CIT Dismisses Gov’t Motion for $650K for Failure to Pay AD Duties

The Court of International Trade denied, without prejudice, the U.S. Government’s motion for default judgment against Country Flavor Corp. in the sum of $617,562.00 as a civil penalty for negligence, as well as $34,363.45 for lost revenue, for unpaid antidumping duties on 13 entries of frozen fish that Country Flavor imported from Vietnam in 2006. While the CIT ruled that, as Country Flavor defaulted and made no attempt to demonstrate that it acted with reasonable care, the Government demonstrated negligence, the CIT also ruled that the U.S. Government failed to provide a basis for determining either the appropriate amount of civil penalty to be imposed or the amount of antidumping duties that remained unpaid.

Gov’t Argues Country Flavor Negligently Misidentified Merchandise for 13 Entries

According to the Government, the fish fillets at issue were a species known as pangasius, and thus were subject to the AD duty order covering frozen fish fillets from Vietnam. However, the Customs Form 7501 entry summaries filed by Country Flavor identified the merchandise as “broadhead”, a species of fish not subject to the AD order. In early February 2011, U.S. Customs and Border Protection issued a notice of penalty and demand for payment, but Country Flavor failed to respond to the pre-penalty notice, the penalty notice, and the demand for payment, and has paid none of the AD duties and civil penalties owed on the 13 entries.

Country Flavor Entered into Default for Failure to Appear, etc.

International Fidelity Insurance Company acted as Country Flavor’s surety for the entries in question. In early August 2011, International Fidelity paid $274,417.78 in duties to settle the Government’s claims against it, and the surety was subsequently dismissed with prejudice from this action. In the meantime, the Country Flavor was entered into default due to its failure to enter an appearance by counsel and failure to plead or otherwise defend itself within 21 days of being served with the summons and complaint.

CIT Rules that Gov’t Established Liability due to Negligence

The CIT ruled that, because when a defendant has been found to be in default, all well-pled facts in the complaint are taken as true, for purposes of establishing the defendant’s liability, the Government successfully demonstrated that Country Flavor is liable for a civil penalty due to negligence pursuant to 19 USC 1592(a).

Gov’t Fails to Establish Amount of Civil Penalties, Lost Revenue; Motion Dismissed

However, the CIT ruled that the Government failed to offer the proof required to establish either the amount of the civil penalty to be imposed, or the amount of antidumping duties that remain unpaid for which Country Flavor is liable. Specifically, under 19 USC 1592(c)(3), a negligent failure to pay applicable antidumping duties is punishable by the lesser of the domestic value of the merchandise or two times the lawful duties, taxes, and fees of which the U.S. has been deprived. The CIT said the Government established neither the domestic value of the merchandise (as the Government did not place such information on the record), nor the amount of unpaid antidumping duties (due to a discrepancy between the values cited in the complaint and the motion).

Therefore, CIT denied the Government’s Motion for Entry of Default Judgment, without prejudice.

(CIT Slip Op. 12-32, dated 03/15/12, Judge Ridgway)