CEK Grp. LLC v. United States

633 F.Supp.3d 1369

CEK GROUP LLC, Plaintiff, v. UNITED STATES, Defendant,M&B Metal Products Company, Inc., Defendant-Intervenor

Slip Op. 23-69 Court No. 22-00082

United States Court of International Trade

May 2, 2023

David John Craven, Craven Trade Law LLC, of Chicago, IL, for Plaintiff CEK Group LLC.

Elisa S. Solomon, International Trade Field Office, U.S. Department of Justice, of New York, NY, for Defendant United States of America. With her on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General, Patricia M. McCarthy, Director, and Reginald T. Blades, Jr., Assistant Director, Commercial Litigation Branch, U.S. Department of Justice, of Washington, DC. Of counsel on the brief was Christopher Berridge, Office of Chief Counsel, U.S. Customs and Border Protection, and Jennifer L. Petelle, Office of Chief Counsel, U.S. Customs and Border Protection, of Washington, DC.

Frederick P. Waite and Kimberly R. Young, Vorys, Sater, Seymour and Pease, LLP, of Washington, DC, for Defendant-Intervenor M&B Metal Products Company, Inc.

OPINION

Restani, Judge:

Importer of steel wire hangers CEK Group LLC ("CEK") challenges the final determination and final administrative decision made by the United States Customs and Border Protection ("CBP"). CEK asserts that the Enforce and Protect Act ("EAPA"), 19 U.S.C. § 1517, investigation should not have been initiated, that CBP made procedural errors regarding the rejection of evidence and failure to provide adequate public summaries, that adverse inferences were improperly applied, and that the determination and decision by CBP are not supported by substantial evidence. The United States ("Government") refutes these claims and asks the court to sustain CBP's evasion determination.

BACKGROUND

On July 6, 2020, M&B Metal Products Company, Inc. ("M&B"), a domestic producer of steel wire garment hangers, filed an EAPA duty evasion allegation asserting that CEK participated in a scheme to transship wire hangers from China through Thailand into the United States. EAPA Duty Evasion Allegation Concerning Steel Wire Garment Hangers Imported from Thailand—Importer: CEK Group LLC, C.R. 5, P.R. 5 (July 6, 2020) ("Allegation"). M&B alleged that CEK and three other U.S. importers, working with Thai exporter and manufacturer NWH Manufacture Company Limited ("NWH"), evaded an antidumping order on steel wire hangers from China. Allegation at 2-3, Ex. 1; see also Notice of Antidumping Duty Order: Steel Wire Garment Hangers from the People's Republic of China, 73 Fed. Reg. 58,111 (Dep't Commerce Oct. 6, 2008) ("AD Order").

On September 14, 2020, CBP's Trade Remedy Law Enforcement Directorate ("TRLED") initiated the investigation of CEK for EAPA Case Number 7501. Initiation of Investigation for EAPA Case Number 7501, C.R. 17, P.R. 29 (Sep. 14, 2020) ("Initiation Memo"). In analyzing the allegation submitted by M&B, TRLED determined that the materials that M&B provided "reasonably suggest[ ] that covered merchandise has entered into the customs territory of the United States by means of evasion." Initiation Memo at 1.

On December 11, 2020, TRLED determined that reasonable suspicion existed that the hangers were in fact manufactured in China, and imposed interim measures upon CEK. EAPA Consolidated Investigation 7501: Notice of Determination as to Evasion at 2, C.R. 36 (Sept. 16, 2021) ("Evasion Determination"). One week later, TRLED issued the Notice of Initiation of Investigation. Notice of Initiation of Investigation and Interim Measures: Consolidated EAPA Case 7501, C.R. 25, P.R. 39 (Dec. 18, 2020). TRLED sent CEK a Request for Information ("RFI") on January 28, 2021, and a supplemental RFI one month later. EAPA Consolidated Case 7501: Request for Information from CEK Group LLC at 1, C.R. 1, P.R. 1 (Jan. 28, 2021); EAPA Consolidated Case 7501: Supplemental Request for Information from CEK Group LLC at 1, C.R. 32, P.R. 51 (Feb. 26, 2021). CEK responded to the RFI but failed to respond to the supplemental RFI. CEK - RFI Response, C.R. 31, P.R. 49 (Feb. 25, 2021) ("CEK RFI Resp."); TRLED - CEK Non-Response to Supp RFI, P.R. 54 (Mar. 10, 2021) ("CEK Supp. RFI Non-Resp."). Additionally, TRLED sent an RFI to NWH on January 27, 2021, and, after two prior responses were rejected for deficiencies in the filing, TRLED accepted a response on March 10, 2021. EAPA Consolidated Case 7501: Request for Information from the Foreign Producer at 1, C.R. 26, P.R. 41 (Jan. 27, 2021) ("NWH RFI Request"); NWH - RFI Response, C.R. 33, P.R. 54 (Mar. 10, 2021) ("NWH RFI Resp."); see also Evasion Determination at 3.

