Royal Brush Mfg., Inc. v. United States
| Docket Number | 2022-1226 |
| Decision Date | 27 July 2023 |
| Citation | 75 F.4th 1250 |
| Parties | ROYAL BRUSH MANUFACTURING, INC., Plaintiff-Appellant v. UNITED STATES, Dixon Ticonderoga Company, Defendants-Appellees |
| Court | U.S. Court of Appeals — Federal Circuit |
Appeal from the United States Court of International Trade in No. 1:19-cv-00198-MAB, Chief Judge Mark A. Barnett.
Steven D. Gordon, Holland & Knight LLP, Washington, DC, argued for plaintiff-appellant. Also represented by Ronald Alan Oleynik.
Margaret Jantzen, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee United States. Also represented by Brian M. Boynton, Claudia Burke, Patricia M. McCarthy, Antonia Ramos Soares.
Felicia Leborgne Nowels, Akerman LLP, Tallahassee, FL, argued for defendant-appellee Dixon Ticonderoga Company. Also represented by Michael J. Larson; Julia Padierna-Peralta, Washington, DC.
Before Lourie, Dyk, and Stoll, Circuit Judges.
Royal Brush Manufacturing Inc. ("Royal Brush"), an importer of pencils, was accused of transshipping pencils from China through the Philippines to avoid antidumping duties assessed on pencils of Chinese origin. Customs and Border Patrol ("CBP") found that the pencils had been transshipped. It based this finding in part on evidence that had not been supplied to Royal Brush because it was confidential business information. Royal Brush was also denied the opportunity to rebut this evidence.
We hold that we have jurisdiction and that the failure to provide access to the redacted information was a violation of due process. Under the applicable CBP regulation, Royal Brush must be given an opportunity to rebut this information with its own evidence.
This case concerns five entries of pencils that Royal Brush imported to the United States between 2017 and 2018. On February 27, 2018, Dixon Ticonderoga Company ("Dixon"), a competing importer of pencils, filed a complaint with CBP alleging evasion by Royal Brush of antidumping duties under the Enforce and Protect Act of 2015 ("EAPA"), Pub. L. No. 114-125, 130 Stat. 155 (), 19 U.S.C. § 1517, and the related regulation, 19 C.F.R. Part 165. Dixon alleged that Royal Brush was transshipping pencils from China through the Philippines, falsely claiming the pencils to be of Philippine origin and thus not subject to the antidumping duties assessed on certain pencils from China.
CBP initiated an investigation on March 27, 2018, and a CBP attaché conducted a site visit to Royal Brush's Philippines manufacturer, the entity Royal Brush alleged had been producing the pencils that it imported. The attaché took photographs of and inside the facility and, in his report, wrote that "[t]he pictures and captions provided in this report indicate a clear story line of repacked Chinese pencils bound for the United States in boxes labeled, Made in the Philippines." J.A. 175. CBP only provided Royal Brush with the public version of the report which redacted all of the photographs.
CBP then commenced a formal investigation to determine whether Royal Brush was evading antidumping duties. CBP issued a notice of investigation to Royal Brush in a letter dated June 26, 2018. The letter stated that "CBP will . . . suspend the liquidation for any entry that has entered on or after March 27, 2018, the date of initiation of this investigation; and, CBP will extend the liquidation period for all unliquidated entries that entered before that date." J.A. 776. Such liquidation suspension was mandated by 19 U.S.C. § 1517(e) and 19 C.F.R. § 165.24(b)(1).
In November 2018, CBP conducted a verification site visit to the Philippines manufacturer. The resulting Verification Report concluded that the Philippines manufacturer did not have the capability to produce sufficient quantities of pencils to account for the total number of pencils imported to the United States in 2018. CBP provided only a redacted version of the report to Royal Brush which included neither the numbers used to calculate production capability and capacity nor the final production capability and capacity determinations. The redacted version also omitted other confidential business information,1 such as photographs of the facility and information about certain invoices and purchase orders.2
Royal Brush sought to file a rebuttal to the Verification Report. Because the Verification Report was submitted more than 200 days after the investigation was initiated, a rebuttal would only have been proper if the Verification Report contained "new factual information." 19 C.F.R. § 165.23(c)(1). CBP at first indicated that this rebuttal was allowed but ultimately rejected the rebuttal because CBP determined that the verification report did not, in fact, contain new factual information. CBP only accepted Royal Brush's written arguments in response to the Verification Report. Royal Brush was denied the opportunity to submit rebuttal evidence.
