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Federal Circuit Says CBP Violated Due Process Rights in EAPA Case by Not Providing Access to BPI

CBP violated importer Royal Brush Manufacturing's due process rights by failing to provide it access to business confidential information (BCI) in an antidumping and countervailing duty evasion proceeding, the U.S. Court of Appeals for the Federal Circuit said in a highly anticipated opinion on July 27.

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Judges Alan Lourie, Timothy Dyk and Kara Stoll ruled the "relatively immutable" principle of due process, where the government must provide access to the evidence used as the basis for an action that seriously injures an individual, extends to administrative proceedings. Dyk, the author of the opinion, said the court is aware of no such court holding showing that BCI is exempt from this rule, adding that there is no "legitimate government interest" in refusing to provide access to this information in Enforce and Protect Act cases.

Steven Gordon, counsel for Royal Brush, said in an email that the opinion means CBP must establish administrative protective orders (APOs) in EAPA cases, a move which will "inevitably make for fairer adjudications." Gordon added that Royal Brush is "very pleased that the court addressed this issue so forcefully."

The court also said there is no case supporting the government's "extraordinary theory" that it can avoid due process compliance by failing to provide for a protective order. In the case, the U.S. claimed that confidential information cannot be disclosed without a statute or regulation allowing an APO, relying on the language of the Trade Secrets Act and cases showing that agencies can regulate their own proceedings. The appellate court said none of those cases allows for the refusal to provide BCI access to an adverse party.

While the Trade Secrets Act bars a government employee from disclosing trade secret information "to any extent not authorized by the law," the court said there is no doubt releasing that confidential information is allowed by the law "as a matter of constitutional due process."

The government noted that release of confidential information under the Trade Secrets Act is not barred where there is an APO, but posited that there is no legal basis on which Royal Brush is entitled to the BCI since neither the EAPA statute nor CBP's regulations permits or requires the release of the information. Dyk said the government's position is "untenable on its face," adding that the "right to due process does not depend on whether statutes and regulations provide what is required by the Constitution."

The Court of International Trade previously held that CBP didn't violate Royal Brush's due process rights since it provided public summaries of the confidential information (see 2111010036). Both at CIT and at the Federal Circuit, the U.S. said neither the statute nor its regulations mandate the use of APOs, under which access to the information would be made available. Dyk said the statute and regulations "do not bar protective orders," noting that the government does not offer any reason why the use of APOs would impair the EAPA process. This shows that CBP "has inherent authority to provide protective orders in EAPA proceedings before the agency."

The U.S. also claimed Royal Brush failed to show lack of access to the BCI resulted in prejudice. But the appellate court said that when a due process violation has occurred "because of a denial of access to new and material information upon which an agency relied, no additional showing of prejudice is required."

Dyk also made clear that there is no question that CBP relied on facts not provided to Royal Brush when finding that it evaded the AD/CVD on cased pencils from China by transshipping them through the Philippines. This established the link in the court's finding of a due process violation, since the law clearly states that in administrative proceedings, due process "includes the right to know what evidence is being used against one."

Further addressing Royal Brush's right to rebuttal, the court said that the importer will be given access to the numerical data used to calculate the production capacity of the Philippine manufacturer, which CBP used as part of the basis of its evasion finding, along with the relevant photographs. This information will be added to the administrative record subject to an APO. The court didn't reach the question of a right to rebuttal since "the regulations themselves provide the right to rebut because CBP relied on new factual information." The court also rebuked the government on the question of jurisdiction, finding that Royal Brush didn't challenge a liquidation decision and so didn't need to file a protest.

(Royal Brush Manufacturing v. United States, Fed. Cir. # 22-1226, dated 07/27/23; Judges: Alan Lourie, Timothy Dyk, Kara Stoll; Attorneys: Steven Gordon of Holland & Knight for plaintiff-appellant Royal Brush Manufacturing; Margaret Jantzen for defendant-appellee U.S. government; Felicia Nowels of Akerman LLP for defendant-appellee Dixon Ticonderoga Company)