank documents, as well as reiterating its failure to disclose its relationship to Camellia Casting" and that the claims against CBP's failure to provide access to confidential information in the proceeding are moot because Phoenix "no longer suffers any harm from this error."

(Phoenix Metal Co. v. U.S., Slip Op. 24-68, CIT # 23-00048, dated 06/10/24; Judge: Jane Restani; Attorneys: Gregory Menegaz of deKieffer & Horgan for plaintiff Phoenix Metal Co.; Liridona Sinani for defendant U.S. government; and Nicholas Birch of Schagrin Associates for defendant-intervenor Cast Iron Soil Pipe Institute)