Skyview Cabinet USA, Inc. v. United States , 2023 CIT 91 ( 2023 )

Slip Op. No. 23-91
UNITED STATES COURT OF INTERNATIONAL TRADE
SKYVIEW CABINET USA, INC.,
Plaintiff,
v.
Before: Stephen Alexander Vaden,
UNITED STATES,
Judge
Defendant,
Court No. 1:22-cv-00080
and
MASTERBRAND CABINETS, INC.,
Defendant-Intervenor.
OPINION
[Sustaining Customs’ Final Determination of evasion.]
Dated: June 20, 2023
Kyl J. Kirby, Attorney and Counselor at Law, of Fort Worth, TX, for Plaintiff Skyview
Cabinet, Inc.
Ioana Cristei, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, for Defendant United States. With her
on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General;
Patricia M. McCarthy, Director; and Tara K. Hogan, Assistant Director, Commercial
Litigation Branch. Of counsel on the brief were Joseph F. Clark and Eric Brekke,
Attorneys, Enforcement and Operations Office of the Chief Counsel, U.S. Customs
and Border Protection.
Timothy C. Brightbill, Wiley Rein LLP, of Washington, DC, for Defendant-Intervenor
MasterBrand Cabinets, Inc. With him on the brief was Laura El-Sabaawi.
Court No. 1:22-cv-00080 Page 2
Vaden, Judge: Plaintiff Skyview Cabinet, Inc. (Skyview) comes before the
Court to challenge U.S. Customs and Border Protection’s (CBP or Customs) Final
Determination of Evasion (Final Determination) and the agency’s subsequent
Administrative Review affirming that determination (the Administrative Review).
See Notice of Determination as to Evasion, EAPA Cons. Case Number 7553 (Sep. 16,
2021); Admin. Rev. Case Number H321677 (Jan. 28, 2022), J.A. at 3,071-086, ECF
No. 32. In its Motion for Judgment on the Agency Record, Plaintiff argues that
Commerce’s finding of evasion was unlawful insofar as it failed to comply with
various procedural requirements set out by the Enforce and Protect Act (EAPA), 19
U.S.C. §1517. See generally Pl.’s Br., ECF No. 30. Plaintiff alleges that Customs did
not support its findings with substantial evidence, unlawfully applied adverse
inferences, failed to confer with Commerce as the statute requires, violated Skyview’s
due process rights, shifted the burden of proof onto Skyview contrary to the statute,
and unlawfully admitted hearsay into evidence. Id. at 11-36. For the reasons set
forth below, Plaintiff’s Motion for Judgment on the Agency Record is DENIED; and
Customs’ determinations are SUSTAINED.
BACKGROUND
The Department of Commerce (Commerce) issued antidumping and
countervailing duty orders on wooden cabinets and vanities (WCV) from China
(Orders) on April 21, 2020. Wooden Cabinets and Vanities and Components Thereof
from the People’s Republic of China: Antidumping Duty Order, 85 Fed. Reg. 22,126Court No. 1:22-cv-00080 Page 3
(Apr. 21, 2020); Wooden Cabinets and Vanities and Components Thereof from the
People’s Republic of China: Countervailing Duty Order, 85 Fed. Reg. 22,134 (Apr. 21,
2020). On October 13, 2020, MasterBrand Cabinets, Inc. (MasterBrand) filed an
allegation of evasion and request for an investigation under EAPA against Skyview.
MasterBrand Allegation 1-14, Exs. 1-9, J.A. at 80,157-243, ECF No. 33. MasterBrand
also included a request that certain information, such as photographs and the
identity of some persons named in the allegation, be treated as confidential under 19
C.F.R. § 165.4(a). Id. at 12. Pursuant to the regulation, MasterBrand also submitted
a public version of its allegation, including a summary of the redacted content. Id.MasterBrand alleged that Skyview had “imported Chinese cabinets subject to the
Orders from Rowenda Kitchen . . . that [had] been transshipped from China through
Malaysia and to the United States to evade the Orders.” Id. at 1-2. MasterBrand
further alleged that the subject imports had not been manufactured by Rowenda
Kitchen, as Skyview claimed, but that Rowenda Kitchen was merely a transshipment
facility. Id. To support its allegations, MasterBrand provided Customs with trade
and shipping data illustrating significant changes in the shipping patterns of
merchandise covered by the Orders since Commerce imposed those tariffs. Id. at 6.
The data showed a decrease in Chinese wooden vanity and cabinet imports of 37%
from 2018 to 2019 and 64% from January to July 2020 with a simultaneous increase
of 81% from 2018 to 2019 and 164% from January to July 2020 of imports of the
subject merchandise from Malaysia to the United States. Id. at 6-8, Exs. 6-7. It also
showed that there had been a notable increase in the amount of covered merchandise
Court No. 1:22-cv-00080 Page 4
being shipped from China into Malaysia during the relevant time. Id. at 8. To further
support its allegation, MasterBrand included bill of lading data from Rowenda
Kitchen’s imports from 2019-2020, showing that the company had only begun
importing wooden vanities and cabinets the same month that Commerce had imposed
provisional measures during the dumping investigation. Id. at 8, Ex. 3.
Finally, MasterBrand provided data collected by a third-party market
researcher who visited the alleged Rowenda Kitchen manufacturing facility in
Malaysia. The researcher collected statements from Rowenda Kitchen’s owners and
employees attesting to the limited capabilities of the facility and describing it as a
transshipment operation. Id. at 9-10, Ex. 9. Photos of the alleged manufacturing
facility included in the researcher’s report showed that “there was only minor
equipment in the factory, such as tables for holding doors or paint sprayers, but no
equipment that indicated that there was manufacturing or significant assembly of
cabinets or cabinet parts.” Id. at 10, Attach. A. Although the photos were redacted
as business confidential, the narrative descriptions of what those photos depicted
were included in the public version. MasterBrand Allegation at 10, J.A. at 1,163,
ECF No. 32 (public version of MasterBrand’s allegation providing detailed narrative
description of what the redacted photos depict and how they support the allegation of
evasion). On October 22, 2020, Customs acknowledged receipt of MasterBrand’s
“properly filed EAPA allegation,” and on November 13, 2020, it initiated an
investigation of Skyview under the authority of 19 U.S.C. §1517(b)(1). Initiation
Memo at 1-4, J.A. at 80,421-423, ECF No. 33.
Court No. 1:22-cv-00080 Page 5
On November 24, 2020, Customs sent Skyview a CF-28 Request for
Information regarding the subject entries. CF-28 Req., J.A. at 80,451-454, ECF No.
