CIT Picks Deposits Over Escrow for Deposits of Section 232 Duties While Appeal Is Pending

The Court of International Trade ordered in an April 15 opinion that exporter Oman Fasteners shall make duty deposits for potential Section 232 steel and aluminum duty liability on all entries affected by its case challenging the validity of certain Section 232 duties. Oman Fasteners requested that the court should establish and administer an escrow account throughout the stay period pending an appeal of the court's decision. A three-judge panel said that the court was not convinced that setting up an escrow account is better than depositing estimated Section 232 duties for affected entries.

The trade court had in October 2021 stayed its decision, putting a hold on liquidation of Oman Fasteners' entries subject to Section 232 tariffs but directing Oman Fasteners and the government to negotiate on how to ensure the government gets paid the derivatives 232 tariffs it's owed, should it win the appeal (see 2110150029).

Oman Fasteners has since told DOJ that bonding for its subject entries covered by Section 232 tariffs is too costly (see 2203220081). Instead, Oman Fasteners wanted to deposit the duties into a private escrow pending the appeal since liquidation will not occur for years, since the entries are also subject to antidumping reviews that will take a while to settle, and there is no guarantee that the exporter would be able to recoup its deposits of estimated Section 232 duties. DOJ said that such an arrangement is without precedent and disregards CIT's previous order to come to agreement with the government.

Judges Jennifer Choe-Groves, M. Miller Baker and Timothy Stanceu sided with the government, declaring that it is unconvinced that an escrow solution is superior to the deposits of the duties and that Oman Fasteners might be unable to recoup its duties. On the latter point, the court said that if its judgment striking down the expansion of Section 232 duties as having violated procedural time limits is affirmed, the court would have the power to order the refund of deposits made.

As for escrow's supposed superiority over deposits, the three judges said that the court would have to monitor the escrow as opposed to the "well-established" deposit procedures set up by CBP. "While an extra burden on the court would not be a disqualifying reason for establishing an escrow account in a case in which doing so is necessary to ensure fairness to the parties, this is not such a case," the opinion said. "Here, the escrow account procedure essentially would perform the function that deposits of estimated duties perform under existing statutory and regulatory procedures, which Congress established for the administration of the Tariff Act of 1930, and, specifically, for the protection of the revenue."

Lastly, the three judges ruled that it is "a matter of speculation" that having an escrow account would help in any judicial challenge to the antidumping reviews covering the entries. "The court’s responsibility is to resolve the current dispute regarding security according to the present circumstances of this litigation rather than upon speculation concerning the issues that may be addressed in a future administrative proceeding conducted under the antidumping duty laws," the opinion said.

(Oman Fasteners v. United States, Slip Op. 22-35, CIT Consol. #20-00037, dated 04/15/22, Judges Jennifer Choe-Groves, M. Miller Baker and Timothy Stanceu. Attorneys: Andrew Caridas of Perkins Coie for plaintiff Oman Fasteners; Meen Geu Oh for defendant U.S. government)