CAFC and CIT Refine Contours of Exhaustion Doctrine

Litigants are generally required to exhaust their administrative remedies by presenting all arguments to the agency before being able to pursue judicial challenge. The United States Court of International Trade has applied this doctrine with increased frequency in recent cases, dismissing issues that it concluded were not fully litigated or properly presented before the agency. However, the U.S. Court of Appeals for the Federal Circuit recently reversed the U.S. Court of International Trade on this issue in a decision that appeared to be legally straightforward. The plaintiff in Itochu Building Products v. United States benefited from a partial rescission from the antidumping duty order on steel nails from China that resulted from a changed circumstances review, but requested that it become effective earlier than intended. The U.S. Department of Commerce addressed Itochu’s arguments in its preliminary results of the review, and provided the parties to comment on any issues they felt remained to be addressed further. Itochu, however, did not comment on the preliminary results of that review, and CIT Judge Stanceu accordingly dismissed the lawsuit for failure to exhaust in September 2012.

In its August 2013 decision, the CAFC ruled that the CIT had abused its discretion, and reinstated the case. The CAFC found that it would have been “futile” to require exhaustion, given the agency’s position that it was precluded by statute from granting the earlier timeframe: “there was no reasonable prospect that Commerce would have changed its position in the present changed-circumstances review if only Itochu had re-filed its comments.” It also mattered that the Commerce determination would have been expressly delayed if comments were submitted: “Such extra time, of up to seven months, would have prejudiced Itochu, which would have had to continue to depositing antidumping duties…”

Last week, the CIT distinguished the CAFC’s Itochu decision when applying the exhaustion doctrine to dismiss Aluminum Extrusions Fair Trade Committee v. United States. That appeal arose from an October 2012 scope ruling, in which Commerce ruled that an importer’s “side mount valve controls” met the exclusion for “finished goods kits” and accordingly were not subject to the AD/CVD orders on aluminum extrusions from China. This action resulted from a new Commerce policy that was set forth in the preliminary results and not commented on by the plaintiff, who relied on the Itochu decision to argue that it would have been futile to require the issue to be raised again after it was initially addressed. However, CIT Judge Carman distinguished the Itochu decision and dismissed the case, holding that “the instant case does not present the same rare circumstances found in Itochu.” The plaintiff was required to have administratively challenged the “new discretionary policy” given “that there was no possibility of prejudice caused by filing comments.”

Although the CAFC decision demonstrates that circumstances will exist where parties will be excused from exhausting their administrative remedies, it is clear that the CIT remains prepared to employ the doctrine in the cases it hears. Either way, as a general matter parties should raise all concerns before the agency during the administrative proceeding in order to avoid having to fall back on one of the rarely-justified exceptions. Doing so will best preserve the ability to appeal and avoid having to defend against the anticipated attempt to dismiss for failure to exhaust that appears to be increasingly applied at the CIT. In Itochu, the CAFC informed the CIT that such application must be measured and fair to litigants before withstanding appellate review – despite the discretionary standard. While the CIT did not hesitate to dismiss based on exhaustion last week, it expressly did so within the evolving bounds of that doctrine articulated by the CAFC.

CAFC and CIT Refine Contours of Exhaustion Doctrine

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