UNITED STATES оf America, Plaintiff, v. AMERICAN HOME ASSURANCE CO., Defendant.
Court No. 10-00185
United States Court of International Trade
Jan. 23, 2014
Slip Op. 14-7
GOLDBERG, Senior Judge
In the Preliminary Calculation Memorandum, Commerce specifically identified its selection of CONWGT3U (the conversion factor) as “the most appropriate conversion weight to use,” stating that it “represents the weight of the finished nail plus any collating materials, reflecting the scope of the order and also the fact that collating materials are part of the finished product.” Preliminary Calculation Memorandum at 1-2. In addition, Commerce provided “over two hundred pages of detailed calculations” supporting its decision to use what the agency believed to be the most appropriate conversion factor. See Def.‘s Brief at 35. As such, “Commerce clearly gave Stanley ample opportunity to raise the issue after the Preliminary Results.” Def.‘s Brief at 36. Because it did not do so, Stanley failed to exhaust its administrative remedies and is thus barred from pursuing its claim of ministerial error in this forum.
IV. Conclusion
Stanley‘s Motion for Judgment on the Agеncy Record is denied, and Mid Continent‘s Motion for Judgment on the Agency Record is denied in part and granted in part. Further, the Government‘s Motion for Partial Voluntary Remand is granted. This matter is remanded to the Department of Commerce for further proceedings not inconsistent with this opinion. A separate order will enter accordingly.
Herbert C. Shelley, Steptoe & Johnson LLP, of Washington, DC, argued for defendant. On the brief wеre Taylor Pillsbury, Meeks, Sheppard, Leo & Pillsbury, of Newport Beach, CA, and Ralph Sheppard, Meeks, Sheppard, Leo & Pillsbury, of Fairfield, CT.
OPINION
GOLDBERG, Senior Judge:
This case is before the court on competing cross-motions for summary judgment. In this action on a bond, Plaintiff, the United States (“United States” or “the Government“), seeks recovery of unpaid antidumping duties from surety Defendant American Home Assurance Company (“AHAC“). The parties dispute (1) whether AHAC is liable for the unpaid duties as the surety on a continuous bond, and (2) assuming AHAC is liable, whether AHAC owes the Government both prejudgment interest in the form of equitable interest and interest pursuant to
SUBJECT MATTER JURISDICTION AND STANDARD OF REVIEW
In 2001, AHAC entered into a continuous bond with importer JCOF (USA) International, Inc. (“JCOF“). The Government now seeks recovery on the bond for unpaid antidumping duties. Thus, jurisdiction is proper pursuant to
Both parties have moved for summary judgment. Summary judgment is available when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” USCIT R. 56(a). To
UNDISPUTED FACTS
Importers must generally post security before U.S. Customs and Border Protection (“Customs“) will release imported merchandise from its custody. Hartford Fire Ins. Co. v. United States, 648 F.3d 1371, 1372 (Fed.Cir.2011). Importers often use surety companies to post the required security. Id. A “surety bond creates a three-party relationship, in which the surety becomes liable for the principal‘s debt or duty to the third party obligee.” Ins. Co. of the W. v. United States, 243 F.3d 1367, 1370 (Fed.Cir.2001).
AHAC is a surety company authorized to issue surety bonds. Pl.‘s Statement of Material Facts as to Which There Are No Genuine Issues to Be Tried, ECF No. 27 (“Pl.‘s Facts“) ¶ 1; Def.‘s Resp. to Pl.‘s Statement of Material Facts as to Which There Are No Genuine Issues to Be Tried, ECF No. 30 (“Def.‘s Resp.“) ¶ 1. AHAC issued the surety bond at issue in this case pursuant to аn arrangement with U.S. importer JCOF. Pl.‘s Facts ¶ 2; Def.‘s Resp.1 ¶ 2. The bond, on which JCOF and AHAC were jointly and severally obligated, had a limit of liability of $600,000 per bond period. Pl.‘s Facts ¶ 3; Def.‘s Resp. ¶ 3.2
During the period covered by the continuous bond, JCOF imported two entries of crawfish tail meat from Yangzhou Lakebest Foods Company, Ltd. (“Yangzhou Lakebest“)—a Chinese exporter. Pl.‘s Mot. & Mem. in Supp. of Mot. for Summ. J., ECF No. 27 (“Pl.‘s Br.“), at Ex. D, Resp. 4. The entries occurred on November 1, 2001 and November 2, 2001 and were identified as entry numbers M42-1164064-2 and M42-1164065-9, respectively. Pl.‘s Facts ¶¶ 4-5; Def.‘s Resp. ¶¶ 4-5. JCOF declared a zero percent ad valorem antidumping duty rate for both entries at importation. Pl.‘s Br. at Ex. D, Resp. 4.
