CBP’s Office of Regulations and Rulings Is Undermining EAPA in Decisions They Don’t Want You to See

News & Insights
Nov 1, 2019

U.S. Customs and Border Protection’s (CBP) website informs the public that on May 17, 2018, after initiating an Enforce and Protect Act (EAPA) investigation of certain import transactions of Columbia Aluminum Products, LLC (Columbia) to determine whether the company had evaded the antidumping duty order on aluminum extrusions from the People’s Republic of China (Case No. A-570-967), the Trade Remedy Law Enforcement Directorate of the Office of Trade (TRLED) imposed interim measures on Columbia’s imports of aluminum door thresholds. CBP’s website further notes that on March 20, 2019, TRLED reached a final affirmative determination of evasion regarding Columbia’s imports, finding that substantial evidence demonstrated “that Columbia imported aluminum door thresholds made from aluminum extruded in China by transshipping the thresholds through Vietnam and falsely declaring the country of origin.” With the affirmative ruling, CBP ordered the continuance of the suspension of liquidation of all import entries made by Columbia of products assembled, shipped, or otherwise processed by Houztek Architectural Products Company, Limited (Houztek) that were entered on or after February 9, 2018, the date of initiation of the investigation. Further, CBP required live entry for all future such imports by Columbia and announced that it would evaluate Columbia’s continuous bond, potentially requiring single transaction bonds.

That is, at least, what CBP’s website lets you know.

What CBP’s website does not let you know is that the agency has since determined that Columbia did not evade the relevant antidumping duty order through transshipment prior to December 19, 2018 and that an affirmative finding of evasion is only warranted with regard to Columbia’s imports on or after that date.

How was that distinction made? Why has this change occurred?

That information is not provided. In fact, there is no mention on the Enforce and Protect Act (EAPA) page of CBP’s website that the agency’s affirmative determination has been, in any way, modified. This is because Regulations & Rulings of the Office of Trade (ORR) has, thus far, elected not to publicize or otherwise make available the decisions they issue in response to requests for administrative review.

ORR’s refusal to publish its decisions in administrative reviews of TRLED’s final evasion determinations in EAPA proceedings is irrational. TRLED makes public all of its determinations as to whether (1) to initiate an investigation; (2) to implement interim measures; and (3) to make a final affirmative finding of evasion. Accordingly, the reasoning behind the TRLED’s decisions are available to any party that might seek to file an EAPA allegation, as well as any party that might need to respond to an EAPA allegation. These decisions assist importers and brokers in identifying whether certain import transactions might constitute evasion. Through the publication of these determinations since October 2016, TRLED has facilitated the development and growth of CBP’s EAPA proceedings, as parties have become more familiar with the administrative process and the agency’s approach to interpreting the EAPA statute and regulations. Failing to notify the public that ORR has decided that a TRLED determination was deficient in some manner leads to inappropriate reliance on erroneous decisions.

Because Columbia appealed the affirmative evasion finding to the U.S. Court of International Trade, CBP recently filed an administrative record with the court that includes ORR’s 28-page decision following administrative review (Columbia Aluminum Products LLC v. United States, Court No. 19-00185). In reversing the TRLED, ORR asserted that, first, CBP must determine whether the U.S. Department of Commerce (Commerce) has expressly held that products originating in one country remain subject to an antidumping and/or countervailing duty order when exported from another country AND, second, CBP must determine whether Commerce has expressly held that the product at issue is within the scope of the relevant order(s). Accordingly, ORR’s unpublished opinion poses a substantial threat to CBP’s ability to administer antidumping and countervailing duty orders.  

ORR observed that the scope of the antidumping and countervailing duty orders on Chinese aluminum extrusions (“the Orders”) “do not expressly address goods completed or assembled in other foreign countries, and/or goods exported from other foreign countries.” ORR did not address whether the scope of any such order would normally be expected to specifically address whether goods originating in one country but exported from another country remain within that scope. Nevertheless, based on the lack of any express coverage in the scopes at issue, ORR held that the following two conclusions drawn by the TRLED were inaccurate:

[U]nder the AD/CVD order on aluminum extrusions, if the origin of the extruded aluminum profile is
China, the product remains subject to the order, regardless of where the product is assembled…

[U]nder the Order, it does not matter whether the door threshold itself is of Vietnamese origin, if the
origin of the extruded aluminum profile is China, the product remains subject to the order.

ORR reasoned that if the TRLED’s conclusions were true, “there would be no reason for Commerce to conduct, as it is currently conducting, for example, an anti-circumvention and scope inquiry into whether aluminum profiles extruded in China and assembled into aluminum jalousie shutters in the Dominican Republic are within the scope of the Orders .” ORR further argued that Commerce’s determinations as to the scope status of products assembled in third-countries from Chinese extruded aluminum was fact-specific and “[n]o such fact-specific inquiry has been undertaken by Commerce with respect to the fact pattern at issue here.” ORR concluded that “the effect that the assembly of the door thresholds in Vietnam may or may not have on the country of origin of the door thresholds for purposes of determining whether the door thresholds are of Chinese origin, is a determination for Commerce to make, not CBP.” ORR noted that there was “no record evidence” that Commerce had “applied a substantial transformation analysis” or that Commerce had “otherwise determined that completion or assembly of door thresholds in Vietnam from Chinese inputs does not constitute a substantial transformation” (emphasis in original).

