Trade Court Says CBP Right Not to Pay Out Delinquency Interest Under CDSOA

CBP properly denied payouts of interest assessed after liquidation, known as delinquency interest, on collected antidumping and countervailing duties under the Continued Dumping and Subsidy Offset Act of 2000, the Court of International Trade said in a series of five nearly identical opinions. Judge Timothy Stanceu ruled that it must rely on CBP's interpretation of how to administer the CDSOA and define how interest is earned on AD/CV duties given ambiguities in the statute pertaining to delinquency interest. The court also held that given that the interest is put into a single sum after liquidation, it loses its "individual character" and is no longer interest earned on the duties.

"We are disappointed in the Court’s ruling and actively evaluating the analysis and our client’s options going forward," said Adam Gordon, counsel for one of the plaintiffs.

In the cases, led by Adee Honey Farms, Hilex Poly and American Drew, the plaintiffs say the text of CDSOA as enacted by Congress expressly requires that CBP distribute “all interest” associated with antidumping and countervailing duties to affected domestic producers under CDSOA (see 2105250069). CBP says delinquency interest is not included in CDSOA distributions.

The present dispute centers on CBP's interpretation of a few words in the statute. Under one provision, titled "Deposits Into Accounts," the law instructs CBP to deposit into the affected domestic producers' accounts all AD/CV duties "including interest earned on such duties." In another provision, titled "Distribution of Funds," the law says to distribute all funds "including all interest earned on the funds" from assessed duties to affected domestic producers. The question now becomes whether the phrase "including interest earned on such duties" includes delinquency interest.

To sort through the question, Stanceu first looked at the text of these provisions, which he admits is not entirely favorable to the government. However, there is ambiguity in the terms. Stanceu explained that the two provisions indicate Congress' intent to have CBP deposit all interest earned on the duties, but it is unclear what is meant by the terms "interest earned on such duties" and "all interest earned on the funds." Thus, the judge turned to the Tariff Act of 1930 to see how AD/CVDs earn interest to see what Congress may have meant.

Section 778(a) of the Tariff Act says that interest shall be paid on over and underpayments of amounts deposited for AD/CVDs. However, at the time of the 1979 amendment made to the Tariff Act, the deposit of the estimated duties did not provide for the assessment of interest of the estimated duties. The interest began accruing when the estimated AD/CVDs were required to be deposited, and stopped accruing after liquidation.

Stanceu looked at the authority for the delinquency interest, Section 505 of the Tariff Act amended by the Trade and Tariff Act of 1984. This section was amended again by NAFTA, which said that unpaid duties post liquidation shall bear interest by 30-day periods until the full balance is paid. The interest which accrues from the date of deposit to the date of liquidation for over- and underpaid AD/CVDs "did not provide for delinquency interest."

The judge ruled that, given the provisions in question and the history of other interest sections, CBP's decision to not pay out delinquency provisions was reasonable. "Interest on antidumping and countervailing duties accruing from the time of the required deposit to the liquidation of the entry and assessed at liquidation unambiguously can be described as interest earned on those duties," the opinions said. "But the same cannot be said for interest that begins to accrue on the total amount owing on an already-liquidated entry." The concept of liquidation reinforces this, the judge said, since liquidation is a step in which all the money becomes "fixed," meaning all duties, taxes, fees and interest get combined into a single sum. No interest can be described as being fixed.

"In light of this intricate statutory structure, [delinquency interest] reasonably may be viewed as interest owing on a combined, 'liquidated' amount for the entry rather than interest 'earned on' antidumping or countervailing duties per se," the opinion said. "Therefore, it was reasonable for Customs to interpret the CDSOA as requiring the deposit and distribution of only that interest on antidumping and countervailing duties that was assessed at liquidation of the entry." When congressional intent is not clear, as Stanceu says it is not in this case of the definition of the words "earned on," the court must side with the agency's interpretation, the judge said.

(Adee Honey Farms v. United States, Slip Op. 22-70, CIT Consol. #16-00127, dated 06/08/22, Judge Timothy Stanceu. Attorneys: Paul Rosenthal of Kelley Drye for plaintiffs; Adam Gordon of The Bristol Group for plaintiff Monterey Mushrooms; Beverly Farrell for defendant U.S. government)

(American Drew, et al. v. United States, Slip Op. 22-71, CIT #17-00086, dated 06/08/22, Judge Timothy Stanceu. Attorneys: J. Michael Taylor of King & Spalding for plaintiffs; Beverly Farrell for defendant U.S. government)

(Hilex Poly Co. v. United States, Slip Op. 22-72, CIT #17-00090, dated 06/08/22, Judge Timothy Stanceu. Attorneys: J. Michael Taylor of King & Spalding for plaintiffs; Beverly Farrell for defendant U.S. government)