On February 13, 2004, the U.S. Department of Commerce (“Commerce“) published the final results of an administrative review of the order on crawfish tail meat from the People‘s Republic of China. Freshwater Crawfish Tail Meat from the People‘s Republic of China, 69 Fed.Reg. 7193 (Dep‘t Commerce Feb. 13, 2004) (“Final Results“). In those results, Commerce assigned Yangzhou Lakebest an antidumping duty rate of 223.01% ad valorem. Id. at 7197. The review period spanned from September 1, 2001 to August 31, 2002. Id. at 7194.
On May 12, 2004, Commerce directed Customs to liquidate entries of the subject crawfish meat at the rates set forth in its Final Results.3 Pl.‘s Facts ¶ 9;
Much of the confusion in this case stems from litigation that an exporter other than Yangzhou Lakebest instituted in response to the Final Results. Due to the pendency of litigation, the court preliminarily enjoined the Government from liquidating entries exported by Shanghai Taoen International Trading Co., Ltd. (“Shanghai Taoen“) during the period of review. Pl.‘s Facts ¶ 8; Def.‘s Facts ¶ 8. The preliminary injunction did not affect JCOF‘s imports, as the imports came from Yangzhou Lakebest and Yangzhou Lakebest was not a party to the pending litigation. See Def.‘s Statement of Add‘l Material Facts as to Which There Are No Genuine Issues to Be Tried, ECF No. 30 (“Def.‘s Facts“) ¶ 3; Pl.‘s Resp. to Def.‘s Statement of Add‘l Material Facts as to Which There Are No Genuine Issues to Be Tried, ECF No. 37 (“Pl.‘s Resp.“) ¶ 3. Nonetheless, when the Shanghai Taoen litigation concluded, Customs reliquidated JCOF‘s two entries on June 3, 2005 (“June 2005 reliquidations“). See Pl.‘s Facts ¶ 14; Def.‘s Resp. ¶ 14. The June 2005 reliquidations resulted in new bills with a total bill amount $51,997.31 greater than the bills associated with the June 2004 liquidations.4 See Pl.‘s Br. at Exs. G, H. After Customs made a second demand on AHAC, AHAC filed protest number 2704-05-102579. See Pl.‘s Facts ¶ 16; Def.‘s Resp. ¶ 16. Again, AHAC did not institute litigation when Customs denied the protest.
Customs sent AHAC a demand letter on February 9, 2007, seeking total payment of $1,157,898.22 for unpaid duties plus interest in connection with JCOF‘s two entries. Pl.‘s Facts ¶ 18; Def.‘s Facts ¶ 18. AHAC denied liability on grounds unrelated to those it raises in the instant action. Pl.‘s Facts ¶ 19; Def.‘s Facts ¶ 19; Pl.‘s Br. at Ex. K. The Government then instituted this action on a bond on June 21, 2010. Summons & Compl., ECF Nos. 1-2. In its answer, AHAC asserts multiple affirmative defenses hinging on its belief that JCOF‘s two entries were deemed liquidated at the rate in effect at the time of entry—i.e., zero percent. See Answer to Compl., ECF No. 8. AHAC, thus, believes it is not liable under the surety bond.
