The U.S. Court of International Trade has ruled on a case involving Superior Commercial Solutions, LLC (Superior), an importer of quartz slab countertops, and U.S. Customs and Border Protection (Customs). The court largely upheld Customs’ determination that Superior was evading antidumping and countervailing duties on quartz surface products imported from China, but also found that Customs violated Superior’s due process rights in the process.
The case centered on the Enforce and Protect Act (EAPA), which allows Customs to investigate allegations of duty evasion. Superior challenged several aspects of Customs’ actions, including the timeliness of the investigation, the notice provided, and the evidence used to support the determination.
Background of the Case
In 2019, the U.S. Department of Commerce issued orders imposing antidumping and countervailing duties on quartz surface products from China. These duties aimed to counteract unfair trade practices.
In September 2022, Cambria Company LLC, a domestic producer of quartz surface products, alleged that Superior was evading these duties. Cambria claimed that two Chinese companies were exporting quartz to Vietnam, where Kales Quartz Co., Ltd. (Kales) processed it before exporting it to Superior in the United States.
Customs acknowledged receipt of Cambria’s allegation in October 2022 and initiated an EAPA investigation. Customs then informed Superior of the investigation on January 26, 2023, along with interim measures.
Customs issued requests for information to Superior, Kales, and other companies. After receiving comments, Customs determined that Superior was importing quartz slab products from China “by undervaluation and/or transshipment through Vietnam.” Customs also applied an adverse inference against Kales and Strry, determining that all of Superior’s quartz slab products that entered the United States from Kales/Engga or Strry during the period of investigation were of Chinese origin. Superior requested an administrative review of Customs’ determination, which Customs’ Office of Trade, Regulations & Rulings Directorate affirmed.
Key Findings of the Court
The court’s decision can be summarized as follows:
1. Timeliness of the Investigation: The court agreed with Superior that Customs did not initiate the EAPA investigation within the 15-business-day deadline mandated by the EAPA statute. The court found that Customs’ interpretation of the “date of receipt” of the allegation, which allowed the agency to delay the start of the investigation, was contrary to the law.
The court stated that the statute clearly indicates that the Commissioner “shall initiate an investigation” within 15 days of receiving an allegation.
The court acknowledged that Customs received the EAPA allegation on September 8, 2022, and did not acknowledge receipt of the allegation until October 6, 2022, and did not initiate an investigation until October 28, 2022. The court concluded that Customs’ failure to meet the 15-day statutory deadline to initiate an investigation was contrary to the EAPA statute.
The court decided not to completely invalidate the investigation due to the missed deadline. Instead, the court decided to exercise its equitable powers and order that any entries entered after September 29, 2022 (the date on which the EAPA investigation should have been initiated under the statutory deadline) shall not be subject to any interim or final measures applying AD/CVD duties.
2. Notice of Investigation: The court also found that Customs violated Superior’s due process rights by not providing timely notice of the investigation. The court held that a “meaningful opportunity to be heard” should occur before the imposition of interim measures.
The court found that the regulation at 19 C.F.R. § 165.15(d)(1) is arbitrary, capricious, and not in accordance with law because the regulation does not provide an importer participating in an administrative proceeding with a procedural due process right to notice and a meaningful opportunity to be heard.
The court concluded that Customs’ failure to notify the importer promptly about the EAPA investigation deprived Plaintiff of notice and a meaningful opportunity to be heard before the temporary deprivation occurred. The court decided that any entries entered after September 29, 2022 shall not be subject to the cash deposit rate of 371.47% ad valorem interim measures applying AD/CVD duties, nor shall be subject to final measures due to the same lack of notice and a meaningful opportunity to be heard.
3. Evasion Determination: The court largely upheld Customs’ determination that Superior was evading duties. The court found that Customs’ determination was supported by substantial evidence.
The court stated that Customs properly applied an adverse inference against Kales/Engga and Strry by inferring that all of the subject merchandise that they exported to the United States during the period of investigation was of Chinese-origin. The court held that Customs’ adverse inference was in accordance with law and supported by substantial evidence.
The court also found that Customs’ determination that Kales/Engga and Strry failed to cooperate and comply to the best of their ability with Customs’ requests for information in multiple instances is supported by substantial evidence.
4. Adverse Inference and Cooperating Importer: The court rejected Superior’s argument that Customs improperly applied an adverse inference against Superior, a cooperating party, due to the non-cooperation of other entities. The court cited precedent that adverse inferences are not improper simply because they have a collateral impact on a cooperating party.
5. Other Claims: The court found that Superior had waived several other claims (Counts III, IV, V, and X) in its complaint because it did not provide arguments in support of them in its opening brief.
Implications of the Ruling
The ruling highlights the importance of procedural due process in trade investigations and the need for Customs to adhere to statutory deadlines. While Customs’ determination of evasion was largely upheld, the court’s findings of procedural violations will likely have implications for how Customs conducts EAPA investigations in the future.
The court’s decision to provide a remedy by excluding entries entered after September 29, 2022 from interim or final measures will likely have a financial impact on Superior.