DOJ Defends Another Counterclaim in Denied Protest Case, Despite 4 Years Passed

DOJ is again arguing that it can file counterclaims in Court of International Trade classification cases -- even after more than four years into a case. Days after defending its counterclaim in another denied protest case involving importer Cyber Power (see 2203180042), DOJ is now arguing that delays by another importer in a separate case, Second Nature, allow it to bring a counterclaim despite the time elapsed (Second Nature Designs Ltd. v. United States, CIT #17-00271).

DOJ argues that its counterclaim is valid because Second Nature did not fully disclose the details of its merchandise in the original complaint, and DOJ "did not know that Second Nature’s allegations were incomplete until after conducting significant discovery." DOJ's motion is in response to Second Nature's argument that the counterclaim was filed out of time and its accusation of delaying tactics by DOJ (see 2203020065).

DOJ says it "did not begin to realize that Second Nature’s merchandise consisted of vastly more varied styles than had been previously anticipated based on the complaint, and that Second Nature’s discovery responses were incomplete, until after defendant deposed Second Nature’s designated agent in Nov. 2018 ... throughout 2019 and 2020, [the DOJ] reached out to Second Nature multiple times in an attempt to receive full and accurate responses, without success."

DOJ is seeking to reclassify nearly 1,000 entries of dried botanicals imported between 2015 and 2016 and collect additional tariffs. The government asked CIT in a Jan. 28 motion for leave to file a counterclaim, arguing that over the course of discovery, the government realized the "voluminous and diverse merchandise" originally classified under two tariff subheadings were more properly classified under 11 different subheadings and subject to additional duties.

In a Feb. 18 filing, Second Nature's argued that the government's counterclaim is barred by the finality of liquidation. DOJ now argues that the 11 protests and the suit at CIT filed by Second Nature extends the finality of liquidation. "Second Nature seems to believe that the Government’s ability to recover additional duties ... is cut off if CBP has not applied the higher rate during the 90-day reliquidation period," DOJ said. "Such a theory is contrary to the plain meaning of 28 U.S.C. § 1583, which permits a counterclaim for additional duties associated with the imported merchandise that is the subject of the complaint. ... By commencing this action ... Second Nature fulfilled the statutory requirements to avoid finality."

DOJ said that the only issue before the court is the proper classification of the merchandise and that "If, in reaching that correct result, the Court determines that a different classification requiring additional duties is applicable, it could only award relief to the Government if the Government has asserted a counterclaim."