DISCUSSION
The parties raise two issues in their summary judgment briefing. First, AHAC argues that the bills underlying the Government‘s collection action “are legally
I. AHAC is legally obligated to pay under continuous bond number 270114235
The first issue in this case turns on the parties’ divergent interpretations of the legal effect of the June 2005 reliquidations. AHAC essentially argues that the untimely June 2005 reliquidations superseded and canceled the timely June 2004 liquidations. Def.‘s Br. at 6-7 (citing Mitsubishi Elecs. Am., Inc. v. United States, 18 CIT 929, 931, 865 F.Supp. 877, 879 (1994)). Because the reliquidations occurred more than ninety days after the June 2004 liquidations, AHAC further avers that the June 2005 voluntary reliquidations were invalid under
Without any valid liquidations, AHAC asserts that the entries were deemed liquidated by operation of law at the rate asserted by the importer of record. Id. at 8 (citing
According to AHAC, it did not need to challenge the June 2005 reliquidations in this Court because they were void at their inception and not merely voidable. Generally, “all liquidations, whether legal or not, are subject to [
AHAC‘s arguments are unpersuasive. The court agrees that Customs’ untimely reliquidations vacated and “substituted for the collector‘s original liquidation.” Mitsubishi, 18 CIT at 931, 865 F.Supp. at 879. Nonetheless, the court finds that the timely protest requirement applied because the entries at issue were not deemed liquidated by operation of law and because the reliquidations occurred before the June 2004 liquidations became final. Thus, the June 2005 reliquidations—“whether legal or not“—became final and conclusive against AHAC when AHAC did not institute litigation challenging them. See Juice Farms, 68 F.3d at 1346; accord Philip Morris U.S.A. v. United States, No. 89-1712, 1990 WL 79000, at *2 (Fed.Cir. June 13, 1990) (“[A]n unlawful reliquidation is not void, but is merely voidable.“).
A review of relevant case law is instructive. In Juice Farms, Customs erroneously liquidated entries subject to a suspension order. Id. at 1345. The importer did not recognize the error until the administrative review concluded, at which point the importer attempted to protest the liquidations. Id. Customs denied the protest as untimely, and the importer filed suit in this Court. Id. In affirming the court‘s dismissal of the action for lack of jurisdiction, the Federal Circuit found that even inadvertent, unlawful liquidations are subject to the timely protest requirement. Id. at 1346.
In Cherry Hill, the Federal Circuit concluded that the timely protest requirement applied with equal force in government collection actions. 112 F.3d at 1557. Nonetheless, based on the facts of the case, the court identified an exception to this general rule. Id. at 1558. In Cherry Hill, Customs delayed more than thirteen months before liquidating certain entries as dutiable that had previously entered duty-free. Id. at 1551. In the intervening period between entry and liquidation, though, a liquidation had already taken effect by operation of lаw under the deemed liquidation statute. Id. at 1559 (citing
Unlike in Cherry Hill, there were no final and conclusive liquidations in this case when the June 2005 reliquidations occurred. First, the June 2004 liquidations were not yet final under
On its face,
AHAC has not convinced the court that a contrary conclusion is warranted. Indeed, adopting AHAC‘s interpretation would set untenable precedent. Logically extended, AHAC‘s argument would mean that any reliquidation after six months could result in a retroactive deemed liquidation, as the reliquidation would supersede the original, timely liquidation. AHAC‘s argument also fails if it hinges on the belief that the June 2005 reliquidations were invalid because they violated
AHAC‘s interpretation also does little to advance the purposes of the deemed liquidation statute.
In sum, the facts of Cherry Hill are distinguishable from those in the instant case; accordingly, a different result obtains. AHAC bore the burden оf timely challenging the admittedly erroneous reliquidations before this court. Because it did not, and because no exception to the timely protest requirement applies, AHAC has not preserved its challenge and is liable as a surety under the continuous bond.5 See Juice Farms, 68 F.3d at 1346.
