Do the U.S. Constitution’s procedural protections governing the deprivation of life, liberty and property apply in the context of import regulation? That question may deserve a skeptical response, especially in light of the longstanding principle that “engaging in foreign commerce is not a fundamental right protected by notions of substantive due process.” [1] But even if there is no substantive right to engage in foreign commerce, is there nonetheless a right to procedural protections, under the due process clause of the U.S. Constitution, when the government takes action to restrict importation? Judicial precedent states that such guarantees exist, but they have been narrowly construed; procedural due process challenges have generally been unsuccessful in the trade remedies field [2].
A recent decision by the Court of Appeals for the Federal Circuit, however, reveals that constitutional constraints may in fact govern the procedures by which importers are subject to trade-restricting decisions of U.S. agencies. Royal Brush Mfg., Inc. v. United States involved an allegation that Royal Brush, an importer of pencils, transshipped Chinese-origin pencils through the Philippines in order to evade U.S. antidumping duties imposed on pencils from China. [3] U.S. Customs and Border Protection (CBP) opened an investigation under the Enforce and Protect Act of 2015 (EAPA) [4], and conducted a “verification” at the site of the Philippine manufacturer. CBP obtained information, including production orders, invoices, and photographs of equipment, from which it concluded that the Philippine facility was incapable of producing the quantity of pencils that Royal Brush had imported into the United States. In part on the basis of this information, CBP determined that Royal Brush had evaded the AD duties on imports of pencils from China. However, the information obtained by CBP was treated as confidential and was not released to Royal Brush or its counsel, because CBP’s regulations do not authorize the release of confidential information obtained in an EAPA investigation. [5]
Royal Brush appealed to the U.S. Court of International Trade (CIT), which remanded the case and ordered CBP to provide public summaries of the confidential information, but it rejected Royal Brush’s argument that it was entitled to review the confidential information itself. The CIT stated that “Congress has not mandated that Royal Brush be afforded such access and Royal Brush has not shown that due process requires it.” [6] On remand, CBP prepared public summaries of the confidential information, but the redactions emptied the public versions of content – for example, replacing a photograph with the word “photo,” and replacing numbers with the word “number.” [7] The CIT found that CBP complied with its regulatory obligations “by providing the necessary public summaries of the confidential information,” and again held that “Royal Brush has not established that CBP has failed to provide Royal Brush the process that it is due.” [8] Accordingly, the CIT affirmed CBP’s remand determination.
The CIT’s decision raises the question, what process is due? [9] This is particularly important in a situation – such as under EAPA – where Congress has not specified through legislation the procedures by which confidential information is to be managed, unlike AD/CVD proceedings, in which those procedures are laid out in elaborate detail. [10]
The Court of Appeals answered that question, and reversed. [11] It explained that there is one “relatively immutable” principle of due process, which is that “the evidence used to prove the [g]overnment’s case must be disclosed to the individual so that he has an opportunity to show that it is untrue.” [12] The Court of Appeals quoted several of its prior decisions, as well as those by other courts regarding the due process requirement that a party be granted access to the information on which the Government relies in reaching an adverse determination. The Court found that there is “no legitimate government interest here in refusing to provide confidential business information to Royal Brush,” given that the Government’s concerns about the “necessity of secrecy can be alleviated by issuing a protective order,” as in AD/CVD cases. [13]
The Government, in defending the CBP’s actions, contended that neither the EAPA nor CBP’s regulations provide a mechanism, such as a protective order, under which confidential information could be disclosed to Royal Brush or its counsel. “In other words,” the Court of Appeals summarized the Government’s position, “the government can avoid compliance with due process requirements by the simple expedient of failing to provide for a protective order in a statute or regulation.” [14] The Court rejected that contention: “We are aware of no case supporting any such extraordinary theory, and it is untenable on its face. The right to due process does not depend on whether statutes and regulations provide what is required by the constitution.” [15] The Court found that CBP has the “inherent authority” to issue protective orders [16], and it turned the Government’s logic on its head – reasoning that the absence of an authorizing statute does not prevent CBP from issuing protective orders in the absence of a statutory or regulatory provision prohibiting it from doing so. [17] On the latter point, it could be argued that, since the Court found that a party’s due process right to confront the evidence used against it emanates from the Constitution, a statute or regulation prohibiting the issuance of protective orders would be unconstitutional, and hence could not lawfully prohibit the disclosure of the information to the targeted party under some sort of protective mechanism. But the Court of Appeals in Royal Brush was not called on to address that difficult situation. [18]
Royal Brush will be remanded to CBP, which will be required to develop a protective order under which it may release the information on which it has relied to the company’s counsel. In addition, the Government has recently requested a voluntary remand in at least one other case in light of the Royal Brush decision [19], and it is likely that CBP will establish a procedure for issuing protective orders in EAPA proceedings, to avoid similar disputes regarding the due process rights of targeted importers. This is particularly urgent as EAPA proceedings have become more active in recent years. More broadly, the Court of Appeals’ decision undoubtedly will have implications for other proceedings in which CBP is involved and which currently do not provide for the disclosure of confidential information to parties under protective order.
