CIT Judge Reif Hears Oral Arguments in EAPA Investigation Case Involving Classification Dispute
Court of International Trade Judge Timothy Reif heard oral arguments April 30 regarding an affirmative evasion finding for countertop importer Vanguard Trading Co. Among other things, the case challenges the strict liability standard CBP has established for importers regarding evasion and CBP’s ability to decide when it must seek scope clarification from the Commerce Department during EAPA investigations (Vanguard Trading Co. v. U.S., CIT # 23-00253).
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The importer’s counsel, David Craven, argued that when Vanguard entered its goods, “there was a legitimate question” as to whether they should have been entered as Type 01 or Type 03, and the importer’s decision to classify the imports as not subject to AD/CVD was “reasonable.”
Reif said that he’s “been around the trade revenue laws for a piece of change” and that, in his experience, there aren’t many cases that don’t see “a fair amount of contention over the scope or whether a good might be subject.”
“Won’t there always be what could be characterized as a good-faith disagreement?” he asked.
If so, he continued, in what cases could EAPA actually apply?
He asked if Craven was sure that Vanguard’s case posed an “unusual circumstance” regarding a scope dispute. Craven argued that Vanguard’s facts were unusual; most EAPA cases regard country-of-origin or transshipment disputes, he said.
“EAPA was really intended to address those situations where a company engaged in manufacturing operations outside of the country where the goods were being made, and in some way producing goods that evaded the scope,” Craven said. “And here, most of the issues that traditionally would be raised in EAPA are not present.”
Reif indicated he didn’t like the argument, saying that the statute “has fairly simple wording” that covers both classification and country-of-origin disputes and that he “was trained to look at the statute.”
He moved on to ask Gurian why the government hadn’t sought a remand when it had done so in another case involving Ikadan (see 2306130052). In that case, Commerce released a scope ruling 10 days prior to the close of an EAPA investigation that found only part of the products being investigated were in-scope. The government eventually chose to rely on CBP’s determination. The government’s attorney, Nico Gurian, said that in this case, the government determined that the evidence was substantial enough to support an evasion finding.
Vanguard sought a scope ruling itself after being unable to convince CBP to seek one. The department issued one “long” after the evasion determination was made by CBP's Trade Remedy Law Enforcement Directorate and affirmed in the agency’s appeals process, the government’s attorney, Nico Gurian, said. Vanguard has sought to have the ruling -- which determined some of its products were in scope, but others weren’t “if the lab tests were to support that” -- placed on the record (see 2406240048).
Craven argued that CBP’s refusal to seek scope clarification from Commerce hadn’t been reasonable.
“It is our position that in a situation such as this, where there is a legitimate, substantial dispute as to scope, that … Customs cannot reasonably determine that it can make the decision,” he said.
Reif said that CBP is allowed independently to determine whether or not it should seek a scope ruling from Commerce. He explained he was “troubled” because he couldn’t “see the limit” to Craven’s argument.
If CBP is “required to seek this advice [from Commerce] whenever there’s a disagreement over the scope,” he said, “what line can you give the court that would enable us to decide in your favor without opening a hole that’s big enough to drive a 747 through?”
Craven also argued that CBP’s regulatory guidance instructed that any other interested parties could also seek scope rulings from Commerce. But this was “essentially rendered moot” if EAPA investigations weren’t suspended while the department fulfilled such scope ruling requests, he said.
“Your client could have sought a scope ruling from Commerce at any point,” Reif said.
Craven agreed, saying that they “were trying not to overly complicate the record.” He said that “in retrospect, they would probably do something differently.”
The parties also discussed a conflict over certain lab tests on the record. The lab test results Vanguard submitted couldn’t conclusively be ruled to have tested the products Vanguard imported, which meant they couldn’t be considered reliable, Reif said.
Craven said that they “believe those tests were reliable because they were tests of the same series of products.” They didn’t have actual tests for the imports under investigation, but that was “because by the time this case arose, the goods had all been distributed,” he said.
Gurian said that, first, the issue was moot. He also said no information links the test results’ lab report to the subject merchandise; the report doesn’t provide adequate identifying information, and nothing explains why the report described a different chemical composition for Vanguard’s products than did the patent Vanguard initially filed for those products.
Craven argued that the lab reports show that the products didn’t necessarily always contain the same chemical composition as appeared in the patent, as the lab testing had shown.