II. The Government is entitled to equitable interest, but not 19 U.S.C. § 580 interest
The court must next determine the amount of money due to the Government. The importer‘s total liability for the two entries exceeds AHAC‘s $600,000 bond limit. See Pl.‘s Facts ¶ 11; Def.‘s Resp. ¶ 11. Therefore, if AHAC owes anything over the bond limit, it will come exclusively as damages in the form of interest for its own default. The Government seeks two types of interest in this case—statutory interest under
A. Statutory interеst under 19 U.S.C. § 580 is not available when the bond secures antidumping duties
The historical context of
Against this backdrop, both sides advance divergent interpretations of
AHAC counters that revenue generation was the overriding purpose of early customs duties and that antidumping duties are imposed for distinct, remedial reasons. See Def.‘s Reply to Pl.‘s Resp. to Def.‘s Cross-Mot. for Summ. J. & in Opp‘n to Pl.‘s Mot. for Summ. J., ECF No. 42 (“Def.‘s Resp. Br.“), at 9. AHAC asserts that the disparate purposes underlying duties implementing trade remedies and customs duties preclude interpreting “duties” in
i. Legal framework
Supreme Court precedent teaches that the meaning of statutory language can expand over time. See West v. Gibson, 527 U.S. 212, 218 (1999) (“Words in statutes can enlarge or contract their scope as other changes, in law or in the world, require their application to new instances....“). A “statute is presumed to speak from the time of its enactment” and to “embrace[] all such... things as subsequently fall within its scope.” De Lima v. Bidwell, 182 U.S. 1, 197 (1901). As a result, general, prospective statutes apply to later-created concepts so long as the “language fairly and. clearly includes them.” Newman v. Arthur, 109 U.S. 132, 138 (1883); accord Cain v. Bowlby, 114 F.2d 519, 522 (10th Cir.1940). The court looks to the meaning and intent of the original statute to determine whether that statute fairly and clearly includes a new conсept. See Jerome H. Remick & Co. v. Am. Auto. Accessories Co., 5 F.2d 411, 411 (6th Cir.1925) (cited approvingly in Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 158 (1975)).
For example, in Cain, a widow instituted litigation against a truck driver who fatally struck her husband on a highway. 114 F.2d at 521. The statute underlying the widow‘s action applied to the negligence of “driver[s] of any stage coach or other public conveyance.” Id. The court addressed whether the words “other public conveyance” fairly included a truck driver operating as a common carrier even though trucks did not exist at the statute‘s enactment. Id. at 522. In its analysis, the court examined the historical purpose of stage coaches to transport passengers and property and concluded that truck drivers engaged as common carriers did not differ in any meaningful way. Id. at 523. Thus, the court extended the statute to cover truck drivers engaged as common carriers. Id.
Other courts have used reasoning similar to that found in Cain. For instance, in Jerome H. Remick & Co., another court interpreted a Copyright Act provision to apply to radio broadcasts, even though radios did not exist at the Copyright Act‘s inception. 5 F.2d at 411-
ii. 19 U.S.C. § 580 does not apply to later-created antidumping duties serving a fundamentally different purpose than historical customs duties
In light of that background, this court must decide whether “duties” in
In 1799, Congress used the word “duties” to describe the duty assessment scheme that it had established for imported merchandise, similar to the modern customs duty regime. At first glance, it might appear reasonable to read
Initially, the court notes that diffеrent entities administer antidumping duty law and customs law. Congress itself sets customs duty rates, while an administrative agency (Commerce) sets antidumping duty rates. Although Customs implements the regime that Congress has established, it does not have discretion regarding the rates of duty or whether to collect customs duties at all. Commerce, however, is authorized to investigate alleged dumping and set antidumping duty rates on its own. See, e.g.,
Moreover, ordinary customs duties and antidumping duties serve fundamentally different purposes. The court accepts that the nation‘s first customs duties were rooted in some muted protectionist principles. See Act of July 4, 1789, ch. 2, § 1, 1 Stat. 24 (1789) (creating duties “for the support of government, for the discharge of the debts of the United States, and the encouragement and protection of manufactures“). Nonetheless, the critical purpose of early duties was to generate revenue for the nascent country—a purpose that is still reflected in modern customs duties. See, e.g., United States v. Laurenti, 581 F.2d 37, 41 n. 12 (2d Cir.1978) (noting that customs duties were a principal source of early federal revenue).7 Antidumping duties, in contrast, are not intended as revenue-generating devices. See Canadian Wheat Bd. v. United States, 641 F.3d 1344, 1351 (Fed.Cir.2011). Antidumping
Due to the well-documented differences between antidumping and customs duties, the court has previously interpreted the word “duties” in an interest statute to encompass only ordinary customs duties. Dynacraft, 24 CIT at 993, 118 F.Supp.2d at 1292. In Dynacraft, an importer deposited estimated duties after an affirmаtive preliminary determination in an antidumping duty investigation. Id. at 989-90, 118 F.Supp.2d at 1288-89. The International Trade Commission ultimately reached a negative injury determination, and an antidumping duty order never went into effect. Id. at 989, 118 F.Supp.2d at 1288. The parties disputed whether interest accrued on the importer‘s duty overpayment. Id. at 990, 118 F.Supp.2d at 1289.