During March and April of 2021, M&B and NWH each voluntarily submitted factual information. Evasion Determination at 4. TRLED accepted both submissions and placed them on the record. Id. CEK sought to submit information rebutting M&B's submission, and after two previous submissions were rejected for failing to contain actual rebuttal information, TRLED accepted the rebuttal information. Id. Finally, TRLED rejected several submissions from NWH, including video evidence mailed to TRLED, for being untimely. Id. With the record complete, CEK and M&B each submitted written arguments and rebuttal arguments. CEK Written Argument, C.R. 35, P.R. 64 (May 10, 2021); M&B Written Argument, P.R. 65 (May 10, 2021); CEK Rebuttal Argument, C.R. 34, P.R. 66 (May 25, 2021); M&B Rebuttal Argument, P.R. 67 (May 25, 2021).

After reviewing the record evidence and relevant arguments, TRLED issued its notice of determination as to evasion on September 16, 2021. Evasion Determination. CEK submitted a timely request for review, and CBP's Office of Regulations and Rulings ("ORR"), after reviewing the determination de novo, issued a decision affirming TRLED's determination of evasion. See Administrative Review Determination of Evasion Decision, C.R. 69, P.R. 114 (Jan. 28, 2022) ("Admin. Review"). CEK filed this action in the court, challenging the TRLED determination and ORR decision. See Compl., ECF No. 2 (Mar. 11, 2022).

JURISDICTION & STANDARD OF REVIEW

The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) and 19 U.S.C. § 1517(g). The EAPA requires that the court determine whether a determination issued pursuant to 19 U.S.C. § 1517(c) or a review pursuant to 19 U.S.C. § 1517(f) was conducted "in accordance with those subjections" by examining whether CBP "fully complied with all procedures under subsections (c) and (f)" and "whether any determination, finding, or conclusion is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 19 U.S.C. § 1517(g)(2)(A)-(B). While the agency bases its determination and decision on substantial evidence and the court reviews the agency's actions to assess whether they are arbitrary and capricious, "both standards require an assessment based on a reasonableness standard." Ad Hoc Shrimp Trade Enf't Comm. v. United States, Slip Op. 23-61, 632 F.Supp.3d 1369, 1374 (CIT Apr. 26, 2023) (citing Ass'n of Data Processing Serv. Orgs., Inc. v. Bd. of Governors of Fed. Rsrv. Sys., 745 F.2d 677, 683-84 (D.C. Cir. 1984)). "The court's review of Customs' determination as to evasion may encompass interim decisions subsumed into the final determination." Vietnam Finewood Co. Ltd. v. United States, 44 CIT —, —, 466 F. Supp. 3d 1273, 1284 (2020).

DISCUSSION

I. Customs' Initiation of the Investigation

CEK contends that CBP improperly initiated the EAPA investigation. Pl. CEK Group LLC, Mem. in Supp of its R. 56.2 Mot. for J. on the Agency Record at 10-20, ECF Nos. 33-34 (Sept. 12, 2022) ("CEK Br."). CEK asserts that the allegation submitted by M&B did not contain "sufficient" information to reasonably suggest that CEK was importing covered merchandise through evasion. CEK Br. at 11. The United States argues that M&B's allegation presented "robust information" to suggest evasion in the importation of wire hangers. Def. United States, Resp. Oppo. To Pl.'s Mot. for J. on the Agency Record at 8, 13-23, ECF Nos. 38-39 (Jan. 13, 2022) ("Gov. Br."). The Government also contends that CEK cannot challenge the initiation of an investigation. Gov. Br. at 11-13.

Pursuant to 19 U.S.C. § 1517(b)(1), CBP "shall initiate an investigation if the Commissioner determines that the information provided" in an allegation by a domestic manufacturer "reasonably suggest that covered merchandise has been entered into the customs territory of the United States through evasion." 19 U.S.C. § 1517(b)(1). The necessary information should be "reasonably available to the interested party to support its allegation." 19 C.F.R. § 165.11(b)(6). "Reasonably suggest" is not further defined in the statute, however, it is a standard the Government must follow, and is therefore challengeable. 19 U.S.C. § 1517(b)(1); 5 U.S.C. § 702.

In Leco Supply, Inc. v. United States, the court found that CBP properly assessed the data presented in an allegation to reasonably suggest that Leco was importing merchandise through evasion. 46 CIT —, —, 619 F.Supp.3d 1287, 1295-97 (2023). The allegations in Leco, which are not entirely dissimilar to those asserted here, noted a lack of employees at the alleged manufacturing factory as well as significant changes in imports from Laos and Vietnam following an imposition of new AD/CVD Orders. Id. CBP determined that these factors reasonably suggested that the covered merchandise was entering the United States through evasion. Id. These facts were considered "adequate" by the court to demonstrate CBP's determination was not arbitrary, capricious, or an abuse of discretion. Id.

In its brief, the Government argues that although "reasonably suggest" is not defined in the statute, legislative and judicial sources show that the phrase implies a threshold, initial finding as opposed to a higher standard, such as substantial evidence. Gov. Br. at 12 n.5. The Government points to 21 U.S.C. § 360i, administered by the Food and Drug Administration, which requires a manufacturer or importer to...