United States Court of International Trade

Complaint Dismissed where Plaintiff Failed to Exhaust Administrative Remedies

In Ceramark Technology, Inc. v. United States, Court No. 13-357, Slip Op. 15-40 (May 1, 2015), the court considered whether Plaintiff Ceramark Technology, Inc. (“Ceramark”), failed to exhaust administrative remedies by not commenting on Commerce’s findings on remand.  Prior to remand, in its initial decision, the U.S. Department of Commerce (“Commerce”) determined that Plaintiff, had circumvented the antidumping duty order on small diameter graphite electrodes (“SDGE”) from the People’s Republic of China (“PRC”), which covers “all [SDGE] of any length, whether or not finished, of a kind used in furnaces, with a nominal or actual diameter of 400 millimeters (16 inches) or less . . . .” SDGE Order, 74 Fed. Reg. at 8775.  Commerce determined, pursuant to § 781(c) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1677j(c) (2012), that 17-inch graphite electrodes constituted a circumventing minor alteration of the order.

Ceramark challenged this decision as not in accordance with law and unsupported by a reasonable reading of the record evidence.  The court agreed in part, and remanded, ordering Commerce to consider important aspects of the record that weighed against Commerce’s determination. On remand, Commerce again found that 17-inch graphite electrodes constituted a circumventing minor alteration, and plaintiff did not file any comments regarding Commerce’s findings, claiming to do so would be futile. The court disagreed and found that plaintiff was required to exhaust administrative remedies by commenting on the findings.  According to the court, Plaintiff was required to comment on new factual findings, and any new evidence provided under the redetermination.  While Commerce still might not have agreed with Ceramark’s arguments on remand, there was no excuse for not exhausting all administrative remedies.  For these reasons, the court dismissed Plaintiff’s complaint for failing to exhaust administrative remedies.

Remand Results Sustained

Navneet Publications (India) Ltd. et al. v. United States, Court No. 13-204, Slip Op. 15-41, came before the court on a remand determination.  In the court’s previous decision, the court remanded U.S. Department of Commerce’s decision because (1) Commerce justified the all-others rate partly on the basis of the low number of individually investigated companies (Commerce chose only 2 out 57 possible respondents), which was a product of Commerce’s own decision-making, and (2) Commerce failed to corroborate the rate with economic reality. Navneet Publ’ns (India) Ltd. v. United States, 38 CIT __, __, 999 F. Supp. 2d 1354, 1362–66 (2014). The court issued a remand based on two sets of facts: first, the all-others rates in the past four reviews were between one and four percent, and correlated closely with the rates for individually investigated respondents. Id. at 1364–65. Second, comparing the two selected respondents’ average unit values to those of six all-others respondents suggested that the six respondents should have lower rates. On remand, Commerce provided a new all-others rate together with a reasonable explanation of that rate. 

Instead of relying on a shortage of information from individually investigated companies to provide an all others rate, Commerce based the .5% rate, on the behavior of the uncooperative companies. Commerce assumed that the companies’ failure to cooperate was a rational choice, that is, that the companies would have cooperated if cooperation would yield them a lower rate.  Such an assumption has been supported by precedent from the Federal Circuit, as well as by prior opinions of this court. Commerce also reasoned that, had Commerce selected one or more uncooperative companies for individual investigation, the agency would have established an all-others rate above de minimis. 19 U.S.C. § 1673d(c)(5)(A). Therefore, a rate of 0.5%, above de minimis, was appropriate.

Other District Courts

Bad False Claims Act Complaint Dismissed

Strangers to an importing company must do substantially more than play “armchair detective” in order to make out a plausible complaint that the company is violating the False Claims Act, according to a recent decision by the U.S. District Court for the Eastern District of Pennsylvania.

In United States ex rel. Customs Fraud Investigations Inc. v. Victaulic Company, Court No. 13-1983 (April 10, 2015), the Court held that Customs Fraud Investigations (CFI), described as company that “conducts confidential research and analysis related to potential Customs fraud”, had failed to raise plausible in a First Amended Complaint (FAC) that Victaulic, a producer and importer of pipe fittings, had imported unmarked or improperly marked pipe fittings in a way that violated the Tariff Act and the “reverse false claims” provision of the False Claims Act.  The Court had previously dismissed CFI’s whistleblower case, and now held that letting the company re-plead its claim would be “futile” and “inequitable”.

CFI’s claims were based on import statistics, showing that Victaulic imported a substantial amount of pipe fittings from Poland and China, and a series of photographs from eBay, which, according to CFI, demonstrated that Victaulic was not marking its fittings in one of the methods required by the Customs regulations. CFI had also purchased a few unmarked pipe fittings through eBay, and introduced a statement from a customer who claimed to have received unmarked Victaulic pipe fittings in a box which contained a foreign packing list.

The claims failed on several grounds, the Court held. First, a failure to pay marking duties does not constitute a violation of the FCA, since marking duties are not an obligation owed to the government which an importer evades through failure to mark. Rather, marking duties arise after importation, if Customs determines that the goods are not lawfully marked, and are not the result of a false entry. Second,  CFI’s investigative methodology was unreliable, as several of the photographs it used in its study were unclear, did not show possible locations where markings might appear, and in one case, showed a pipe fitting not made by Victaulic. As eBay is a secondary market fueled by many different distribution channels, there is no evidence that fittings sold there were initially intended for the United States market in any case. Nor had CFI furnished any evidence that a failure to mark was part of an intentional effort by Victaulic to pass off foreign-made pipe fittings as “Made in USA”.

In addition, the FAC failed to plead fraud with the level of particularity required by the Federal Rules of Civil Procedure, another reason for dismissing its claim.

The Court noted that CFI was a stranger to Victualic, trying to plead its whistleblower case on the basis of external, and ultimately unreliable, information. Many “reverse False Claims Act” cases are brought by current or former insiders, who witnessed or even participated in the alleged frauds.