Continental Materials, Inc. Application for Further Review of Protest 3501-11-100121

HQ H200755 November 18, 2014 PRO 2-05 OT:RR:CTF:ER H200755 GGK Port Director U.S. Customs and Border Protection 330 2nd Avenue South, Suite 560 Minneapolis, MN 55401 Attn: Kristi Johnson, Supervisory Import Specialist RE: Continental Materials, Inc.: Application for Further Review of Protest 3501-11-100121 Dear Port Director: This is in response to the application for further review (“AFR”) for Protest 3501-11-100121 (“protest”), filed by Continental Materials, Inc. (“CMI”), on December 21, 2011. We apologize for the delay in our response. FACTS: CMI imports building materials, including steel nails. In August 2008, the company imported a shipment of various steel nails, totaling 1,164 containers, from the Republic of Korea (“Korea”). The shipment was entered as entry xxx-xxxx6634 on August 24, 2008. The steel nails in the shipment were purchased by CMI from a Korean manufacturer, Han Ya Nail Manufacturer (“Han Ya Nail”), through Rich Wing International Co., Ltd. The commercial invoice and packing list submitted with the entry are issued by Rich Wing International Co., Ltd. and the bill of lading identifies Rich Wing International Co., Ltd. as the shipper/exporter. Moreover, the commercial invoice, packing list and bill of lading all indicate that the shipment of steel nails are marked as “Made in Korea.” Finally, the Manufacturer ID provided on the Entry Summary corresponds to the Manufacturer ID used for Han Ya Nail and CMI asserts in its protest that the nails are purchased from Han Ya Nail. In January 2009, U.S. Customs and Border Protection (“CBP”) received information regarding the arrest of two individuals associated with Han Ya Nail, including the company’s owner. The individuals were arrested and prosecuted for allegedly importing construction nails from the People’s Republic of China (“PRC”), falsifying the country of origin for the nails by changing them to Korean origin, and exporting the nails to the United States in violation of foreign trade law. Of particular note, the company’s wrongdoing was discovered because of its unusual import and export activities. That is, the volume of steel nails imported by Han Ya Nail from the PRC was identical to the volume of steel nails it exported. Han Ya Nail did this to avoid antidumping duties. Specifically, certain steel nails from the PRC are subject to antidumping duties in the United States. See Notice of Antidumping Duty Order: Certain Steel Nails From the People’s Republic of China, 73 Fed. Reg. 44,961 (Aug. 1, 2008) (“Antidumping Duty Order”). Thereafter, in early 2010, CBP received confirmation that the owner of Han Ya Nail was convicted by a Korean court for violating Korean Customs and foreign trade laws. Upon receiving confirmation of the court conviction, the Port of Minneapolis reviewed the entry at issue and determined that CMI purchased the steel nails from Han Ya Nail. Moreover, CBP determined that the steel nails in the shipment fell within the scope of the Antidumping Duty Order for certain steel nails from the PRC. See id. Consequently, on April 5, 2010, the port issued a Notice of Action to CMI, on CBP Form 29, notifying the company that its shipment of steel nails is considered to be transshipped from the PRC and subject to antidumping duties at the estimated antidumping duty margin of 118.04 percent, which is the PRC-wide rate. Liquidation of all entries of steel nails from the PRC, entered for consumption between January 23, 2008, and July 31, 2009, was suspended pending the Department of Commerce’s (“Commerce”) first administrative review. On March 23, 2011, Commerce published the final results of the first administrative review and assessed a weighted average dumping margin of 118.04 percent for the PRC-wide entity. See Certain Steel Nails From the People’s Republic of China: Final Results of the First Antidumping Duty Administrative Review, 76 Fed. Reg. 16,379 (March 23, 2011). Moreover, Commerce published the amended final results on April 26, 2011, which addressed ministerial errors related to the weighted average dumping margins for specific exporters. See Certain Steel Nails From the People’s Republic of China: Amended Final Results of the First Antidumping Duty Administrative Review, 76 Fed. Reg. 23,279 (Apr. 26, 2011). Thereafter, on June 9, 2011, Commerce issued liquidation instructions that required CBP to assess an antidumping liability equal to 118.04 percent of the entered value for all shipments of certain steel nails from the PRC exported by the PRC-wide entity and for which no bond or cash deposit was collected as security. See Message Number 1160303 (June 9, 2011). The Port of Minneapolis liquidated the entry at issue on July 8, 2011, and applied the PRC-wide entity’s antidumping duty margin of 118.04 percent to the shipment of steel nails. In liquidating the entry at the PRC-wide antidumping duty margin, the port concluded that the steel nails at issue were transshipped from the PRC and falsely labeled as manufactured in Korea by the manufacturer, Han Ya Nail. Moreover, the port based this determination on the conviction of the owner of Han Ya Nail by the Korean court for transshipment and invasion of antidumping duties. Subsequently, on December 21, 2011, CMI filed the instant protest and requested further review. As a part of its protest, CMI produced several sets of documents alleged to be production records, which are in Korean. These production records, which appear on generic forms without any company specific identifiers, are titled as “Production Daily Report” and “Stock-Out.” The “Production Daily Report” has fields