33. Skyview responded to that request with documentation regarding the origin of
the merchandise in question on December 18, 2020; January 28, 2021; and February
7 and 9, 2021. Skyview RFI Resp., J.A. at 80,514-529, 80,666-673, 80,694-768, ECF
No. 33. In its responses, Skyview provided Customs with information about and
photographs of the alleged Malaysian manufacturer, Rowenda Kitchen. Id. On
February 19, 2021, Customs sent Skyview a Notice of Initiation stating that, “based
on a review of available information, CBP has determined that there is reasonable
suspicion of evasion” and informing the company that it would be imposing interim
measures against it. Notice of Initiation at 2, J.A. at 80,789, ECF No. 33. Customs
then sent Skyview a request for information related to the agency’s country-of-origin
analysis on March 15, 2021, to which Skyview responded on April 8, 2021. Req. for
Information (RFI) at 1-4, J.A. at 80,939-953, ECF No. 33; Skyview RFI Resp. at 1-99,
J.A. 80,994-81,092, ECF No. 33. In its response, Skyview stated that its “local contact
visited the [Malaysian] manufacturer to verify their capacity” and that “the
manufacturer also certified that their products are solely made locally and
government officials can produce country of origin for their products.” Skyview RFI
Resp. at 3-4, J.A. at 80,996-997, ECF No. 33.
On March 15, Customs sent a request for information to the alleged
manufacturer, Rowenda Kitchen, stating that the deadline for a response was March
29, 2021. Final Determination, J.A. at 81,615, ECF No. 33. After receiving no
Court No. 1:22-cv-00080 Page 6
response from Rowenda Kitchen, Customs offered to extend the deadline to April 7,
2021. Id. Rowenda Kitchen responded by stating that it had not received the initial
communication, suggesting that it may have gone to its “junk mail” folder. It
requested an additional extension. Id. Customs granted the request, extending the
deadline to April 12, 2021. Id. Customs then issued a supplemental information
request to Skyview on April 12, 2021. Suppl. RFI, J.A. at 2,250-256, ECF No. 32. In
that request, Customs asked for additional information about Skyview’s “local
contact” and verification of that person’s visit to the alleged Malaysian manufacturer.
Id. at 2,255. Customs also identified numerous questions from the prior request that
Skyview failed to answer and repeated its need for the missing information. Id.Skyview provided a timely response to the supplemental request on April 23, 2021.
Skyview Suppl. RFI Resp. at 1-36, J.A. at 81,407-442, ECF No. 33. However,
Skyview’s response again failed to provide the missing requested information. Final
Determination, J.A. at 81,618 n.36, ECF No. 33.
On June 7, 2021, Skyview voluntarily submitted additional information for the
agency’s review. Skyview Voluntary Submission, J.A. at 2,504-530, ECF No. 32.
Skyview modified its claims and now presented evidence for the first time that the
subject imports had been manufactured by or in conjunction with a different
company, Roxy Heritage Furniture Manufacturer SDN (“Roxy”). Id. at 2,516. Along
with the new documents, Skyview offered the following explanation:
Skyview has made progress in documenting a complicated
supply chain of Rowenda Kitchen . . . . Even with the
extension, there are [sic] not sufficient time to complete the
process. However, Skyview has learned additional
Court No. 1:22-cv-00080 Page 7
information pertaining to its relationship with Rowenda as
provided Kian Hong Ong. The cabinets in question were
produced in Malaysia in conjunction with Roxy Heritage
Manufacturer SDN. BHD. as demonstrated in the
attached.
Id. at 2,507. Meanwhile, despite numerous requests for information and extensions
of deadlines, Rowenda Kitchen failed to respond to any of Customs’ inquiries or
provide any documentation whatsoever. Final Determination, J.A. at 81,615, ECF
No. 33.
On June 24, 2021, MasterBrand submitted comments on Skyview’s voluntary
submission, arguing that Customs should disregard that evidence and instead “rely
on adverse inferences in making a final determination of evasion” because the alleged
manufacturer, Rowenda Kitchen, “did not submit a response to CBP’s request for
information and has refused to participate with the agency in this investigation.”
MasterBrand Comments at 2, J.A. at 81,515, ECF No. 33. Skyview then submitted
its written case brief, responding to the allegations made by MasterBrand and to
Customs’ Notice of Initiation. Skyview Agency Case Br., J.A. at 2,878-904, ECF No.
32. MasterBrand submitted its case brief on July 1, 2021. MasterBrand Agency Case
Br. at 1, J.A. at 81,555-581, ECF No. 33. On July 15, 2021, pursuant to 19 C.F.R. §
165.2(b), both parties submitted responses to the other party’s arguments. Skyview
Resp. Br., J.A. at 2,907-933, ECF No. 32; MasterBrand Resp. Br., J.A. 2,936-962, ECF
No. 32.
On September 16, 2021, CBP published its Final Determination, finding that
there was “substantial evidence” supporting the allegations of evasion. See Final
Court No. 1:22-cv-00080 Page 8
Determination, J.A. at 81,612-626, ECF No. 33. The Final Determination explained
that “[t]hose changes in general country trade patterns and in the specific shipment
activity of Rowenda Kitchen, and the statements in the affidavit . . . that observed
that company’s facilities” coupled with the fact that “none of the Importers provided
the requested production records . . . is applicable in CBP’s final determination with
regard to whether substantial evidence exists of evasion.” Id. at 81,617. Customs
explained that “Rowenda Kitchen’s failure to cooperate and comply to the best of its
ability to CBP’s information requests leads CBP to rely on evidence otherwise on the
record regarding identification of the country of origin of merchandise Rowenda
Kitchen shipped to the Importers.” Id. In its analysis of the evidence offered by
Skyview, Customs found that “the existence of various discrepancies and omissions
with respect to the RFI responses . . . also call into question the accuracy of
information provided[.]” Final Determination, J.A. at 81,618, ECF No. 33.
Customs specified the discrepancies that the agency observed in Skyview’s
submissions in a related footnote. Id. at n.36. First, Customs recalled that Skyview’s
initial response claimed that the company had sent a “local contact” to visit the
manufacturer in order to “verify their capacity” and review their “manpower,
machines, and raw material[s].” Skyview RFI Resp. at 3-4, J.A. 80,996-997, ECF No.
33. However, when Customs requested evidence of the alleged visit in its
supplemental questionnaire, Skyview “only provided documentation that appears to
refer to airline itineraries, none of which even mention Rowenda Kitchen or its
specific location, let alone its operations.” Final Determination, J.A. at 81,618 n.36,
Court No. 1:22-cv-00080 Page 9
ECF No. 33; see Skyview Suppl. RFI Resp. at Attach. 1, J.A. 81,409-413, ECF No. 33.
Second, Customs highlighted that, in its initial March 15, 2021 request, it had asked
Skyview for various accounting documents and records from 2019 and 2020; Skyview
ignored that request. Final Determination, J.A. at 81,618 n.36, ECF No. 33. When
Customs repeated its records request on April 12, 2021, Skyview offered
documentation that was “unresponsive to CBP’s request[,]” including an unsigned tax
return that was unverifiable. Final Determination, J.A. at 81,618-619 n.36, ECF No.
33; see Skyview Suppl. RFI Resp. at Attach. 4, J.A. at 81,431-434, ECF No. 33.