While implying that CBP is not capable of conducting its own substantial transformation analysis of goods offered for importation that may be subject to an antidumping and/or countervailing duty order, ORR does not cite to any legal authority precluding CBP from conducting such an analysis. Nor does ORR indicate what CBP is supposed to do if Commerce has not addressed the issue. Is CBP prohibited from determining that Chinese merchandise, subject to an antidumping and countervailing duty order, is no longer subject to those orders if it is shipped to a factory in Cambodia and exported from a Cambodian address if the scope of those orders does not specify that goods exported from third countries remain subject and Commerce has not conducted a substantial transformation analysis of that particular factual circumstance? As the fact pattern presented in the most recent EAPA case (Cons. Case 7321) demonstrates, if the answer to that question is in the affirmative, then ORR has handcuffed EAPA’s utility in addressing evasion through transshipment.

In this case, ORR observes that Commerce initiated an anti-circumvention inquiry on March 5, 2018, pursuant to 19 U.S.C. § 1677j(b) and (c), to determine whether extruded aluminum products exported from Vietnam by China Zhongwang Holdings Ltd. and its affiliates were circumventing the Orders. Based on this initiation, ORR asserts that “starting with entries on March 5, 2018…exports from Vietnam of products incorporating aluminum previously extruded in China, were potentially subject to the AD/CVD Orders.” There is no citation or legal reference provided to support this claim, nor does ORR explain why it would be reasonable for an importer to assume that products incorporating aluminum extruded in China that are exported from Vietnam are exempt from antidumping and countervailing duties. Nevertheless, ORR held that Commerce’s conduct of an anti-circumvention inquiry was sufficient to authorize TRLED to conclude that aluminum extruded in China and subject to further processing in Vietnam was within the scope of the antidumping and countervailing duty orders on Chinese aluminum extrusions.

ORR did not stop there, however. Even if there was a serendipitous decision by Commerce providing guidance with how to treat transshipped merchandise, ORR asserts that TRLED should have also determined whether Commerce had specifically and explicitly found that the product at issue – here, door thresholds – was within the scope of the Orders. Exploring that issue, ORR held that because Columbia had separately sought a scope ruling from Commerce with regard to door thresholds it imported from China (not Vietnam), the question of whether door thresholds, specifically, were encompassed within the scope
of the Orders was not resolved until Commerce formally concluded the scope inquiry on December 19, 2018. In result, according to ORR, no evasion of the Orders could have occurred prior to December 19, 2018.

This analysis is problematic for reasons that should have been obvious. As Commerce explains in the relevant scope determination, on March 14, 2018, Columbia had requested that the agency issue a scope ruling holding “that its door thresholds are outside the scope of the
Orders.” As Commerce observed, “the plain language of the scope of the Orders specifies that ‘door thresholds’ are included within the scope ‘if they otherwise meet the scope definition, regardless of whether they are ready for use at the time of importation.’” Commerce further explained that it was evident that the domestic industry “expressly included ‘door thresholds’ in the original investigations.” Based on the “explicit mention of door thresholds as in-scope merchandise within the scope of the Orders,” Commerce rejected Columbia’s request.

Commerce’s scope ruling should have indicated to ORR that Columbia’s door thresholds are, and have always been, subject to the scope of the Orders. Yet, citing the Court of Appeals of the Federal Circuit’s decision in Sunpreme Inc. v. United States, 924F.3d 1198 (Fed. Cir. 2019), ORR claims that CBP is prohibited from resolving “a scope issue, and that Commerce’s scope determination is dispositive.” But this is an extreme, unsupportable interpretation of the Federal Circuit’s holding in Sunpreme as it would preclude CBP from ever determining that a product was within scope if the importer sought a scope ruling, even if the product was expressly and explicitly included within the scope description.

Moreover, although ORR refuses to publish its determinations, its reasoning in the Columbia EAPA case is clearly and obviously inconsistent with reasoning employed in other administrative review determinations issued by ORR. The importers involved in EAPA Cons. Case Number 7205 (Lyke Industrial Tool, LLC and Power Tek Tool, Inc.) also sought an administrative review of an affirmative evasion determination and appealed ORR’s administrative determination to the U.S. Court of International Trade (Lyke Industrial Tool, LLC v. United States, Court No. 19-00028). In that case, ORR rejected the importers’ argument that they had a sincere and reasonable belief that the diamond sawblades imported were not encompassed within the scope of the antidumping duty order. ORR explained that on February 23, 2018, one of the importers requested a scope ruling from Commerce seeking confirmation that its products were outside the scope of the order. On May 17, 2018, Commerce issued a scope ruling rejecting the importer’s request, finding that the merchandise was within the scope. ORR therefore affirmed TRLED’s finding of evasion with regard to imports that entered the United States between June 26, 2016 and August 10, 2017 – well before Commerce’s scope ruling was issued. Under the ORR’s reasoning in Columbia, a finding of evasion could not be made for imports entered before May 17, 2018. ORR’s Columbia decision does not mention or otherwise reference this prior contradictory holding.

EAPA is an important tool for ensuring that our trade remedy laws are effective. CBP’s TRLED is to be commended for the tremendous advances that office has made in building a durable structure for administering this law. But the trade community should be deeply concerned that these improvements are endangered by decisions that, whatever their merit, are not supposed to be seen.

Tags: Evasion