On this point, two statutes conflicted.
The court disagreed, equating the word “duties” in
In a different context, the Government itself has advocated an approach similar to that of the Dynacraft court. See Wheatland, 495 F.3d at 1361-
This court finds the reasoning in Dynacraft and Wheatland instructive in this case. Here, like in those cases, the court is asked to construe the open-ended word “duties” to include all types of duties. However, the Dynacraft and Wheatland cases counsel that the meaning of “duties” is not necessarily so expansive and that it may be appropriate to distinguish between duties. Such a distinction is necessary here. Antidumping duties were created over 120 years after
B. The Government is entitled to equitable interest
Although the Government cannot receive interest under
An award of equitable interest in this case raises two primary issues: (1) whether interest may accrue against AHAC absent a showing of bad faith or dilatory conduct, and (2) whether the court must
i. AHAC is liable for equitable prejudgment interest in excess of its bond limit
Regarding the first issue, sureties are normally liable only for duties, fees, and interest up to the bond limit. See United States v. Wash. Int‘l Ins. Co., 25 CIT 1239, 1241-42, 177 F.Supp.2d 1313, 1316 (2001). However, sureties may be answerable for interest beyond that limit for “their own default in unjustly withholding payment after being notified of the default of the principal.” United States v. U.S. Fid. & Guar. Co., 236 U.S. 512, 530-31 (1915) (emphasis added); accord Ins. Co. of N. Am. v. United States, 951 F.2d 1244, 1246 (Fed.Cir.1991).
The parties disagree about when a surety‘s failure to pay becomes unjust. AHAC argues that equitable interest beyond the bond limit is available only when the surety exhibits bad faith or dilatory conduct. Def.‘s Br. 13-14 (citing Wash. Int‘l, 25 CIT at 1243, 177 F.Supp.2d at 1318). The Government maintains that misconduct is not a precondition to an award of equitable interest here. See Pl.‘s Resp. Br. 15-17 (citing United States v. Canex Int‘l Lumber Sales Ltd., Slip Op. 11-98, 2011 WL 3438870 (CIT Aug. 5, 2011); United States v. Millenium Lumber Distrib. Co., 37 CIT —, 887 F.Supp.2d 1369 (2013)).
When addressing the accrual of prejudgment interest in excess of a surety‘s bond limit, the Federal Circuit has held that “if a surety delays payment beyond proper notification of liability, interest accrues on the debt.” Ins. Co. of N. Am., 951 F.2d at 1246 (interpreting the “unjustly withholding” language from U.S. Fid. & Guar. Co.). As a result, the court finds that AHAC need not have exhibited bad faith to be liable for interest beyond its bond limit. Rather, the dispositive fact here is that AHAC did not pay following the Government‘s proper demand on the continuous bond, thereby depriving the Government of the ability to use the withheld funds. That failure exposes AHAC to potential interest liability in excess of its bond limit.
