Leco Supply, Inc. v. United States

Decision Date24 January 2023
Docket Number21-00136,Slip Op. 23-8
CourtU.S. Court of International Trade
PartiesLECO SUPPLY, INC., Plaintiff, v. UNITED STATES, Defendant, and M&B METAL PRODUCTS CO., INC Defendant-Intervenor.

[Sustaining U.S. Customs and Border Protection's affirmative determination of evasion in EAPA Consolidated Case No. 7357 as amended by the remand redetermination.]

Heather Jacobson, Junker &Nakachi P.C., of Seattle, WA argued for Plaintiff.

Kelly A. Krystyniak, Trial Attorney, Commercial Litigation Branch Civil Division, U.S. Department of Justice, of Washington, DC, argued for Defendant. With her on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General, and Patricia M. McCarthy, Director. Of counsel on the brief was Jennifer L. Petelle, Attorney, Office of the Chief Counsel, U.S. Customs and Border Protection.

Kimberly R. Young, Vorys, Sater, Seymour and Pease LLP, of Washington, DC, argued for Defendant-Intervenor. With her on the brief was Frederick P. Waite.

Before: Mark A. Barnett, Chief Judge


Mark A. Barnett, Chief Judge

This matter is before the court on U.S. Customs and Border Protection's ("CBP" or "the agency") first remand redetermination in connection with EAPA Consolidated Case No. 7357. See Remand Redetermination ("Remand Results"), ECF No. 47.[1] CBP issued the Remand Results pursuant to the court's remand order. Order (Aug. 3, 2021) ("Remand Order"), ECF No. 42. The Remand Results concern CBP's affirmative determination of evasion of the antidumping and countervailing duty orders on certain steel wire garment hangers from the Socialist Republic of Vietnam ("Vietnam"). Id. at 2; see also Confid. Notice of Determination as to Evasion, EAPA Case No. 7357 (Oct. 26, 2020) ("Evasion Determination"), ECF No. 22-2; Letter Re: Enforce and Protect Act ("EAPA") Consol. Case No. 7357 (Feb. 24, 2021) ("Admin. Review"), ECF No. 19-3. CBP issued its evasion determination pursuant to its authority under the Enforce and Protect Act ("EAPA"), 19 U.S.C. § 1517 (2018).[2] Plaintiff Leco Supply, Inc. ("Leco") opposes the Remand Results. Confid. Pl. [Leco's] Mem. in Supp. of its Mot. for J. on the Agency R. ("Pl.'s Mem."),[3] ECF No. 52; Confid. Pl. [Leco's] Reply to Def. Resp. to Mot. for J. on the Agency R. ("Pl.'s Reply"), ECF No. 63. Defendant United States ("the Government") responded in support of the Remand Results.[4] Confid. Def.'s Resp. to Pl.'s Mot. for J. on the Agency R. ("Def.'s Resp."), ECF No. 60.

Leco raises four challenges to CBP's evasion determination. Leco argues that (1) CBP improperly initiated the EAPA investigation, Pl.'s Mem. at 10-13; (2) CBP's evasion determination was not supported by substantial evidence, id. at 13-26; (3) CBP denied Leco procedural due process and redacted material evidence in violation of CBP's regulations, id. at 26-46; and (4) CBP's refusal to accept Leco's written arguments during the remand proceeding was an abuse of discretion, id. at 46-47. For the following reasons, the court sustains CBP's final evasion determination, as amended by the Remand Results.

Jurisdiction and Standard of Review

The court has jurisdiction pursuant to section 517(g) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1517(g) (2018), and 28 U.S.C. § 1581(c) (2018). EAPA directs the court to determine whether a determination issued pursuant to 19 U.S.C. § 1517(c) or an administrative review issued pursuant to 19 U.S.C. § 1517(f) was "conducted in accordance with those subsections." 19 U.S.C. § 1517(g)(2). In so doing, the court "shall examine . . . 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." Id.

"The scope of review under the 'arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency." Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). However, CBP "must examine the relevant data and articulate a satisfactory explanation for its action[,] including a 'rational connection between the facts found and the choice made.'" Id. (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)). "An abuse of discretion occurs [when] the decision is based on an erroneous interpretation of the law, on factual findings that are not supported by substantial evidence, or represents an unreasonable judgment in weighing relevant factors." Consol. Bearings Co. v. United States, 412 F.3d 1266, 1269 (Fed. Cir. 2005) (citation omitted). "Courts look for a reasoned analysis or explanation for an agency's decision as a way to determine whether a particular decision is arbitrary, capricious, or an abuse of discretion." Wheatland Tube Co. v. United States, 161 F.3d 1365, 1369 (Fed. Cir. 1998).


