Two weeks ago, the U.S. Court of International Trade issued its first opinion regarding U.S. Customs & Border Protection’s relatively recent practice of requiring single transaction bonds of importers at the “all others” rate in effect for specific antidumping duty orders, where the agency believes that there is a significant risk that the importer is not paying appropriate duties at the time of entry. The opinion was a victory for both CBP and domestic industry petitioners in antidumping cases, affirming the agency’s right to require such bonds and finding that CBP had, in the case before the court, adequately demonstrated the rationale for requiring the bond.
Last week, the Court issued an opinion in a second case challenging a CBP decision to require single transaction bonds, but this time, it found that CBP failed to adequately demonstrate the need for such bonds. The difference in the results of the two opinions appears to be due to the nature of the evidence that CBP presented to the court, as well as to the nature of risk that CBP identified.
The first case involved garlic imported from China, which was accompanied by incomplete and/or apparently unofficial phytosanitary certificates. Based on the documentation that the importer itself provided at the time of entry—as well as the fact that the purported producer of the garlic had not shipped to the United States in a number of years—CBP found that there was a significant risk that the garlic was not actually being obtained from the claimed producer.
Last week’s case involved imports of magnesia carbon bricks. Such bricks, when produced in China, are subject to antidumping duties. The importer, however, claimed that the bricks were from Vietnam. CBP suspected otherwise, and required the importer to post single transaction bonds in amounts equal to the “all others” rate that would be due on goods from China. The importer provided information to CBP in an effort to prove the origin of the bricks, but CBP continued to require the enhanced bonds because of an ongoing criminal investigation of the importer and its management for transshipment and fraudulent entry of Chinese bricks.
The Court rejected CBP’s requirement of single transaction bonds, finding that CBP had not actually placed any documentation or evidence regarding wrongdoing on the record before the Court. Rather, the record contained only vague references to such an investigation. Further, the record did not suggest that CBP even had access, at the time of its decision to require the bonds, to the evidence upon which any such investigation had been founded. Given the nature of the record, the Court found that CBP’s decision to require special bonds was arbitrary.
The difference between the outcomes of the two cases highlights the degree to which the nature of the evidence presented to the court controls the outcome of the court’s review. The court must review CBP’s action to determine whether it is arbitrary and capricious; if the agency cannot provide the materials upon which it based its determination to require enhanced bonding, it is difficult for the court will be able to conclude that the agency action is not arbitrary. But as a law enforcement agency, CBP is reluctant to jeopardize ongoing or future criminal investigations by alerting the public –to its investigation methods or activities.
It is possible that CBP could have provided the Court with evidence in camera or under seal that would have been sufficient to show that the decision to require enhanced bonding was reasonable. Likewise, the agency may be able to develop methods—similar to those employed by its sister agencies the Department of Commerce and the International Trade Commission— to permit the limited release of “confidential information” under a judicial protective order. But if it cannot navigate a path forward for presenting the court with the evidence underlying its decisions, it may not be able to justify those decisions going forward.