for the following: date, specifications, purchase order, quantity, remark and a signature line. The “Stock-Out” has fields for the following: date, purchase order, specifications, quantity, remark and a signature line. None of the production records identify a company name, such as the manufacturer. The only signature that appears on the forms is the name “Lee,” without any indication as to whether this is a first or last name. Lastly, although there are purchase order numbers found on these forms, none of the purchase order numbers match the purchase order referenced on the commercial invoice, packing list, and bill of lading associated with the entry at issue in this protest. Thus, none of the production documents tie to the entry at issue in this protest. In addition to the production records, CMI included several pictures. These pictures allegedly show the front gate of the Han Ya Nail factory in Korea and various production equipment used to manufacture nails. These photographs do not include any information that would allow CBP to identify a company name. Furthermore, CMI submitted a copy of a Korean document that alleges to be a Korean business license that shows Han Ya Nail as a manufacturer and wholesaler of nail, wire and other metal products, as well as an importation and exportation business. Finally, the protest submission included a signed declaration from Peter J. Fischer, the president of CMI. According to the declaration, Mr. Fischer spoke to a representative of a company that also purchased steel nails from Han Ya Nail in the past and allegedly imported the nails to the United States. Mr. Fischer believed that CBP did not assess antidumping duties for the steel nails purchased by that company. However, Mr. Fischer did not provide any entry specific information or receive permission from the actual importer of record to discuss any such entries. In light of the information it submitted, CMI argues that the steels nails were manufactured in Korea and questions the evidentiary basis for CBP’s determination that the steel nails at issue are in fact, manufactured in the PRC rather than Korea. In particular, CMI argues that the Korean criminal conviction of Han Ya Nail’s owner for violating Korean customs and foreign trade laws, including falsifying country of origin, is insufficient evidence for CBP to conclude that CMI’s shipment of steel nails are of Chinese origin. Moreover, CMI asserts that the commercial documents supporting the entry, production records, and photographs submitted by the company all indicate that the steel nails were manufactured by Han Ya Nail in Korea. Finally, CMI alleges that CBP previously determined that antidumping duties did not apply for steel nails imported by a company similarly situated as CMI and that there is sufficient evidence to show that Han Ya Nail was capable of manufacturing steel nails for exportation to the United States. Finally, in the course of conducting the further review of the protest, this office requested additional information regarding the outcome of the Korean court case. Specifically, CBP obtained a public version of the Korean court judgment relating to the conviction of the owner of Han Ya Nail. According to the Korean court judgment, the owner of Han Ya Nail was convicted of falsifying country of origin in violation of foreign trade laws and Korean customs laws. Specifically, the owner, through his company, Han Ya Nail, imported steel nails from China and repackaged the nails as manufactured in Korea. Moreover, the Korean court judgment identified a total of 234 instances, during the period between April 21, 2008 and November 15, 2008, where Han Ya Nail exported the illegally marked Chinese nails to the United States through an intermediary, Rich Wing International Co. Lastly, the total volume of illegal exports totaled 299,843 containers of steel nails. Based on all of the above, we will evaluate whether CBP’s decision to assess antidumping duties is correct. ISSUES: Whether CBP properly liquidated the entries with the assessment of antidumping duties. LAW AND ANALYSIS: We note initially that the instant protest was timely filed, within 180 days from the date of liquidation. 19 U.S.C. § 1514(c)(3)(A). Liquidation of CMI’s entry occurred on July 8, 2011, and this protest was timely filed on December 21, 2011, within 180 days. Additionally, further review is warranted because “the protest involves questions of law or fact which have not been ruled upon by the Commissioner of Customs or his designee, or by the Customs courts." 19 C.F.R. § 174.24(b). Specifically, we will examine whether CBP properly concluded that the steels nails at issue are transshipped and whether CMI has successfully challenged the presumption of correctness attached to the agency’s decision. Accordingly, the criteria for further review is satisfied per 19 C.F.R. § 174.24(b) and 19 C.F.R. § 174.26(1)(iv). In its protest CMI questions CBP’s conclusion that the steel nails at issue are manufactured in the PRC and, thus, subject to antidumping duties. Generally, CBP decisions receive a presumption of correctness and a party challenging a CBP decision bears the burden of proving otherwise. See 28 U.S.C. § 2639(a)(1); St. Paul Fire & Marine Insurance Co. v. United States, 6 F.3d 763, 768 (Fed. Cir. 1993) (noting that in enacting 28 U.S.C. § 2639(a)(1), Congress intended the courts to presume that Customs decisions are correct and the protesting party bears the burden of proving that the agency’s decisions are unreasonable). Moreover, for post-importation challenges to a CBP decision, the burden of proof to overcome the presumption of correctness accorded to CBP