Finally, Customs noted that, in its initial response, Skyview also failed to provide a
requested purchase order and, after subsequent requests, sent what “appears to be a
spreadsheet” including only “two columns of data for which Skyview provided no
explanation.” Final Determination, J.A. at 81,619 n.36, ECF No. 33; see Skyview
Suppl. RFI Resp. at Attach. 6, J.A. 81,435-436, ECF No. 33. Although the agency
observed that “it might be appropriate to apply adverse inferences to Skyview given
the potentially fraudulent ‘certifications’ submitted by its counsel,” it stated that
“CBP is not making an adverse inference against Skyview in this case.” Final
Determination, J.A. at 81,624, ECF No. 33. Instead, CBP chose to apply adverse
inferences solely against the unresponsive alleged manufacturer, Rowenda Kitchen.
Id.Skyview made a timely request for administrative review of the Final
Determination. See 19 U.S.C. § 1517(f)(1); 19 C.F.R. §165.41(a); Skyview Req. for
Admin. Rev. at 1, J.A. at 2,994, ECF No. 32. In its request, Skyview argued that the
Court No. 1:22-cv-00080 Page 10
Final Determination should be reversed because (1) Skyview had provided adequate
evidence to support its claim that the imported merchandise had been manufactured
in Malaysia but that “CBP disregarded evidence that Skyview submitted throughout
the EAPA investigation”; (2) the application of adverse inferences against Skyview
was unlawful; and (3) any outstanding questions regarding the country-of-origin
analysis should have been referred to Commerce. Skyview Req. for Admin. Rev. at
3-4, J.A at 3,002-003, ECF No. 32. MasterBrand submitted its response on November
16, 2021, arguing that the Final Determination was in compliance with the statute
and should therefore be affirmed. MasterBrand Resp. to Req. for Admin. Rev. at 1-
25, J.A. at 81,628-659, ECF No. 33. On January 28, 2022, Customs’ Office of Rules
and Regulations affirmed the Final Determination based on its determination that
“the evidence of evasion here is cumulative and substantial” and “Skyview failed to
provide adequate and reliable evidence that the WCV it imported into the United
States were manufactured in Malaysia.” Admin. Rev. at 8, J.A. at 3,078, ECF No. 32.
Skyview timely filed the present action on March 10, 2022, challenging
Customs’ affirmative Final Determination of evasion and the administrative review
affirming that determination. See Compl. ¶¶ 26-75, ECF No. 2. In its brief before
this Court, Skyview alleged that Customs failed to support its Final Determination
with substantial evidence, unlawfully applied an adverse inference against it, failed
to confer with Commerce in its country-of-origin analysis, unlawfully shifted the
burden of proof onto Skyview, violated Skyview’s due process rights, and permitted
prohibited hearsay evidence onto the record. Pl.’s Br. at 11-37, ECF No. 30. The
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Government submitted its response brief on October 2, 2022; and Defendant-
Intervenor MasterBrand submitted a response brief in support of Customs’ final
determination on October 5, 2022. Def. Resp. Br., ECF No. 25; Def. Int. Resp. Br.,
ECF No. 27.
The Court held oral argument on March 30, 2023. ECF No. 39. In particular,
the Court asked what factors Customs must consider in deciding whether and how to
verify record evidence and what factors the agency considered in this case when
making that determination. Oral Arg. Tr. at 19:6-25–20:1-4, ECF No. 40. Counsel
for Skyview conceded that his client does not dispute the accuracy of the aggregate
data MasterBrand proffered and on which Customs relied in its analysis. Id. 42:23-
25–43:1-10. Skyview also agreed that the merchandise in question would be in scope
if manufactured in China, leaving the only contested issue whether the goods were of
Chinese or Malaysian origin. Id. at 43:11-19. Counsel finally confirmed that
Skyview’s “local contact” who had been sent to visit the Malaysian manufacturing
facility provided no work product supporting the claim that the facility manufactured
the merchandise in question. Id. at 52:3-25–53:1-13.
JURISDICTION AND STANDARD OF REVIEW
This Court has jurisdiction pursuant to 19 U.S.C. § 1517(g) and 28 U.S.C. §
1581(c). Under the Enforce and Protect Act, the reviewing court must examine
Customs’ final determination, see 19 U.S.C. § 1517(c), and administrative review, see
id. § 1517(f). Id. § 1517(g) (providing for court review of both determinations). In its
review of Customs’ determinations, the Court examines “whether any determination,
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finding, or conclusion is arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.” Id. § 1517(g)(1)-(2). Agency action constitutes an abuse of
discretion “where the decision is based on an erroneous interpretation of the law, on
factual findings that are not supported by substantial evidence, or represents an
unreasonable judgment in weighing relevant factors.” Star Fruits S.N.C. v. United
States, 393 F.3d 1277, 1281 (Fed. Cir. 2005). Where the agency “offers insufficient
reasons for treating similar situations differently,” such actions are arbitrary. SKF
USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001) (quoting Transactive
Corp. v. United States, 91 F.3d 232, 237 (D.C. Cir. 1996)).
In reviewing agency action, it is “the duty of the courts to determine in the final
analysis and in the exercise of their independent judgment, whether on the whole
record the evidence in a given instance is sufficiently substantial to support a finding,
conclusion, or other agency action as a matter of law.” Nippon Steel Corp. v. United
States, 458 F.3d 1345, 1351-52 (Fed. Cir. 2006) (citations omitted). Substantial
evidence “means such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229
(1938) (citations omitted).
DISCUSSION
I. Summary
Plaintiff contends that numerous errors in Customs’ investigation were
“arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the
law,” requiring this Court to remand the agency’s determination. Pl.’s Br. at 1-2, ECF
Court No. 1:22-cv-00080 Page 13
No. 30. Plaintiff alleges the following errors: (1) Customs failed to support its finding
that the subject imports were “covered merchandise” at the time of entry; (2) Customs
unlawfully applied adverse inferences against Skyview; (3) Customs failed to confer
with Commerce in making its country-of-origin assessment, contrary to its statutory
obligation to do so; (4) Customs unlawfully shifted the burden of proof onto Skyview;
(5) Customs violated Skyview’s due process rights by not giving Skyview access to
certain confidential information; and (6) Customs unlawfully considered hearsay. Id.The Court considers each of these arguments in turn.
