The fresh garlic was exported by Qingdao Tiantaixing Foods Co., Ltd. (“QTF”), a company that had obtained an antidumping duty cash deposit rate of 32.78% through a new shipper review. This cash deposit rate, however, was limited only to entries of fresh garlic for which QTF was both the producer and exporter. CBP’s review of paperwork – including phytosanitary certificates – accompanying the fresh garlic entries led the agency to question whether QTF was, in fact, the producer of the fresh garlic.
Because Kwo Lee could not demonstrate that QTF was the producer of the fresh garlic, CBP could not ascertain the identity of the producer. The agency became concerned that these entries would ultimately be found subject to the China-wide antidumping duty rate of 376.67%. At over ten times QTF’s cash deposit rate achieved through a new shipper review, the potential risk to revenue was substantial. Accordingly, CBP denied entry for fresh garlic entries shipped by QTF pending the posting of additional security, in the form of a series of single transaction bonds equal to the potential antidumping duty liability of 376.67%.
Kwo Lee appealed CBP’s negative bond sufficiency determination to the CIT. On Friday, the CIT rejected that appeal, finding that:
• CBP has broad statutory and regulatory authority to make bond sufficiency determinations and require additional bonding;
• A bond sufficiency determination is consistent with CBP’s ministerial role in the administration of antidumping duty laws and does not constitute a substantive antidumping duty determination;
• The factual evidence reviewed by CBP in relation to its concerns regarding whether QTF was the producer of the fresh garlic and the agency’s explanation of the conclusion drawn from that evidence were sufficient to establish that CBP’s negative bond sufficiency determination was neither arbitrary nor capricious; and
• Because CBP notified Kwo Lee of its decision, including its reasoning, and gave the importer an opportunity to challenge that decision (both before the agency and the Court), Kwo Lee had been afforded adequate process.
Customs further supported its decision by contextualizing the instant entries: Customs has had tremendous difficulty collecting duties owed on fresh garlic from the PRC, and the fact pattern here (a small importer with a minimal continuous bond enters a large quantity of garlic) is common and often ends in “uncollectable [duties] because the importers are no longer active and cannot be found.”
The CIT also noted that Kwo Lee could not challenge the China-wide antidumping duty rate of 376.67% as part of its appeal of the negative bond sufficiency determination. As Kwo Lee itself had repeatedly argued, the role of CBP in administering the antidumping duty laws is “purely ministerial, such that it has no authority to calculate or recalculate an AD duty rate.” Instead, CBP “simply applies that rate as determined by Commerce.”
The Court had previously granted Kwo Lee a preliminary injunction against the imposition of single transaction bond requirements on entries of fresh garlic, requiring, instead, that the importer provide security in the amount of one million dollars (US$ 1,000,000) through a judicial mechanism seldom used at the CIT. Because this security was provided to the Court as an alternative to single transaction bonds provided to CBP, the CIT stayed the entry of judgment pending the Final Results of the U.S. Department of Commerce’s twentieth administrative review of the antidumping duty order on fresh garlic from China. That administrative review will establish Kwo Lee’s final liability for antidumping duties on the relevant entries; final antidumping duty rates, in turn, will establish whether the cash deposit rate – without the additional million dollar security – are sufficient to cover the importer’s liability.
QTF is currently actively participating in the 20th administrative review as a voluntary respondent. Public information available through bills of lading data indicate that QTF has continued to export large quantities of fresh garlic to the United States through Kwo Lee throughout 2015 that will have final antidumping duty liability determined in the 21st administrative review of the antidumping duty order on fresh garlic from China.