Liquidation Un-Deemed by CIT

What happens when Customs decides that an entry was "deemed liquidated" while the entry is suspended by the Commerce Department? Apparently, nothing. That is the gist of the decision in Fraserview Remanufacturing Inc. v. United States, a (relatively) recent decision from the Court of International Trade. 

The facts of this case are a bit complicated. The imported merchandise was softwood lumber from Canada, which is subject to an antidumping and countervailing duty order. As part of the administrative process, on March 19, 2020, Commerce ordered that CBP suspend the liquidation of the 80 entries subject to this case. Customs, however, mistakenly scheduled the entries for manual liquidation. Inexplicably, Customs, citing "system errors," failed to actually liquidate them. After noticing the failed (and incorrect) effort to liquidate the entries, CBP marked the entries as having been deemed liquidated by operation of law on August 7, 2020. 

"Deemed liquidation" occurs when CBP fails to liquidate an entry within six months after receiving notice from Commerce that it has lifted the suspension of liquidation. 19 USC 1504(d).  Customs published notice of these "liquidations" on September 2 and 3, 2020. 

When the plaintiff realized that Customs considered the entries to be liquidated, despite the suspension, it reached out to CBP asking that the agency reset the status to unliquidated. Customs responded that the 180-day period in which to protest the liquidation had passed and, therefore, the entries were final. 

Not having a valid denied protest, the plaintiff filed suit in the Court of International Trade under the court's "residual jurisdiction." 28 USC 1581(i). As happens almost every time a plaintiff asserts jurisdiction under (i) to challenge a mistake Customs made, the United States moved to dismiss the case on the grounds that the plaintiff failed to protest the liquidation. Absent a protest, the argument goes, the liquidation is final and the plaintiff has no legal recourse.

The thing about this case, though, is that the entries should never have liquidated to start with. Both parties seem to agree with that. There is caselaw (even if in the legal netherworld of "nonprecedential" decisions) stating that erroneous liquidations can, and therefore, should be protested. The government leaned into that, putting the responsibility on the importer to monitor liquidations and file protests accordingly. This is consistent with the government's current position in the Section 301 litigation that Customs actions can only be undone by reliquidation and that reliquidation is impossible without a timely protest.  

The interesting question in this case is whether liquidation every actually happened. Remember, the first mistake was that CBP scheduled the entries to liquidate contrary to Commerce's order to suspend liquidation. Then, Customs tried and failed to liquidate the entries in accordance with its erroneous understanding of the instructions. Given that everyone agrees the entries should not have liquidated, this seems like a perfectly good way for the that the United States to fix its mistake and resolve the case.

Instead, Customs argued that its notice of the deemed liquidation is a protestable event, making it the equivalent of a liquidation. That may be true for a manual liquidation, for which notice is treated as the evidence of liquidation. A deemed liquidation is different. Under the customs regulations, a deemed liquidation occurs on the expiration of the six-month period after suspension ends, not notice. 19 USC 1504(d) and 19 CFR 159.9(c)(2). Here, Commerce did not lift the suspension so deemed liquidation was never triggered. 

Moreover, the current version of the protest statute, 19 USC 1514, requires that the importer (or other authorized party) file the protest within 180 days of the liquidation. For deemed liquidations, that is the actual date of liquidation, not the notice. Because the notice is irrelevant to the protest clock and because the deemed liquidation never actually occurred, the entries are still suspended, exactly as they should have been. The Court, therefore, denied the motion to dismiss and ordered CBP to reset the entries to unliquidated status. When the AD/CVD process is complete, Commerce will tell Customs what to do and we will all hope Customs does it right.


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