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Through his 40 years of experience in the international trade regulatory field, Neil Ellis has litigated numerous cases involving the U.S. trade laws before the administrative agencies, U.S. courts, and in WTO dispute settlement proceedings. Please contact us at neil@neilellislaw.com with questions you may have regarding trade litigation issues.
[1] NEC Corp. v. United States, 151 F. 3d 1361, 1369-70 (Fed. Cir. 1998).
[2] See, e.g., NEC Corp., supra; PSC VSMPO-Avisma Corp. v. United States, 688 F. 3d 751, 761-62 (Fed. Cir. 2012); Gilda Indus. v. United States, 446 F. 3d 1271, 1284 (Fed. Cir. 2006) (no due process right to “additional procedural protections” in challenging USTR action under Section 301); Transpacific Steel LLC v. United States, 4 F. 4th 1306, 1333-35 (Fed. Cir. 2021) (rejecting equal protection argument regarding application of Section 232 steel tariffs).
[3] Royal Brush Mfg., Inc. v. United States, 75 F. 4th 1250 (Fed. Cir. 2023).
[4] 19 U.S.C. § 1517.
[5] The CBP regulation governing EAPA procedures does establish rules governing the submission of confidential information, which specifies that the submitting party must also prepare public summaries “in sufficient detail to permit a reasonable understanding of the substance of the information.” 19 C.F.R. § 165.4(a)(2). However, unlike the rules governing the treatment of confidential information in AD/CVD proceedings, neither Congress nor CBP has authorized the release of the confidential information in an EAPA investigation to the party that is the target of the allegations or its counsel.
[6] Royal Brush Mfg., Inc. v. United States, 483 F. Supp. 3d 1294, 1308 (Ct Int’l Trade 2020).
[7] 75 F. 4th at 1254. The Court of Appeals found that “{t}he public summaries . . . provided no meaningful information.” 75 F. 4th at 1259.
[8] Royal Brush Mfg., Inc. v. United States, 545 F. Supp. 3d 1357, 1369 (Ct Int’l Trade 2021).
[9] See, e.g., NEC Corp., supra, 151 F. 3d at 1371 (“. . . NEC is due a fair and honest process; the question that remains, then, is what process is due.”)
[10] See 19 U.S.C. § 1677f.
[11] This note focuses on one particular aspect of CBP’s handling of confidential information – namely, its refusal to provide the evidence on which it relied to Royal Brush or its counsel. CBP’s denial of Royal Brush’s request for an opportunity to submit rebuttal information was also rejected by the Court of Appeals, but that topic is not explored further here.
[12] 75 F. 4th at 1257 (quoting Greene v. McElroy, 360 U.S. 474, 496 (1959)).
[13] 75 F. 4th at 1259.
[14] 75 F. 4th at 1260.
[15] Id.
[16] 75 F. 4th at 1260, 1262.
[17] Thus, the Court of Appeals implicitly rejected the CIT’s statement that “CBP is precluded from disclosing {confidential information} by statute and regulation.” 545 F. Supp. 3d at 1367 (emphasis added).
[18] The Court of Appeals also brushed aside CBP’s argument based on the legislative history of the EAPA – namely, that a draft of the legislation expressly authorized CBP to issue protective orders, but that provision was deleted in a later iteration of the legislative text. Courts on occasion have interpreted a Congressional decision to delete a proposed statutory provision as evidence of legislative disapproval of the deleted provision. But the Court of Appeals declined to accept that logic, stating flatly that “there is no indication that Congress objected to protective orders.” 75 F. 4th at 1261.
[19] See Defendant’s Partial Consent Motion for Voluntary Remand, ECF No. 62, in Newtrend USA Co. v. United States, CIT No. 22-347 (Sept. 18, 2023).