Based on an assessment of both Customs’ Final Determination of Evasion and
its Administrative Review, the Court finds that Plaintiff’s complaints are without
merit. Contrary to Skyview’s contentions, Customs thoroughly reviewed and
discussed the evidence submitted by the parties; and substantial evidence supports
its conclusions. See Final Determination, J.A. at 81,616-617, ECF No. 33; Admin. Rev.
at 8-15, J.A. at 3,078-085, ECF No. 32. Despite numerous agency requests for
information, Skyview failed to provide support for its claim that the imported
merchandise was manufactured in Malaysia. Final Determination, J.A. at 81,618
n.36, ECF No. 33. The gap left by this failure, combined with the adverse inference
drawn against the alleged manufacturer Rowenda Kitchen for its refusal to provide
any of the requested information, led Customs to conclude that the record as a whole
supported the allegation of evasion. Id. Although Customs redacted the adverse
photos and videos of Rowenda Kitchen’s Malaysia facility as business confidential
information, Skyview was on notice that it needed to provide evidence that actual
Court No. 1:22-cv-00080 Page 14
manufacturing occurred in Malaysia; and Skyview had numerous opportunities to
present contrary evidence refuting the allegation. Id. Furthermore, in its briefs
before the agency and this Court, Skyview does not challenge the accuracy of the
aggregate statistical evidence suggesting a pattern of transshipment following the
imposition of duties on Chinese cabinets. See Pl.’s Br., ECF No. 30 (containing no
challenge to the accuracy of evidence against it); see also Admin. Rev. at 10, J.A. at
3,080, ECF No. 32 (observing that Skyview placed no challenge to the accuracy of the
evidence of evasion onto the record). Skyview’s repeated failure to demonstrate that
any actual manufacturing occurred in Malaysia combined with the evidence
submitted by MasterBrand led to Customs’ evasion finding. See Final Determination,
J.A. 81,612-626, ECF No. 33; Admin. Rev. at 9, J.A. at 3,079, ECF No. 32 (“CBP found,
based upon direct and circumstantial evidence in the administrative record, that
neither Rowenda nor any company in Malaysia had the capacity to produce the
WCV.”).
II. Legal Framework Under EAPA
EAPA calls upon Customs to investigate allegations of evasion. The statute
defines evasion as:
[E]ntering covered merchandise into the customs territory
of the United States by means of any document or
electronically transmitted data or information, written or
oral statement, or act that is material and false, or any
omission that is material, and that results in any cash
deposit or other security or any amount of applicable
antidumping or countervailing duties being reduced or not
being applied with respect to the merchandise.
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19 U.S.C. § 1517(a)(5)(A). “Covered merchandise” is any imported merchandise that
is subject to an antidumping or countervailing duty order. Id. § 1517(a)(3)(A)-(B).
Transshipment — where goods are manufactured in one country and imported
through an intermediary country to evade duties imposed on goods originating from
the manufacturing country — is one example of evasion under EAPA. See CEK Grp.
LLC v. United States, No. 22-00082, 2023 CIT LEXIS 69, at *10 (CIT May 2, 2023)
(discussing a transshipment operation as evidence of evasion under EAPA).
Allegations of evasion may be filed with Customs by any interested party (as
defined by the statute) and are to be “accompanied by information reasonably
available to the party that filed the allegation.” 19 U.S.C. § 1517(b)(2)(B). Once an
allegation of evasion has been submitted, Customs must conduct an investigation
within fifteen days if it finds that the allegation and accompanying information
“reasonably suggest[] that covered merchandise” has been brought into the United
States through evasion. Id. § 1517(b)(1). If Customs receives an allegation of evasion
and it is unable to determine whether the questioned merchandise is within the scope
of the relevant order, the agency will refer the question to the Commerce Department
for a final determination of that issue. Id. at § 1517 (b)(4)(A); 19 C.F.R. § 165.16.
Customs issues a final determination as to whether evasion has occurred
“based on substantial evidence” within three hundred days of the investigation’s
initiation. 19 U.S.C. § 1517(c). Within thirty business days of Customs’
determination, a party found to have entered covered merchandise through evasion,
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or any interested party that filed an allegation, may file an appeal for a de novo
administrative review. 19 U.S.C. § 1517(f).
III. Substantial Evidence Determination
Skyview claims that substantial evidence does not support Customs’ finding
that the subject imports constitute “covered merchandise.” Pl.’s Reply Br. at 1-6, ECF
No. 31. It alleges that “CBP clearly did not consider ‘relevant facts and observations’”
but rather “simply believed that it ‘was confronted with evidence of basic
transshipments[.]’” Id. at 1-2 (quoting Admin. Rev. at 8, J.A. at 3,078, ECF No. 32).
Furthermore, Skyview asserts that any discrepancies in the record that did exist were
reasonably explainable and thus not fatal to its position. Id. at 3-6. The Government
argues that the Final Determination should be affirmed because “[t]he information
Skyview provided failed to overcome the substantial evidence demonstrating evasion,
and thus CBP reasonably concluded that the covered merchandise entered the United
States through evasion[.]” Def.’s Resp. Br. at 17, ECF No. 25.
Skyview misinterprets the substantial evidence standard and what it requires.
Namely, Skyview ignores that the “possibility of drawing two inconsistent
conclusions from the evidence does not preclude the agency’s finding from being
supported by substantial evidence.” Jacobi Carbons AB v. United States, 222 F. Supp.
3d 1159, 1168 (CIT 2017) (citations omitted). Here, Customs acted within its
discretion to determine which of the parties’ claims was more compelling based on an
assessment of whose evidence was more credible and reliable. Customs’ finding that
Skyview’s evidence was replete with contradictions, omissions, and inconsistencies is
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a valid basis on which to determine that its submissions were not credible and that
the record as a whole supported the allegations against it. Final Determination, J.A.
at 81,618 n.36, ECF No. 33 (identifying each piece of evidence that was missing or
inconsistent in each of Skyview’s submissions). A determination where the agency
“favor[s] one conclusion over the other is the epitome of a decision that must be
sustained upon review for substantial evidence.” Elbit Sys. of Am., LLC v. Thales
Visionix, Inc., 881 F.3d 1354, 1356 (Fed. Cir. 2018) (quoting In re Cree, Inc., 818 F.3d
694, 701 (Fed. Cir. 2016)).
As Customs observed in its Administrative Review, “Skyview does not dispute
the accuracy” of the evidence submitted by MasterBrand and “makes no arguments
to refute the statements of transshipment declared by the third-party investigator.”
Admin. Rev. at 10, J.A. at 3,080, ECF No. 32. At oral argument, Plaintiff’s counsel
confirmed that Skyview did not dispute the accuracy or truthfulness of the aggregate
statistical data — critical pieces of evidence that Customs found compelling in its
investigation. Oral Argument Tr. at 41:14-25–43:1-10, ECF No. 40 (responding “The
aggregate data, it is what it is . . . .” to the Court’s summary of the data before the
agency). Instead, Plaintiff simply alleges, without specific examples, that the
agency’s determination was unsupported. See Pl.’s Reply Br. at 2-3, ECF No. 31.
Skyview’s claims that Customs failed to investigate the discrepancies that it
found and that the discrepancies that did exist were minor are equally without merit.
See Pl.’s Br. at 15, ECF No. 30. Customs specifically identified the discrepancies and
omissions that it deemed fatal to the Plaintiff’s case and explained what gaps
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Skyview’s evidence left in substantiating its arguments. See Final Determination,
J.A. at 81,624, ECF No. 33; Admin. Rev. at 8, J.A. at 3,078, ECF No. 32. In the Final
Determination, Customs stated that Skyview’s responses “do not contain production
information demonstrating that the WCV that . . . Skyview imported from Rowenda
Kitchen was produced in Malaysia” and that “the existence of various discrepancies
and omissions with respect to the RFI responses . . . also call into question the
accuracy of information provided[.]” Final Determination, J.A. at 81,618, ECF No.