ii. The court finds that an award of prejudgment interest is warranted here
However, case law is less clear regarding whether prejudgment interest should be awarded automatically after a surety‘s default or whether the court must first balance equities. See Princess Cruises, Inc., 397 F.3d at 1368 (“The degree to which the trial court is tо balance equitable factors to determine whether to award prejudgment interest is not easy to discern from the case law.“). Earlier Supreme Court case law suggested that prejudgment interest turned on a balancing of relative equities. For instance, in Blau v. Lehman, 368 U.S. 403, 414 (1962), the Supreme Court noted that “interest is not recovered according to a rigid theory of compensation for money withheld, but is given in response to considerations of fairness.” (quoting Bd. of Comm‘rs of Jackson Cty. v. United States, 308 U.S. 343, 352 (1939)).
However, in the years since Blau, the Supreme Court has moved towards a “general rule” that prejudgment interest is available “subject to a limited exception for ‘peculiar’ or ‘exceptional’ circumstances.”
Although case law diverges on what equitable factors the court should consider in awarding prejudgment interest, it is clear that full compensation should be the court‘s overriding concern. It appears that not awarding equitable prejudgment interest would be aberrational and due to exceptional circumstances. In this case, AHAC believes that such exceptional circumstances exist because (1) the Government delayed in bringing suit, (2) AHAC raised good faith defenses to liability, and (3) Customs did not timely liquidate the subject entries. Def.‘s Br. 15-17; Def.‘s Resp. Br. 5-8. But those reasons do not demonstrate that equitable interest is inappropriate here.
While the Government‘s delay in bringing suit may justify limiting or declining to award interest, the Government did not excessively delay instituting the instant action. See United States v. Reul, 959 F.2d 1572, 1578-79 (Fed.Cir.1992) (noting that the Government‘s “laxness” in bringing an action may factor into an equity analysis); West Virginia, 479 U.S. at 311 n. 3 (citing doctrine of laches). Although the Government waited until close to the expiration of the statute of limitations, AHAC had no reason to believe that the Government had abandoned its claim, nor does it pinpoint any prejudice that it suffered as a result of the delay. AHAC does not argue, for instance, that it was unable to successfully defend itself in the Government‘s action.
The fact that AHAC raised good-faith defenses to liability also does not constitute “an extraordinary circumstance that can justify denying prejudgment interest.” See Nat‘l Gypsum Co., 515 U.S. at 198. As the Supreme Court noted in a maritime case, “the existence of a legitimate difference of opinion on the issue of liability is merely a characteristic of most ordinary lawsuits.” Id. at 198. Indeed, if the court were to award prejudgment interest only when confronted with bad faith claims, the prevailing party would rarely be fully compensated.
Finally, the court likewise disagrees that Customs’ erroneous reliquidations bar equitable interest, even though the court generally should “refrain from action which unnecessаrily countenances regulatory breaches.” See United States v. Angelakos, 12 CIT 515, 518, 688 F.Supp. 636, 639 (1988). The Government only seeks interest from the second Formal Demand on the Surety, which AHAC received after the erroneous June 2005 reliquidations. See Transcript of Oral Argument 6, ECF No. 49. This actually benefits AHAC because AHAC‘s bond limit was already exhausted after the June 2004 reliquidations, and AHAC ultimately could have been liable for prejudgment interest accruing after the first Formal Demand on the Surety pursuant to the June 2004 liquidations. Thus, the court finds that commencing interest after the second Formal Demand on the Surety be-
In sum, equity favors awarding the Government interest in this action. The court, thus, awards prejudgment interest at a rate set forth in
CONCLUSION
For the foregoing reasons, the court grants in part and denies in part the Government‘s motion for summary judgment. The Government‘s motion is granted with respect to the issue of AHAC‘s liability under continuous bond number 270114235. Regarding the Government‘s interest claims, the court grants the Government‘s claim for equitable pre- and post-judgment interest, but denies the claim for statutory interest under