Target on Finality

In the last post, about the Federal Circuit’s very important decision on due process and allegations of evasion of antidumping duties, I made a snarky, offhand comment that the government believes “liquidation is magic.” That was in the context of the government arguing that Customs’ liquidation of entries mooted an appeal, thereby taking away the importer’s right to further judicial review. I said that knowing full well that I still needed to write this post summarizing Target Corp. v. United States in which Target made what I want to be a valid and righteous argument that Customs’ improper liquidation of entries at a favorable rate of antidumping duty prevents the Court of International Trade from ordering Customs to collect the legally applicable duties. But it turns out that while liquidation is an important legal step, in at least one unusual circumstance it is not sufficiently powerful to overcome the full force of an Article III court.

Understanding this case requires a lot of background from a prior decision called Home Products, which I posted about here. Reading that post will provide useful context. The quick and dirty version is that Home Products involved the antidumping duty order on ironing boards from China. Target imported ironing boards and deposited estimated antidumping duties at the then-prevailing rate of 9.47%. Pursuant to a court order, the liquidation of those entries was enjoined while the parties to the dumping case argued about the correct rate.

In Home Products, after significant litigation, the Court of International Trade accepted a settlement resulting in an antidumping duty assessment rate of 72.29%. The Court lifted the injunction and Commerce directed Customs to reliquidate the entries at the correct rate of duty. Customs, however, liquidated 40 of Target’s entries at the 9.47% deposit rate. The government discovered the incorrect liquidations after the 90-day period in which Customs could reliquidate to correct its error. A very important note here: this reliquidation was not just an administrative error; it was contrary to the judgment from the Court of International Trade.

Target was not happy about having to pay additional duties on entries that were liquidated at a favorable rate. What followed was a lot of litigation in which Target tried to figure out how to use the Home Products case as a vehicle to preserve its favorable liquidations. That resulted in interesting procedural litigation on whether Target could intervene in Home Products. While intervention was not allowed, the CIT let Target participate as a non-party under the Court’s Rule 71. When the CIT eventually ordered Customs to reliquidate the entries consistent with its prior order, Target appealed.

Photo by Filip Mroz on Unsplash

The Court of Appeals for the Federal Circuit decided the appeal on procedural grounds. The Court held that Target might have appealed the CIT’s decision prohibiting it from intervening, but it did not, and the intervention issue was not before it. Moreover, the Court found that Target had not established that it satisfied the requirements to participate in the case as a non-party. As a result, the Federal Circuit dismissed the appeal. But, before slamming the door shut on Target, the Court noted that Target had protested the reliquidations and, if Customs denied those protests, Target can challenge the liquidations in its own case. The current case is exactly that challenge.

That set up a clash between the statutory finality of liquidation and the power of the Court of International Trade to issue orders to enforce its judgments. It also highlights a bigger-picture question about the power of the Court of International Trade to fashion a remedy in a lot of cases that involve liquidated entries but not the merits of the liquidation.

At this point, we need to discuss the finality of liquidation. The law (19 USC 1514(a)) provides that specified decisions of Customs are “final and conclusive upon all persons (including the United States and any officer thereof) unless a protest is filed . . . .” That means once CBP liquidates an entry, the classification, value, rate of duty, and other specified decisions within the jurisdiction of Customs are set in legal stone unless there is a valid protest filed or another exception applies. When the importer is happy with the treatment of the entry, the finality of liquidation is a good thing as CBP cannot go back and assess additional duties. When the importer disagrees with the liquidation, the 180-day protest deadline becomes vitally important. In the absence of a valid protest, any effort to challenge a protestable decision will be dismissed for failing to state a claim on which relief can be granted.

Exceptions to finality include the 90-day period in which CBP can voluntarily reliquidate the entry. The other major exception is where the liquidation was the result of a material false statement or omission by the importer or other person involved in the entry. In that circumstance, Customs can reliquidate the entry to collect the correct duties, taxes, and fees and can assess a penalty as well.

Next, a quick primer on the Court of International Trade. The Court was created in the Customs Court Act of 1980 as the successor to the Customs Court. The CIT is a court under Article III of the Constitution, meaning its judges are nominated by the President and confirmed by the Senate to lifetime appointments. It also means CIT judges can, and often do, sit in other courts. They can do this because they are, for all intents and purposes, district court judges. Like all federal courts, the CIT is a court of special and limited jurisdiction. Unlike other federal courts, the CIT has nationwide jurisdiction but relatively narrow subject matter jurisdiction. Important for this discussion, the CIT has “all the powers in law and equity of, or as conferred by statute upon, a district court of the United States.” 28 USC 1585.

Target’s argument was basically that the liquidation at 9.47% was final and Customs had no authority to reliquidate after the initial 90-day period for voluntary reliquidations. There are plenty of cases that support that argument. But the facts here are unique. The original erroneous liquidation appears to have been Customs’ fault and Customs’ decision to liquidate at the lower rate is arguably a protestable event, even though no one is going to protest a lower-than-expected liquidation (which is also not contrary to the importer). But the problem here is whether the reliquidation at the higher rate to correct the error was Customs' decision, making it a protestable event. Although the Federal Circuit seems to have found it to be without actually addressing the issue, it does not really matter. Commerce’s instructions to reliquidate at 72.9% appear to have been correct and consistent with the Court’s order and Customs had no choice but to follow the instructions. The question now before the CIT is whether that erroneous liquidation, done in violation of a valid Court order is binding on all parties, making the subsequent reliquidations invalid.

The Court rejected that notion. Basically, the Home Products case was properly before the Court of International Trade. As is often the case in the trade remedy cases, the outcome of that litigation impacted many enjoined entries including entries by importers like Target who were not party to the case. In other words, it is agreed that had CBP acted properly, it would have liquidated the entries at the higher rate as ordered by the Court. By failing to act in accordance with the order, CBP accidentally frustrated the remedy the Court granted to the petitioners in that case. Moreover, that remedy was agreed upon as part of a settlement, so it was arguably acceptable to lawyers representing exporters and producers.

Courts do not have to sit on their hands when someone interferes with the enforcement of an order or judgment. According to the CIT, statutory finality of liquidation does not interfere with the Court’s inherent ability to enforce its orders. That is most evident here where the underlying issue was the section 1516 review of a Commerce Department determination for which the liquidation was first suspended and then enjoined to prevent exactly this kind of mootness argument. See 19 USC 1514(b). In such cases, the law requires that the entries be liquidated in accordance with the final decision of the Court. The only way to ensure that happens is to recognize that finality of liquidation does not apply in trade remedy cases once the Court’s jurisdiction over the entries has been invoked. The liquidation-protest process does not divest the Court of the power to ensure that its final judgment is implemented. To find otherwise leads to the absurd possibility of the parties expending the time, money, and effort to litigate often complex trade matters before the Court only to find that their hard-won result (either way) can be frustrated by Customs making a mistake. That cannot be the result Congress had in mind when it passed the Customs Court Act of 1980, which gave the new Court of International Trade all the powers in law and equity that are necessary to provide complete relief.

This is a big case. It is a direct challenge to the scope of the authority of the Court and whether the CIT is truly a court of equal stature and power to the regional district courts. That seems to be what was intended. The quirky set of facts in this case may not be the best vehicle to make that determination, but I fully expect the Federal Circuit to have to weigh in.