33. Customs then included a footnote that detailed three of the “discrepancies and
omissions” that appeared in Skyview’s initial submission and that Skyview failed to
rectify despite subsequent requests by the agency. Id. at n.36 (citing Skyview’s
failure to provide additional information about its “local contact” who had allegedly
visited the Malaysian manufacturer, its failure to provide requested accounting
records from 2019 and 2020, and its failure to provide a specific purchasing order
requested by Customs).
In the Administrative Review, Customs also discussed the issues it found in
Skyview’s RFI responses. Customs stated that it “find[s] that the June 7th
Submission is inadequate to substantiate Skyview’s claim of Malaysian-origin WCV”
because “the documents fail to rise to the level of production documents needed to
substantiate Skyview’s claim that the actual production of its WCV occurred in
Malaysia.” Admin. Rev. at 11, 12-13, J.A. at 3, 081 3,082-083, ECF No. 32. In short,
the agency concluded that “[t]here is nothing to indicate that the WCV at issue were
produced with the materials and parts included in the various provided invoices, and
Court No. 1:22-cv-00080 Page 19
the documentation does not confirm the country of origin of the WCV as being
Malaysian.” Id. at 13. As to the evidence supporting evasion, the agency was equally
thorough in its analysis. In the Final Determination as well as the Administrative
Review, Customs identified with specificity the evidence that it found compelling,
including the aggregate data, the company-specific shipping data, and the
photographs and testimony provided by the investigator. Final Determination, J.A.
at 81,616-617, ECF No. 33; Admin. Rev. at 9-10, J.A. at 3,079-080, ECF No. 32.
Skyview does not challenge the accuracy or truthfulness of the aggregate data, as
Plaintiff’s counsel confirmed before the Court at oral argument. See Oral Arg. Tr. at
43:1-10, ECF No. 40.
Skyview’s claim that Customs failed to investigate the errors and omissions in
Skyview’s evidence misconstrues the agency’s role, which is to perform an
investigation by collecting evidence from the parties and assessing the validity of the
evidence it receives. See 19 U.S.C. § 1517(b). Although the statute empowers the
agency to verify that information, it does not mandate verification in all cases. Id. §
1517(c)(2)(B) (“[T]he Commissioner may collect such additional information as is
necessary to make the determination through such methods as the Commissioner
considers appropriate, including by . . . conducting verifications, including on-site
verifications, of any relevant information.”) (emphasis added). Customs carried out
its statutory duty to investigate the allegation of evasion by soliciting information
from the parties, issuing supplemental questionnaires to clarify apparent errors and
omissions in the evidence, and assessing the record as a whole to make an informed
Court No. 1:22-cv-00080 Page 20
determination as to the credibility of the parties’ claims. See generally Final
Determination, J.A. at 81,612-626, ECF No. 33. After numerous attempts to gather
the necessary information from Skyview and the alleged manufacturers led to
inadequate and contradictory responses, Customs determined that verification would
not be necessary or appropriate in this investigation. An agency decision such as
whether to perform verification is arbitrary and capricious where the agency “relie[s]
on factors which Congress had not intended it to consider, entirely fail[s] to consider
an important aspect of the problem, offer[s] an explanation for its decision that runs
counter to the evidence before the agency, or is so implausible that it could not be
ascribed to a difference in view or the product of agency expertise.” Nat’l Ass’n of
Home Builders v. Defenders of Wildlife, 551 U.S. 644, 658 (2007) (quoting Motor
Vehicle Mfrs. Ass’n of the United States, Inc. v. State Farm Mut. Automobile Ins. Co.,
463, U.S. 29, 43 (1983)). Here, Customs made a specific finding that “there was no
need to consider verification” of the evidence because the agency had determined that
Skyview’s submission was “unreliable and therefore, not probative.” Final
Determination, J.A. at 81,625, ECF No. 33. Where a party’s submitted evidence is
substantially incomplete or discredits itself, failing to “verify” that evidence is not an
abuse of the agency’s discretion.
Skyview further argues that the evidence it presented should outweigh the
evidence against it. However, under the substantial evidence standard, “[i]t is not
for this court on appeal to reweigh the evidence or to reconsider questions of fact
anew.” Trent Tube Div., Crucible Materials Corp. v. Avesta Sandvik Tube, 975 F.2d
Court No. 1:22-cv-00080 Page 21
807, 815 (Fed. Cir. 1992); see also Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43 (discussing
the arbitrary and capricious standard and what it requires of the agency); Downhole
Pipe & Equip., L.P. v. United States, 776 F.3d 1369, 1376 (Fed. Cir. 2015) (“While
Appellants invite this court to reweigh this evidence, this court may not do so.”).
Customs has satisfied its mandate, and substantial evidence supports its evasion
determination.
IV. Application of Adverse Inferences
EAPA permits Customs to “use an inference that is adverse to the interests of”
a party or person who has “failed to cooperate by not acting to the best of the party or
person’s ability to comply with a request for information[.]” 19 U.S.C. § 1517(c)(3).
Skyview contends that Customs’ application of adverse inferences against it was
arbitrary and capricious because Rowenda Kitchen’s failure to respond to Customs’
information requests does not permit the agency to apply adverse inferences against
Skyview. Pl.’s Reply Br. at 6-7, ECF No. 31. Skyview asserts that it cooperated with
the investigation to the best of its ability and had no power to induce Rowenda
Kitchen to cooperate. Id. at 7. The Government retorts that Customs did not apply
adverse inferences against Skyview but instead applied those inferences solely
against Rowenda Kitchen. Def’.s Resp. Br. at 17-19, ECF No. 25; Final
Determination, J.A. at 81,618, 81,624, ECF No. 33. Customs granted Rowenda “three
extensions to the deadline for response and warned that [it] may apply adverse
inferences if the company does not respond.” Def.’s Resp. Br. at 18-19, ECF No. 25.
Nonetheless, Rowenda Kitchen “flatly refused to cooperate[.]” Id. Any collateral
Court No. 1:22-cv-00080 Page 22
consequences the decision to draw an adverse inference against Rowenda Kitchen
had on Skyview were permissible under the statute. Id. at 19-20 (citing Mueller
Commercial de Mexico S. de R.L. de C.V. v. United States, 753 F.3d 1227, 1233-36
(Fed. Cir. 2014)).
First, Customs drew no adverse inferences against Skyview. It only drew an
adverse inference against Rowenda Kitchen for its failure to respond to multiple
requests for information. Final Determination, J.A. at 81,618, ECF No. 33 (“The
claimed manufacturer, Rowenda Kitchen, did not provide an RFI response, despite
being given multiple opportunities to do so . . . . There is no basis for concluding that
Rowenda Kitchen was unable to provide a response to its RFI, and application of
adverse inference to that party is appropriate.”); see also Final Determination, J.A.
