CIT Rules Liq Suspension Still Valid if CBP Fails to Give Surety Notice

The Court of International Trade has ruled in U.S. v. American Home Assurance Co. (AHAC), that U.S. Customs and Border Protection’s suspension of liquidation is not invalid if it fails to notify the surety of the suspension.

(Pan Pacific Products, Inc. imported 119 entries of preserved mushrooms from China into the U.S. between May 2001 and March 2002. These entries were subject to the Commerce Department’s third and fourth administrative reviews of the antidumping (AD) duty orders for the merchandise for February 1, 2001 through January 31, 2002 and for February 1, 2002 through January 31, 2003, respectively.)

Liquidation of Entries Was Suspended But CBP Failed to Provide Surety Notice

Upon request for an administrative review for each period of review, liquidation of the entries subject to each review, including Pan Pacific's, was suspended. However, CBP failed to provide the statutory notice of those suspensions to Pan Pacific’s surety, AHAC. Years later, when CBP was unable to obtain payment of AD duties from Pan Pacific, it demanded payment from AHAC. When AHAC refused to pay, the Government commenced action in the CIT to recover in excess of $3.5 million on AHAC bonds to secure Pan Pacific's payment of AD duties. AHAC asserts CBP's claims are barred by the six year statute of limitations in 28 USC 2415(a) and moved for summary judgment.

Gov’t Argues Notice Not Mandatory, Does Not Affect Validity of Suspensions

The Government asserts that CBP's lack of notice to AHAC did not affect the validity of the suspensions because suspension happens as a matter of law, regardless of whether notice is provided to the surety. The Government argues that 19 USC 1504(c) (available here) does not provide for a consequence for failure to comply with the notice requirement, thus the statutory directive to provide notice is directory, not mandatory.

The Government also argues that the suspensions would only be invalid if AHAC could show that it was prejudiced by the lack of notice. The Government, therefore, seeks to stay its response to AHAC’s motion for summary judgment in order to complete discovery regarding the prejudice, although the prejudice is not specifically referenced in AHAC’s summary judgment motion.

AHAC Says Liq Never Suspended, Lack of Notice Rendered Suspensions Invalid

AHAC insists that liquidation of the entries was never suspended and that, pursuant to 19 USC 1504(c), the entries were deemed liquidated one year after the date they entered the U.S. AHAC seeks to stay CBP's motion for discovery and maintains that no showing of prejudice is required for AHAC to succeed on its summary judgment motion. For AHAC, the fact that it was not given notice rendered the suspensions invalid, resulting in deemed liquidations one year after the entries were made. AHAC therefore argues that once entries are deemed liquidated, the statute of limitations begins to run if the requisite notice has not been given to a relevant party.

CIT Rules Failure to Give Notice Does Not Prevent an Otherwise Valid Suspension

The CIT states that 19 USC 1504 unambiguously provides that notice of a suspension of liquidation is to be provided to a surety after a suspension has come about by operation of law. Therefore, the failure to provide notice does not automatically render invalid or prevent an otherwise valid suspension because it is clear that the giving of notice is not a condition precedent to a suspension of liquidation.

However, the CIT states if AHAC was actually harmed as a result of CBP’s omission, AHAC would be entitled to appropriate relief. Procedural errors are regarded as harmless unless they are prejudicial to the complaining party but because allegations of prejudice are not the subject of AHAC’s summary judgment motion, but are the subject of the Government’s discovery requests, the CIT states that discovery should continue.