Importers Hit With Evasion Rulings Join Ongoing Thai Wheel Litigation

Trailstar, Dexter Distribution Group and Lionshead Specialty Tire and Wheel said in their separate complaints that in April, Commerce incorrectly found that steel trailer wheels between 12 and 16.5 inches in diameter that were produced by exporter Asia Wheel in Thailand were covered by the AD/CVD orders on the products from China. Then, based on that scope ruling, the department illegally ruled in August that the importers had attempted to evade the duty by failing to disclose them as covered when entering their merchandise, they said.

The 2019 AD/CVD orders on Chinese trailer wheels cover “rims, discs and wheels that have been further processed in a third country,” Trailstar said. Along with the order, Commerce released a scope memo that included “exhaustive discussion" of whether the third country assembly provision covered wheels made from rims and discs both from China, or whether it covered wheels made from either rims or discs from China. The memo had said both components must be sourced from China to render a wheel subject to the order, the importers said.

However, in its April scope ruling on Asia Wheel’s tires, Commerce reversed course, the importers said (see 2312010047). By that time, domestic steel wheel producer Dexstar had accused the three importers of transshipping Chinese tires through Thailand, and CBP had already begun evasion investigations. As many of Asia Wheel’s products were manufactured using Chinese steel discs, the importers said they were subsequently hit with an evasion ruling for failing to pay AD/CVD on the imports.

It was unlawful for CBP to ignore Commerce’s initial 2019 scope memo and seek a new ruling, the importers said. Also, Commerce acknowledged that the scope of the order was ambiguous, meaning that the importers’ merchandise should never have been considered covered by AD/CVD at the time of entry, they said.

As to the evasion ruling, they said they hadn't made any attempts to evade AD/CVD, as that would require “CBP to find that the entry in question was made by a material false statement or act or material omission.”

“A reasonable disagreement over the scope of the Orders cannot be considered a ‘material and false statement or act or a material omission,’" Lionshead said.

The importers said they had been given no notice that trailer wheels with only one Chinese component could be covered by the orders, so they relied on the “‘clear and specific instructions’” in the 2019 scope memo. Government agencies are required to provide fair warning if such regulations change without notice, they said.

The importers also said Commerce may have violated their rights under the Federal Circuit's recent Royal Brush decision, in which the appeals court ruled importers’ due process rights were violated when duty evasion was found based on undisclosed proprietary information, Lionshead and Trailstar said.

“The confidential version of the final determination or any other confidential documents on the record have never been released to Lionshead and the other importers,” Lionshead said.

Asia Wheel has its own case winding through the court system contesting the same scope ruling (see 2312010047), as well as another challenging another scope ruling that found the same for another set of AD/CVD orders on steel wheels between 22.5 and 24.5 inches in diameter (see 2308110057). It moved for judgment in the latter case Jan. 30 (see 2401310069).