81,624, ECF No. 33 (“CBP is not making an adverse inference against Skyview in this
case.”). Any contrary claim by Skyview is mistaken. Cf. Pl.’s Br. at 20, ECF No. 30
(“CBP Unlawfully Applied Adverse Inferences Against Skyview”).
Second, as to the application of adverse inferences against Rowenda, the
statute offers clear instruction. Customs may draw adverse inferences against a
party that “has failed to cooperate by not acting to the best of the party or person’s
ability to comply with a request for information[.]” 19 U.S.C. § 1517(c)(3)(A). Eligible
parties against whom an adverse inference may be drawn include “a person that is a
foreign producer or exporter . . . of covered merchandise” such as Rowenda Kitchen.
Id. § 1517(c)(2)(A)(iii). In its Final Determination, Customs explained that it was
drawing an adverse inference in selecting from facts otherwise available for its
Court No. 1:22-cv-00080 Page 23
country-of-origin analysis to fill the gaps that Rowenda Kitchen’s repeated refusal to
cooperate created:
The claimed manufacturer, Rowenda Kitchen, did not
provide an RFI response, despite being given multiple
opportunities to do so. The RFI issued to Rowenda Kitchen
requested significant information relating to its production
and sale activities, including transactions related to the
Importers. There is no basis for concluding that Rowenda
Kitchen was unable to provide a response to its RFI, and
application of adverse inference to that party is
appropriate.
Final Determination, J.A. at 81,618, ECF No. 33. Although Skyview argues that it
suffered collateral consequences because of Customs’ drawing an adverse inference
against Rowenda Kitchen, Skyview’s citation to cases in the antidumping context
governing when a cooperating party may nonetheless have an adverse inference
drawn against it for another party's failure to cooperate misses the mark. Compare
Pl.’s Br. at 22, ECF No. 30 (citing caselaw to support Plaintiff’s argument that adverse
inferences cannot be applied against a cooperating party except in the specific
instance where there is substantial evidence that the cooperating party has leverage
to induce cooperation from the non-cooperating party), with Mueller, 753 F.3d at 1236(“[W]e do not bar Commerce from drawing adverse inferences against a non-
cooperating party that have collateral consequences for a cooperating party. Where
an adverse inference is used to calculate the rate of a non-cooperating party that rate
may sometimes be used in calculating the rate of a cooperating party and thus have
collateral consequences for the cooperating party.”) The discussion of what must be
shown in order to apply adverse inferences against a cooperating party because of its
Court No. 1:22-cv-00080 Page 24
non-cooperating compatriots is irrelevant where the agency applied an adverse
inference against the non-cooperating party. See Final Determination, J.A. at 81,618,
ECF No. 33; Admin. Rev. at 7, J.A. at 3,077, ECF No. 32. Indeed, the statute permits
Customs to draw an adverse inference against a non-cooperating party “without
regard to whether another person involved in the same transaction or transactions
under examination has provided the information sought.” 19 U.S.C. § 1517(c)(3)(B).
Skyview does not point to specific information on the record that it provided that
might lessen any collateral consequences to Skyview of Customs’ decision to draw an
adverse inference against Rowenda. Consequently, Skyview has pointed to no reason
to disturb Customs’ decision to draw an adverse inference against Rowenda Kitchen
based on Rowenda Kitchen’s failure to cooperate with the investigation.
V. Failure to Confer with Commerce
EAPA requires Customs to investigate whether covered merchandise has
entered into the United States through evasion, which the agency does by assessing
the evidence it receives from interested parties regarding the merchandise’s country
of origin. 19 U.S.C. § 1517(c)(1)(A); 19 C.F.R. § 165.27(a). Skyview claims that,
because there are allegedly conflicting facts regarding the country of origin of the
subject merchandise entered into the record, the statute required Customs to refer
the matter to Commerce for consultation. Pl.’s Br. at 25, ECF No. 30; Pl.’s Reply Br.
at 7-8, ECF No. 31. Customs’ failure to confer with Commerce, according to Skyview,
makes its determination “arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.” Pl.’s Br. at 25, ECF No. 30. In response, the Government
Court No. 1:22-cv-00080 Page 25
observes that Skyview misinterprets the statute, which is meant to apply only where
the question that Customs is unable to answer pertains to the scope of the orders.
Def.’s Resp. Br. at 20, ECF No. 25. In other words, the Government posits that the
statute instructs Customs to confer with Commerce only in the specific situation
where it is “unable to determine whether the imported merchandise is the type of
merchandise covered by the scope of the order at issue.” Id. To adopt Skyview’s much
broader interpretation would, according to the Government, “essentially strip CBP of
its authority to investigate evasion of AD/CVD duties because any such finding would
be immediately transferred to Commerce.” Id. The Government also argues that the
statute authorizes Customs to determine whether imported merchandise is “covered
merchandise” — an essential component of the investigatory duties assigned to
Customs — and only when that determination cannot be made is Customs instructed
to confer with Commerce. Id. at 21. Finally, the Government contends that there is
no question here as to whether the merchandise at issue was “covered merchandise”
so that the provision of the statute discussing how Customs must resolve a contested
question is irrelevant. Id.The language of the statute is clear: Customs “shall . . . refer the matter to
[Commerce] to determine whether the merchandise is covered merchandise” when
Customs “is unable to determine whether the merchandise at issue is covered
merchandise.” 19 U.S.C. § 1517(b)(4)(A)(i). Thus, only when there is a dispute about
whether the merchandise is the type of merchandise that would be subject to an
Court No. 1:22-cv-00080 Page 26
antidumping or countervailing duty order must Customs refer the dispute to
Commerce for determination. Id.Here, there is no dispute about whether the wooden vanities and cabinets at
issue are of the type that would be subject to the antidumping and countervailing
duty orders. At issue in the investigation is only the country of origin for the
merchandise in question. If the cabinets and vanities originate from China, the
Orders apply; if they originate from Malaysia, the Orders do not. The statute
delegates the determination of the country of origin to Customs. See 19 U.S.C. §
1517(c)(1)(A); 19 C.F.R. §165.27(a) (both providing that Customs “shall make a
determination . . . with respect to whether such covered merchandise was entered
into the customs territory of the United States through evasion”). As Customs
explained in its Administrative Review:
Here, there is no dispute that if Chinese-manufactured
WCV were shipped directly from China to the United
States, the WCV would fall under the AD/CVD orders.
There is also no dispute that Skyview’s entries were
entered as classified under subheading number,
9403.40.9060, HTSUS, and, again, if of Chinese origin, are
within the scope of the AD/CVD Orders. The only fact in
contention is whether the WCV at issue are in fact of
Chinese origin.
Admin. Rev. at 7-8, J.A. at 3,077-78, ECF No. 32.