decisions is by a preponderance of the evidence. See St. Paul Fire & Marine Ins. Co., 6 F.3d at 768 (holding that the higher clear and convincing burden of persuasion is inappropriate for post-importation challenges to Customs’ rulings and that section 2639(a)(1) requires the protesting party to overcome the presumption of correctness accorded Customs’ decisions to extend by a preponderance of the evidence). Accord Fabil Mfg. Co. v. United States, 237 F.3d 1335, 1340 (Fed. Cir. 2001). Finally, preponderance of the evidence in civil actions is defined as “the greater weight of evidence, evidence which is more convincing than the evidence which is offered in opposition to it.” St. Paul Fire & Marine Ins. Co., 6 F.3d at 768 (internal citations omitted). Based on this framework, we will evaluate whether CMI’s arguments and the evidence submitted by the company overcomes the presumption of correctness attached to CBP’s assessment of antidumping duties. Before proceeding with the presumption of correctness analysis, we will first address CMI’s allegation that CBP has insufficient evidence to conclude that the steel nails at issue are manufactured in the PRC rather than Korea. In HQ W231289 (October 11, 2007), we noted that while decisions of CBP officials are generally presumed correct, there must be a reasonable basis for the decision. Here, CBP’s determination that the steel nails are transshipped from the PRC is based on information from a foreign criminal conviction involving the Korean manufacturer. In the case Donnelly v. FAA, 411 F.3d 267, 270 (D.C. Cir. 2005), a federal agency admitted and relied on collateral evidence from a foreign criminal conviction during administrative hearing proceedings. In allowing the use of such evidence, the Court of Appeals for the District of Columbia Circuit concluded that “principles of comity suggest that the [foreign] judgment should be given weight as prima facie evidence of the facts underlying it and the burden was on [the petitioner] to impeach the judgment.” Donnelly, 411 F.3d at 270-71. After reviewing the Korean court judgment, we find that the Korean criminal conviction of Han Ya Nail’s owner should be given weight as prima facie evidence of the facts underlying it. Thus, we accept that the Korean court system convicted the owner of Han Ya Nail of importing steel nails manufactured in the PRC into Korea through his company and illegally changing the country of origin of the Chinese nails to Korean. These nails were subsequently exported to the United States in violation of foreign trade laws and Korean customs laws. Moreover, between April 21, 2008 and November 15, 2008, these illegally transshipped steel nails were exported to the United States through a company identified as Rich Wing International Co. Finally we accept that the total volume of illegally transshipped steel nails exported during this period totaled 299,843 containers. Applying these facts to the entry at issue, we first note that CMI asserts that the manufacturer of the steel nails at issue in this protest is Han Ya Nail of Korea. This is the same company identified in the Korean court conviction as being involved in the illegal transshipment of Chinese steel nails from Korea to the United States. Moreover, the company’s wrongdoing was discovered because the volume of steel nails imported by Han Ya Nail from the PRC was identical to the volume of steel nails it exported. Second, the shipment of steels nails imported by CMI was entered on August 24, 2008. This entry date falls within the time period identified by the Korean court conviction as the period during which the transshipment occurred—April 21, 2008 and November 15, 2008. Moreover, the Korean court conviction verified over 230 separate instances where Rich Wing International Co. exported the transshipped nails from Korea to the United States. Here, the commercial invoice and packing list submitted as a part of the entry package are issued by Rich Wing International Co., Ltd. and the bill of lading identifies the company as the shipper/exporter. Therefore, the shipment of steel nails at issue in this protest is exported to the United States by Rich Wing International Co. Finally, we note that the entry at issue covered 1,164 containers of steel nails. The Korean court conviction found that Han Ya Nail’s owner, through his company, illegally marked and transshipped a total of 299,843 containers of steel nails to the United States. Thus, the amount of steel nails at issue in this protest falls within the total number of containers of Chinese steel nails illegally transshipped to the United States. Based on all of the above, we conclude that there is a reasonable basis for CBP to determine that the steel nails imported by CMI are of Chinese origin and illegally transshipped to the United States. As explained above, the Korean criminal conviction qualifies in this case as prima facie evidence of facts upon which CBP relied on. Moreover, these facts provided a reasonable basis for CBP to conclude that the steel nails at issue are of Chinese origin and illegally transshipped. Therefore, the presumption of correctness attaches to our decision. Consequently, CMI has the burden to impeach the facts we relied upon and to prove by a preponderance of the evidence that CBP’s decision is in error. In its protest, CMI asserts that the entry documentation, including the commercial invoice, packing list and shipping documents, all indicate that the nails were made in Korea. These commercial documents, however, originate from Rich Wing International Co., Ltd., a company specifically implicated in the illegal transshipment scheme carried out by Han Ya