Enforcement of Judgment and Reliquidation

Home Products International, Inc. v. United States is one of those cases that causes much head scratching and some gnashing of teeth.

There is a long-recognized principle of customs law that once Customs and Border Protection liquidates an entry, that liquidation is final as to all parties. That principle is enshrined in law at 19 USC 1514(a), which says, in relevant part, that a liquidation:

shall be final and conclusive upon all persons (including the United States and any officer thereof) unless a protest is filed in accordance with this section, or unless a civil action contesting the denial of a protest, in whole or in part, is commenced in the United States Court of International Trade in accordance with chapter 169 of title 28 within the time prescribed by section 2636 of that title . . . .

The problem is Home Products stems from the fact that after 10 years of apparently hard-fought litigation in the Court of International Trade, the Court issued a judgment that the entries of ironing boards subject to an antidumping duty order should be liquidated at rate of 72.29%. Contrary to the Court's order, Customs liquidated the entries as entered at 9.47%. This error was not noticed until after the liquidation became final under 19 USC 1501 (i.e., 90 days later).

Home Products, one of the domestic parties to the antidumping litigation, noticed the error and notified Customs. Customs then asked the Court to issue an order directing it to reliquidate the entries, which the Court did.

That did not sit well with Target, which was the importer of 40 entries of the subject merchandise. There were almost certainly other importers facing the same increase in duty. Target, reasonably enough, argued that the erroneous liquidations were final and no further action could be taken to collect the unpaid millions of dollars in antidumping duties.

What was the Court to do?

My immediate thought was that Target is the victim in this circumstance. Target's entries liquidated as entered in the ordinary course. That was a mistake by Customs and not the result of any misrepresentation or negligence by Target. Under the normal rules, those liquidations should be final and conclusive. The onus to make up the missing revenue should fall on Customs as it was the only party that made an actual mistake. I recognize that this analysis, if applied, would end up in a windfall to Target. That is true, but that is a risk built into the rule that liquidations are final. If CBP under collects revenue and there is no violation by the importer, that is on Customs not the importer.

But, the law is more complex than the single rule on finality of liquidation. First of all, nothing in 19 USC 1514(a), relating to the finality of a CBP liquidation, mentions an antidumping duty determination by the Court of International Trade or Federal Circuit. That is separately covered in 1514(b), which reads:

With respect to determinations made under . . . subtitle IV of this chapter which are reviewable under section 1516a of this title, determinations of the Customs Service are final and conclusive upon all persons (including the United States and any officer thereof) unless a civil action contesting a determination listed in section 1516a of this title is commenced in the United States Court of International Trade . . . .

Emphasis added. Subtitle IV is titled "Countervailing Duty and Antidumping Duties." Section 1516a is titled "Judicial Review In Countervailing Duty and Antidumping Duty Proceedings." That should give you a hint to where this is going.

In this case, a civil action was commenced in the CIT to challenge a determination under subtitle IV of the law. Therefore, the exception to the finality of a Customs determination explicitly included in Section 1514(b) applies. Moreover, 19 USC 1516a(e) states that entries subject to the determination "shall be liquidated in accordance with the final court decision in the action." Together, these statutes provide a pretty clear indication that Congress expected Customs to apply CIT decisions to the subject entries and that a contrary liquidation would not be a bar to the Court enforcing its decision.

The question remaining is how is the CIT to make that happen? In this case, the Court treated the question as a motion under the Court's inherent authority to enforce its judgments. This power is necessary to ensure that the Court can provide complete relief when relief is appropriate.

The Court approached the enforcement action as a question of whether to issue an affirmative injunction requiring Customs to reliquidate the entries in conformity with the order. That means issuing a substantial bill to Target and the other importers.

CIT Rule 71 addresses enforcement of a judgment for or against a non-party such as Target and also Customs. The rule states only that the procedures used to enforce a judgment for or against a party apply to non-parties. Target made a motion to intervene, which appears to have been misplaced because the case itself is over. Nevertheless, the Court welcomed Target's submission and turned to the appropriateness of granting an injunction.

Turning to the enforcement, the Court found that the erroneous liquidation had been brought to its attention soon enough after the error to merit correction. For this, the Court "borrowed" the 180-day period applicable to a timely protest of a liquidation. In other words, no one rested on their rights to such a degree that the erroneous liquidations should stand.

Next, the Court found Target had notice of the correct rate of duty via the Federal Register Notice of the Court's decision. This is debatable in fact, but a legal reality. Once the Court determined that Target and the other similarly situated importers were aware of the windfall that resulted from the erroneous liquidation, the Court found the equities to favor correcting the liquidations, which is exactly what it ordered.

Note that there are some decisions indicating this is not the correct reading of the law. In particular Cemex, S.A. v. United States, 384 F.3d 1314 (Fed. Cir. 2004). The Court of International Trade addressed that case head on. First, it noted that a narrow reading of the decision is that the parties sought correction of the erroneous liquidation too late to still be entitled to relief. The broader reading that that domestic parties have no remedy to correct an erroneous liquidation seems inconsistent with the statutory analysis set out above. Thus, the Court declined to adopt that approach.

I follow all of that just fine and hope the explanation is clear. I admit that I had to overcome an initial and fairly visceral conclusion that this decision was incorrect. My conclusion was largely informed by my professional focus on representing importers in actions to recover overpaid duties and defending them against collection actions. In most normal customs matters, finality is a strong argument provided there is no violation. This, on the other hand, is a different circumstance with different applicable law.

I do have one additional concern, again largely informed by my experience. Why does CBP get to collect these duties without repercussions? Had a private party failed to follow a Court order, the party would be at risk of serious consequences from the Court. Would it have been appropriate for the Court to issue a Show Cause order requiring CBP to explain what happened and why it should now be permitted to collect these duties? Is there any mechanism by which CBP could share the burden of the duties to relieve the importers of an unexpected expense? I do not know the answer to either of those questions.

There are many problems with trying to hold CBP responsible. First, CBP would have to find some previously allocated money to apply to the judgment. If Congress allocated those funds, it seems unlikely CBP could make them available for another purpose. Otherwise, the money would come from the Treasury and go to the Treasury. Second, as long as the importers are not paying the duty, the price of the product in the US is unlikely to go up and the relief granted the domestic industry in the antidumping duty case would be diluted through no fault of the domestics. That is true whether CBP were ordered to pay the duties, or forgo collecting all or a portion of the duties.

It feels wrong for an importer to get a bill after liquidation because CBP messed up the liquidation of its entries following a case in which the importer did not even participate. As much as that hurts, it seems to be the best result.


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