The issue of fraud committed in trade cases handled by Commerce recently has garnered much-needed attention by both the international trade bar and the courts. On February 2, 2011, the Customs and International Trade Bar Association held a seminar in Washington, D.C. entitled "Trust but Verify: Fraud in Agency Trade Proceedings," during which two federal judges, officials from the U.S. government, and members of the trade bar spoke about the fraud in agency proceedings. Representatives of U.S. producers reported that fraud is occurring ever more frequently in cases before Commerce. The panel considered means within existing federal law to address the issue, including possible application of the federal False Claims Act and provisions concerned with Customs fraud.
Five days later, in Home Products International, Inc. v. United States, App. No. 2101-1184, the U.S. Court of Appeals for the Federal Circuit reversed the U.S. Court of International Trade ("CIT") with directions to remand a case to Commerce because newly discovered evidence indicated that the agency's proceedings were tainted by material fraud. (See http://www.cafc.uscourts.gov/images/stories/opinions-orders/10-1184.pdf.)
Home Products International concerned an appeal of Commerce's final results in the second administrative review of the antidumping duty order on Ironing Tables from China. During the review, a Chinese producer named Since Hardware submitted false documentation in order to establish understated production costs for ironing tables it had exported to the United States. Because the fraud was not discovered and thus Since Hardware's calculated production costs were improperly low, it was assigned a de minimis dumping margin. Since Hardware stood to benefit from its false submissions in two ways: the de minimis margin would have caused U.S. imports of ironing tables produced by Since Hardware that were covered by the second review to be assessed no dumping duties, and future entries of ironing tables produced by Since Hardware would be charged no cash deposits.
Although it did not yet know of the fraud, Home Products International, a U.S. producer of ironing tables, appealed the second review final results to the CIT. Before the CIT had issued its decision, Commerce issued the final results of the third administrative review. In that review, Commerce finally discovered Since Hardware's fraud. Significantly, Commerce also concluded that Since Hardware had committed the same fraud in the second review.
After the final results in the third review were issued, Home Products sought to amend its complaint in the appeal of the second review to include new allegations of fraud by Since Hardware. Home Products also asked the CIT to remand the second review to Commerce with directions that Commerce reconsider Since Hardware's second review dumping margin in light of the newly discovered evidence of fraud. The government, however, opposed the motion, arguing that the newly discovered evidence of fraud was "irrelevant" because it was not on the original record of the second review. The CIT denied Home Product's request, stating that it "must avoid the temptation to consult extra-record facts and evidence unfolding in subsequent, ever-evolving administrative reviews of antidumping orders." Home Products appealed the CIT's decision to the Court of Appeals.
The Federal Circuit found that the CIT abused its discretion when denying Home Product's request for a remand, reasoning that administrative agencies "possess inherent authority to reconsider their decisions," and that that authority is "even more fundamental when … it is exercised to protect the integrity of its own proceedings from fraud." Home Products, App. No. 2101-1184 at page 13. In reaching its decision, the Federal Circuit labeled as "strange" the government's argument "that nothing in the antidumping statute instructs Commerce to conduct administrative reviews to uncover fraud." Home Products, App. No. 2101-1184 at 10 and 14. The second review final results have been remanded to Commerce.