Leco is a domestic importer of metal wire hangers purportedly manufactured by Truong Hong Development Multidisciplinary Group Ltd. ("Truong Hong"), a Lao company. See Compl. ¶¶ 4, 11, ECF No. 2. On October 2, 2019, M&B, a domestic producer of metal wire hangers lodged an allegation with CBP in which it averred that Leco and nine other importers entered hangers that had been manufactured in Vietnam and transshipped through Laos in violation of antidumping ("AD") order A-552-812 and countervailing duty ("CVD") order C-552-813 (together, the "AD/CVD Orders") on hangers from Vietnam. See Compl. ¶ 8; Def.'s Resp. at 2-3. In support of its allegations, M&B provided a report prepared by a foreign market researcher ("Market Research Report"), which concluded that the Truong Hong factory in Laos did not have the capacity to produce the volume of hangers allegedly imported from Truong Hong. EAPA Duty Evasion Allegation Concerning Steel Wire Garment Hangers Imported from Laos-Importer: Leco Supply (Oct. 2, 2019) ("Allegation Narrative")[5] at 7, CR 14, PR 12, CJA Tab 3. M&B also cited changes in metal hanger production trends reflecting a significant decrease in hanger production in Vietnam and corresponding increases in Laos and China. Id. at 4. In response to these allegations, on October 25, 2019, CBP initiated EAPA investigations into imports by Leco and the nine other importers identified in M&B's submissions. Notice of Initiation of Investigation and Interim Measures Taken (Jan. 30, 2020) ("Initiation Notice") at 3, available at https://www.cbp.gov/sites/default/files/assets/documents/2020-Mar/EAPAInvestigation%207357%20%28508%20compliant%29.pdf (last visited Jan. 24, 2023).[6] On January 30, 2020, CBP consolidated its investigations of all ten importers into EAPA Consolidated Case No. 7357. Id. at 12.

Pursuant to 19 C.F.R. § 165.5, CBP sent requests for information ("RFI(s)") to Leco and the other importers requesting information about their import policies and procedures, purchase and sales records for the hangers, and corporate structure. Evasion Determination at 3. CBP also sent an RFI to Truong Hong requesting information about its manufacturing process for hangers, including detailed production capabilities and capacities; the sources of its raw materials; its corporate structure and affiliations; and the source of any finished hangers not produced on-site. Id. at 3-4. Truong Hong failed to provide a substantive response to the RFI. Id. at 5.

On October 26, 2020, CBP issued an affirmative determination as to evasion. Id. at 1. CBP found that "substantial evidence exist[ed] demonstrating that the Importers misrepresented the country of origin on their imports of hangers" and that "[e]vidence on the record strongly suggest[ed] that a Truong Hong [[ ]] in Vietnam actually manufactured the hangers." Id. at 11. CBP explained that, despite having requested and received multiple extensions from CBP, Truong Hong failed to provide a substantive response to the RFI. Id. at 5. Based on CBP's finding that Truong Hong failed to cooperate with the EAPA investigation to the best of its ability, CBP determined to use facts available with an adverse inference. Id. at 10-11.

On November 24, 2020, Leco requested an administrative review of the Evasion Determination. Req. for Admin. Review of Evasion Determination (Nov. 25, 2020), CR 319, PR 476, CJA Tab 89. In the subsequent decision, CBP explained that the questionable authenticity of the documentation submitted by Leco and other importers, coupled with evidence of significant ties between Truong Hong and DNA Investment Joint Stock Company ("DNA"), a Vietnamese company subject to the AD/CVD Orders, supported a finding that the hangers imported by Leco during the period of investigation were manufactured in Vietnam. Admin. Review at 9-11.

In the Administrative Review, CBP specifically addressed several issues relevant to this litigation. First, CBP found that Truong Hong's receipts for its purchased raw materials and packaging materials appeared to be self-generated because they were printed on Truong Hong's own letterhead. Id. at 9. CBP also determined that the record did not support a finding that Truong Hong could produce the volume of wire hangers that it exported to the United States during the period of investigation. Id. at 10. Specifically, the importers being investigated submitted inconsistent quantities of machines and employees employed by Truong Hong and the production capacity reports appeared to have been created by Truong Hong because most were printed on Truong Hong's letterhead. Id. Furthermore, the only other evidence of production capacity was "some poor quality photos" allegedly taken in 2013 and 2014 and eleven undated photographs provided by Truong Hong through the importers. Id. Finally, CBP discussed Truong...

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