Plaintiff’s counsel conceded this point at oral argument, agreeing that the
wooden cabinets and vanities imported by Skyview would be within the scope of the
Orders if found to have originated from China. Oral Arg. Tr. at 43:11-19, ECF No. 40
(responding “We do not dispute that” to the question of whether, if the goods had been
Court No. 1:22-cv-00080 Page 27
purchased from China, “they would be subject to the anti-dumping order and within
scope”). Because there is no dispute about whether the wooden cabinets and vanities
Skyview imported are of the type covered by the Orders, there was no dispute over
the Orders’ scope that should have been referred to Commerce. See 19 U.S.C. §
1517(b)(4)(A) (requiring a dispute over whether the merchandise is covered by an
order). The statutory provisions regarding referral are thus irrelevant, and Skyview’s
arguments that Customs abused its discretion by not seeking Commerce’s guidance
are meritless.
VI. Burden Shifting
EAPA provides that Customs “may collect such additional information as is
necessary to make the determination” by “conducting verifications, including on-site
verifications, of any relevant information.” 19 U.S.C. § 1517(c)(2); see also 19 C.F.R.
§ 165.25(a) (“Prior to making a determination . . . CBP may in its discretion verify
information . . . as is necessary to make its determination.”). Skyview argues that
Customs’ determination must be reversed because, under the statute, the agency
“was required to verify the facts presented by both Skyview and Masterbrand” but
that “[t]he record is absent of CBP doing anything beyond the beginning phase of the
EAPA action.” Pl.’s Reply Br. at 9, ECF No. 31. Skyview argues that, by failing to
verify the submitted information, Customs unlawfully shifted the burden onto
Skyview, requiring it to disprove the allegations made against it. Pl.’s Br. at 30, ECF
No. 30. The Government responds that Skyview has misconstrued the statute. Def.’s
Br. at 21-22, ECF No. 25. It is the respondent that bears the burden of establishing
Court No. 1:22-cv-00080 Page 28
its right to any reduced duty and that requiring “the Government to affirmatively
prove the origin of material before assigning duties would both frustrate the statutory
directive and incentivize respondents to withhold information.” Id. at 22. Further,
the Government argues that “verification” does not require Customs to “[conduct] an
independent search based upon a party’s unsupported assertions” but rather “is a
process to confirm information it has already received.” Id. at 23. Ultimately, the
Government argues that Customs was within its authority to determine that the
information it received from Skyview was not credible and to decline to conduct any
further investigation or verification on the company’s behalf. Id.After receiving a plausible allegation of evasion of customs duties, Customs
“shall initiate an investigation” and make a determination based on “substantial
evidence.” See 19 U.S.C. §§ 1517(b)(1), (c)(1)(A). The substantial evidence standard
requires the agency to consider the record as a whole, including “whatever in the
record fairly detracts from its weight[,]” and render a decision based on “such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion.”
Universal Camera Corp. v. NLRB, 340 U.S. 474, 477-488 (1951); Nippon Steel, 458
F.3d at 1351; DuPont Teijin Films USA v. United States, 407 F.3d 1211, 1215 (Fed.
Cir. 2005). Where the record would support more than one conclusion by substantial
evidence, the agency’s choice between the options governs. See Universal Camera
Corp., 340 U.S. at 488 (holding that a court cannot “displace the [agency’s] choice
between two fairly conflicting views”).
Court No. 1:22-cv-00080 Page 29
Customs’ regulations implementing the statute define the administrative
record, permit Customs to obtain additional information by issuing requests for
information, and allow parties to voluntarily submit information for the agency’s
consideration. 19 C.F.R. §§ 165.21, 165.23. It is from this record — built largely by
the parties themselves — that Customs makes its determination regarding whether
evasion has occurred. Here, Customs did not shift the burden onto Skyview by
requiring Skyview to “disprove” the allegations. Rather, after reviewing all the
evidence offered by the parties and making numerous attempts to build a more
complete record by soliciting additional, missing information from Skyview, Customs
found that substantial evidence supported the evasion allegations. See Final
Determination, J.A. at 81,617, ECF No. 33 (stating that the general shipping patterns
of covered merchandise between China, Malaysia, and the United States; the specific
shipping data from Rowenda Kitchen; and the affidavits are “applicable in CBP’s final
determination with regard to whether substantial evidence exists of evasion by the
Importers.”).
Regarding Plaintiff’s claim that Customs was required but failed to perform a
verification of the evidence it provided, the Court agrees with the Government’s
interpretation of Customs’ duty. As discussed above, under 19 C.F.R. § 165.25(a),
“CBP may in its discretion verify information in the United States or foreign countries
collected under § 165.23 as is necessary to make its determination” (emphasis added);
but where the agency has determined that the evidence is not credible or is otherwise
lacking, it is not required to conduct verification. In this case, the agency stated in
Court No. 1:22-cv-00080 Page 30
the Final Determination that there was “no need to consider verification of the
information” because it had already determined that the submissions were
“unreliable and therefore, not probative.” Final Determination, J.A. at 81,625, ECF
No. 33. Specifically, the agency explained that “the onus is on Skyview, as the
importer, to investigate and know the full production chain of its imports and to
provide CBP with accurate information.” Admin. Rev. at 13, J.A. at 3,083, ECF No.
32. Having failed to provide such information, the agency reasonably determined
that there was nothing to verify. Id. Customs’ decision not to verify did not have the
effect of shifting any evidentiary burdens. The substantial evidence standard
continued to govern. See id. at 9 (explaining that the final affirmative determination
was supported by the absence of a “dispute as to whether the WCV are in scope
merchandise, if of Chinese origin” and that “CBP found, based upon direct and
circumstantial evidence in the administrative record, that neither Rowenda nor any
company in Malaysia had the capacity to produce the WCV.”).
VII. Due Process
Skyview raises a constitutional challenge under the Due Process Clause to the
procedures Customs employed in this investigation. Plaintiff takes issue with
Customs’ reliance on photographs and videos 1 of the alleged manufacturer’s facility
1Although the Court will analyze Skyview’s claims regarding the photos and videos, Skyview
has likely forfeited its claim regarding the videos. It did not raise any constitutional claim
regarding the video evidence before the agency and made but a bare mention of the videos in
the due process section of its brief to the Court. Compare Oral Arg. Tr. at 73:10-13 (pointing
to the bottom two sentences on page 33 of Skyview’s opening brief), with Pl.’s Br. at 33 (“It is
worth noting that videos in the Administrative Record also differ from the investigator’s
depiction of the manufacturing location.”).
Court No. 1:22-cv-00080 Page 31
while redacting them from its view as “business confidential.” Pl.’s Br. at 33-34, ECF
No. 30. Without having access to those photos and videos before filing suit at the
Court of International Trade, Skyview claims that “CBP deprived Skyview of the
opportunity to review, evaluate, and comment on business confidential data and,
consequently, a fair opportunity to defend itself.” Id. at 34. In its brief, the
Government argues that Customs met its requirement to provide the plaintiff with
“notice and a meaningful opportunity to be heard” but “that right does not entitle an
importer to all information upon which CBP makes its determination.” Def.’s Resp.