On May 6, 2019, CBP issued a final affirmative determination of evasion and noted that it would continue to suspend liquidation of entries. The evasion determination was upheld on de novo administrative review by the CBP's Office of Trade, Regulations, and Rulings.
On November 6, 2019, Royal Brush appealed to the U.S. Court of International Trade ("CIT"), and soon thereafter moved to enjoin liquidation throughout the pendency of the case. The CIT granted the motion to enjoin liquidation on November 27, 2019, and later remanded the proceeding to CBP requiring CBP to provide summaries of the redacted information, as required by 19 C.F.R. § 165.4(e), and to reconsider the denial of the opportunity to rebut. The CIT did "not hold that Royal Brush is entitled to receive business confidential information" and noted that "Congress has not mandated that Royal Brush be afforded such access and Royal Brush has not shown that due process requires it." J.A. 81.
On remand, CBP issued public summary versions of the Attaché Report and the Verification Report to Royal Brush. The photographs in the Attaché Report were replaced with generic descriptions such as "photo of sign," "photo of a different sign," and "photo of labeled box with finished merchandise." J.A. 1375-84. The summaries in the Verification Report replaced all numbers associated with production capability and capacity with either "number" or "no." According to CBP:
CBP's remand proceeding complied with the Court's Remand Order. The EAPA statute and applicable regulations do not provide for a mechanism, such as an administrative protective order . . . , for disclosure of confidential business information to interested parties. As such, CBP is not authorized to disclose business confidential information to interested parties or their authorized representatives.
J.A. 36 (footnote omitted).
As to the rebuttal issue, CBP "continue[d] to find that the Verification Report d[id] not contain new factual information" and rejected Royal Brush's rebuttal submission. J.A. 18. Specifically, CBP found that the calculations in the Verification Report were "simply CBP using and verifying the factual data on the record and therefore [were] a natural part of CBP's investigation as to whether evasion occurred." J.A. 26.
Royal Brush appealed again to the CIT, arguing that the public summaries were insufficient; that the failure to provide the unredacted information deprived Royal Brush of due process; that the Verification Report contained new information that it should be allowed to rebut; and that the CBP determination was arbitrary and capricious and not supported by substantial evidence.3 The CIT held that "CBP has complied with 19 C.F.R. § 165.4 by providing necessary public summaries of the confidential information and that Royal Brush has not established that CBP has failed to provide Royal Brush the process that it is due." J.A. 9-10. The CIT also sustained CBP's decision to reject Royal Brush's rebuttal submission and upheld the evasion determination, concluding that it was not arbitrary and was supported by substantial evidence.
Royal Brush appealed to this court pursuant to 28 U.S.C. § 1295(a)(5). Around December 2021, after Royal Brush filed this appeal, the government informed Royal Brush that, contrary to the EAPA, 19 U.S.C. § 1517(d)(1)(A)(i), (e)(1), CBP's own regulations, 19 C.F.R. §§ 165.24(b)(1)(i), 165.28(a)(1)(i)-(ii), and CBP's previous representations in its initiation of investigation and final evasion determination, all five of Royal Brush's entries had been liquidated. All of these five entries had been liquidated before the injunction, and the first had been liquidated even before Dixon's transshipping complaint. At liquidation, antidumping duties were assessed on the last two entries but not on the first three.
Because the entries had been liquidated, the United States moved to dismiss this case for lack of jurisdiction. That motion was referred to the merits panel.
Congress, concerned with evasion of antidumping duties, on February 24, 2016, enacted the EAPA, a statutory scheme for determining whether "covered merchandise was entered into the customs territory of the United States through evasion." 19 U.S.C. § 1517(c)(1)(A). Evasion proceedings begin with an allegation or referral to CBP. 19 U.S.C. § 1517(b)(1). Then, CBP has 15 business days to "initiate an investigation if [CBP] determines that the information provided in the allegation or the referral . . . reasonably suggests that covered merchandise has been entered into the customs territory of the United States through evasion." Id. After initiation, CBP generally has 300 days to make an evasion determination based on substantial evidence. Id. § 1517(c)(1)(A). Finally, after CBP makes its evasion determination, an entity deemed to have evaded duties has 30 days to seek administrative review by "appeal[ing] . . . for de novo review of the determination." Id. § 1517(f)(1).
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