Nail and its owner. Moreover, there are no documents from an independent third party with knowledge of the origin of the nails to substantiate the claim that they are manufactured in Korea. Consequently, the available documents fail to overcome the presumption of correctness attached to CBP’s determination because they are created by a party implicated by the Korean criminal conviction. Additionally, CMI provided the following: 1) photographs of what is claimed to be the Han Ya Nail factory in Korea; 2) documents asserted to be production records from Han Ya Nail; and 3) a copy of a document that appears to be the business license of Han Ya Nail Manufacturer, which describes the company as a manufacturer and wholesaler of nail, wire and other metal products, and an importation and exportation business. We note that CMI also asserts that it imported these steel nails in good faith believing that they originated from Korea. Good faith, however, is not a determinative factor in whether antidumping duties are assessed. First, neither the photographs nor production records identify a company name. In the case of the photographs, there appears to be Korean words in one of the pictures, however, the words are not legible. Therefore, it is not possible for CBP to verify that these photographs are in fact, related to Han Ya Nail. In terms of the production records, we note that none of the records reference the purchase order at issue in this protest. Consequently, these production records would not support a finding that the nails at issue in this protest were manufactured by the unidentified entity. Lastly, the business license provided only demonstrates that Han Ya Nail is authorized to do business as a manufacturer and wholesaler. Nothing in the business license shows that the company actually manufactured the nails at issue in this protest. Finally, even if CBP accepts that the photographs, production records and copy of the business license are legitimate and related to Han Ya Nail, the totality of this evidence only demonstrates that Han Ya Nail is a Korean manufacturer that has the capability of making nails, wires and other metal products. It does not demonstrate that Han Ya Nail manufactured the nails at issue in this protest. CPB does not question whether Han Ya Nail is a Korean manufacturer of nails. This is a fact that is accepted by both CBP and the Korean court. What is at issue is that the company, while capable of manufacturing nails, also imported and exported nails, as confirmed by the business license provided by CMI. In its capacity as an importer, Han Ya Nail imported Chinese steel nails into Korea and illegally repackaged the Chinese nails as made in Korea. More importantly, the company then exported the illegally marked Chinese steel nails, through Rich Wing International Co., to the United States. The quantity of PRC nails imported by Han Ya Nail into Korea and the quantity of nails exported by the company to the United States correlated such that it triggered an investigation into the company, which lead to a criminal conviction against the company’s owner. Finally, CMI purchased and imported these illegally marked Chinese steel nails into the United States and circumvented the antidumping duty order in place for certain steel nails from the PRC. None of the evidence provided by CMI calls into question these facts. As a final note, CMI submitted a signed declaration from the company’s president, which alleges that CBP did not assess antidumping duties on a previous entry of steel nails manufactured by Han Ya Nail and imported into the United States by a different importer. CMI has not provided any information that would allow CBP to identify the referenced entry. Nor has CMI received permission from the importer of record of that entry to provide such information. Without specific entry information, CBP cannot confirm any of CMI’s statements. Therefore, we decline to consider the allegations contained in the signed declaration. In summary, CMI bears the burden of challenging the presumption of correctness that attached to CBP’s determination that the steel nails at issue are of Chinese origin and, thus, are subject to the antidumping duties assessed. In order to successfully challenge the presumption of correctness, CMI must show by a preponderance of the evidence—or evidence that is more convincing than the evidence relied upon by CBP—that the agency erred. Here, the evidence submitted by the company simply indicates that Han Ya Nail has the capability of producing nails. Such evidence does not call into question the evidence that Han Ya Nail’s owner, through his company, illegally transshipped Chinese steel nails to the United States and falsified their country of origin. Nor does the evidence challenge CBP’s conclusion that the steel nails imported by CMI are illegally transshipped and are of Chinese origin. Therefore, CMI has failed to overcome the presumption of correctness attached to CBP’s assessment of antidumping duties for the shipment of steel nails at issue in this protest. HOLDING: CMI has failed to overcome the presumption of correctness attached to CBP’s determination that the shipment of steel nails at issue in this protest are of Chinese origin, illegally marked, and transshipped from Korea; therefore, the steel nails are subject to antidumping duties. For all the reasons set forth above, the protest must be DENIED IN FULL. In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the Protestant no later than 60 days from the date of this letter. Sixty days from the date of the decision, the Office International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division