Br. at 24, ECF No. 25. The Government points to 19 C.F.R. § 165.4 and the
accompanying notes, which outline how such materials are to be treated throughout
the course of an EAPA investigation. Id. at 25. That provision, according to the
Government, describes a balance of interests whereby the confidentiality of the
submitting party is protected while the party against whom the documents are being
used is given access to a public version of the materials, including summaries of the
“confidential” information. Id. The Government contends that Customs properly
executed this balance because “Skyview was on notice as to what information CBP
would require for its investigation, and the type of evidence it was reviewing, and
thus had plenty of opportunity to submit its own evidence.” Id. at 26.
Due process guarantees parties a “right to notice and a meaningful opportunity
to be heard.” PSC VSMPO-Avisma Corp. v. United States, 688 F.3d 751, 761-62 (Fed.
Cir. 2012) (quoting LaChance v. Erikson, 522 U.S. 262, 266 (1998)). As the Supreme
Court has instructed, “the due process clause forbids an agency to use evidence in a
Court No. 1:22-cv-00080 Page 32
way that forecloses an opportunity to offer a contrary presentation.” Bowman
Transp., Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 288 n.4 (1974)
(citing Ohio Bell Telephone Co. v. Public Utilities Comm’n, 301 U.S. 292 (1937) and
United States v. Abilene & S.R. Co., 265 U.S. 274 (1924)). Thus, one way to
substantiate a claim that an agency has violated a party’s due process rights is to
demonstrate that agency action has inhibited a party’s ability to present its case or
to respond to evidence being used against it. In the narrow confines of Plaintiff’s
specific claims in this case, it has failed to make such a showing.
Customs provided summaries of the confidential evidence. Although Customs
redacted the photos and videos as confidential business information, the narrative
form of the allegations describes their content with enough specificity that Plaintiff
was put on notice and able to offer counterevidence. MasterBrand Allegation at 10-
11, J.A. at 1,163-164, ECF No. 32; Notice of Initiation at 2-4, J.A. at 1,423-424, ECF
No. 32. Plaintiff does not dispute that it was aware that the question of whether any
manufacturing occurred in Malaysia was the key question before Customs. Oral Arg.
Tr. at 65:7-18 (asking Skyview’s counsel whether lack of information on the contents
of the photos and video prevented Skyview’s agent from making photos and videos of
its own and hearing no dispute); see also Final Determination, J.A. at 81,625 n.67,
ECF No. 33 (discussing Skyview’s failure to provide any evidence of manufacturing
in Malaysia). In the unique context of photos and videos, nothing Customs did
prevented Skyview from submitting photos and videos of any facility in Malaysia that
Plaintiff claimed manufactured the merchandise in question. Skyview was free to
Court No. 1:22-cv-00080 Page 33
begin outside the alleged manufacturing facility and create a video walkthrough
demonstrating actual manufacturing of wooden cabinets and vanities. Such evidence
would have refuted MasterBrand’s claims of transshipment. Indeed, Skyview claims
to have sent a person to Malaysia for this purpose. Oral Arg. Tr. at 51:9-16, ECF No.
40. Yet, despite taking advantage of the ability to procure such evidence, the
unidentified agent who allegedly traveled to Malaysia on Skyview’s behalf provided
no photos, videos, or other evidence to demonstrate what he observed at the facility.
Id. at 52:3-25–53:1-13. The only photos that Skyview did submit of the Malaysian
facility were piecemeal and apparently originated from the otherwise unresponsive
party, Rowenda Kitchen. Id. at 51:21-25. Having had adequate notice of what type
of evidence was necessary to refute the claims MasterBrand made, Skyview sought
to procure such evidence and came up short. Due process requires notice and an
opportunity to be heard by providing evidence at a meaningful point in the
proceedings. See PSC VSMPO-Avisma Corp., 688 F.3d at 761-62 (finding that, where
a party was aware of the evidence that might be used against it and had “the
opportunity to put forth evidence” to support an alternative conclusion, there is no
due process violation). Plaintiff received that opportunity, and its as-applied due
process challenge regarding photographic and video evidence must therefore fail.
VIII. Hearsay
Finally, Skyview argues that evidence provided by a third-party investigator,
paid by MasterBrand, constituted unlawful hearsay and thus should not have been
considered by Customs in making its determination. Pl.’s Br. at 34-37, ECF No. 30;
Court No. 1:22-cv-00080 Page 34
Pl.’s Reply Br. at 11-12, ECF No. 31. Citing the Administrative Procedure Act and
Federal Circuit precedent, the Government argues that hearsay evidence is
admissible where it is relevant and credible. Def.’s Resp. Br. at 28, ECF No. 25. In
this case, the Government argues that “the affidavits are not irrelevant, immaterial,
or unduly repetitious, and Skyview has presented no evidence calling into question
the truthfulness, reasonableness, and credibility of the affiants.” Id. at 29. Therefore,
the Government urges the Court to affirm Customs’ inclusion of the third party’s
affidavits. Id.
For better or worse, the Federal Rules of Evidence do not govern
administrative adjudications. See Fed. R. Evid. 801(c) (defining hearsay as an out-
of-court statement “a party offers in evidence to prove the truth of the matter asserted
in the statement”). It is long established that agencies may consider hearsay and
that it “may be treated as substantial evidence, even without corroboration if, to a
reasonable mind, the circumstances are such as to lend it credence.” Hayes v. Dep’t
of the Navy, 727 F.2d 1535, 1538 (Fed. Cir. 1984); see also Richardson v. Perales, 402
U.S. 389, 407-08 (1971) (clarifying that hearsay evidence is not prohibited in
administrative proceedings if it is reliable and probative). Plaintiff’s reason for
attacking the credibility of the hearsay statements is that they are “biased towards,
prejudice[d] against, and [are] adverse to Skyview based on MasterBrand’s
employment of the services” — in other words, that the investigator was on
MasterBrand’s payroll. Pl.’s Br. at 36, ECF No. 30. Customs noted that the
allegations made in the investigator’s report were corroborated by “foreign market
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research . . . conducted by disinterested entities, including U.S. government agencies,
not parties to the case[.]” Admin Rev. at 14, J.A. at 3,084, ECF No. 32. Therefore,
Customs found “no reason to conclude that this information is biased or irrelevant[.]”
Id. Because admission of hearsay evidence is permitted in administrative
proceedings and Customs adequately explained why it considered the challenged
evidence credible, substantial evidence supports its determination.
CONCLUSION
Skyview has raised several procedural claims against Customs’ evasion
determination in addition to questioning its evidentiary basis. All of Skyview’s
objections fail. The Court therefore SUSTAINS Customs’ Final Determination of
evasion in EAPA case number 7553 and SUSTAINS the January 28, 2022 decision
in Administrative Review number H321677.
/s/ Stephen Alexander Vaden
Stephen Alexander Vaden, Judge
Dated: June 20, 2023
New York, New York