CIT Orders Halt of Cash Deposit Payments for Exporter in Section 232 'Derivative' Case

The Court of International Trade in an Oct. 21 opinion let exporter Oman Fasteners stop paying cash deposits over its potential Section 232 steel and aluminum tariff liability in a case on the validity of the national security duties on "derivative" products. A previous court order let Oman Fasteners stop making duty deposits after reaching an agreement with the U.S. on the resumption of bonding. The U.S. said the company wasn't entitled to bonding since it had failed to abide by the arrangement. A three-judge panel ruled that the U.S. shall exclude Oman Fasteners from the need to post cash deposits for potential Section 232 liability until the U.S. can get another order from the court or Oman Fasteners voluntarily enters into an agreement that modifies the terms of the court's opinion.

The plaintiffs, Oman Fasteners and Huttig Building Products, argued that President Donald Trump's 2018 decision to expand the Section 232 tariffs to derivative goods was illegally made beyond the 105-day deadline laid out in the Section 232 statute.The trade court agreed, ruling that the move was illegal, following its decision in the nearly identical PrimeSource Building Products v. U.S. case. The U.S. Court of Appeals for the Federal Circuit, though, in Transpacific Steel v. U.S., said the president properly hiked Section 232 duties on Turkish steel imports beyond the 105-day deadline (see 2107130059).

Following its initial decision in Oman Fasteners' case, the trade court ordered the U.S. to liquidate the relevant entries without the Section 232 duties, stop the obligation for the plaintiffs to post bonding and refund any Section 232 deposits. Given the Transpacific ruling, though, the trade court stayed these directives, ordering the government to confer with Oman Fasteners and Huttig to reach an agreement on monitoring and bonding for entries brought in after June 10, 2021 -- the date of the Oman Fasteners judgment finding the tariffs to be imposed unlawfully.

In another opinion, CIT ordered Oman Fasteners to make duty deposits for its potential Section 232 liability, finding that the plaintiff could discontinue the deposits after reaching an agreement on the resumption of bonding. The U.S. then told the plaintiffs that an agreement had been reached over a bonding amount proposed by Oman Fasteners and that the plaintiffs did not have to pay cash deposits. The U.S. then said that this agreement was made in error and that certain stakeholders at CBP were not consulted about the bonding amount. The government came back with its own bonding number -- nearly double the amount floated by Oman Fasteners. The parties then took to the trade court to settle the dispute.

Judges Jennifer Choe-Groves, M. Miller Baker and Timothy Stanceu ruled that the U.S. did not honor its initial agreement made with Oman Fasteners, and that the terms of the initial agreement were clear and agreed upon. Even though the lower bonding amount was agreed to, the U.S. continued to require cash deposits from the plaintiffs. As a result, the three-judge panel ruled that the U.S. must now allow Oman Fasteners an exclusion from submitting cash deposits on potential Section 232 duties.

The U.S. tried to justify its position by arguing that the new, higher bond number was a mark CBP never agreed upon, and while this is "technically true," the argument ignores that the government agreed to allow exclusion from cash deposits in return for a much smaller bond. The U.S. further said Oman Fasteners should not be allowed the cash deposit exclusion since it has not honored its bonding arrangement (see 2209280048).

The panel said this argument "is misleading because it does not recognize that the directive as to bonding the court included in its October 15, 2021 Opinion and Order was confined to postjudgment entries. ... The court, therefore, rejects defendants’ argument. Because the current dispute between the parties involves security only for post-judgment entries, we reject defendants’ attempt to enlarge the scope of the court’s inquiry." The government argued that bonding is a "unique privilege," but the court reminded the U.S. that it was the court and not CBP that granted this privilege.

In all, the court ordered that Oman Fasteners will be permitted to stop making cash deposits for its potential amount of Section 232 duties owed. As to the plaintiffs' request that the court order the U.S. to honor the full amount of their current Section 232 bond and permit Oman Fasteners to continue bonding after the current bond is exhausted, the panel said this would be too indefinite a time frame and an "unnecessarily broad" order. "We are allowing the exclusion from the Section 232 duty deposit requirement to continue until such time as defendants move for, and obtain from this Court, a modification of the requirements of this Opinion and Order, or Oman Fasteners voluntarily enters into an agreement with defendants modifying those requirements."

(Oman Fasteners v. U.S., Slip Op. 22-119, CIT Consol. #20-00037, dated 10/21/22, Judges Jennifer Choe-Groves, M. Miller Baker, Timothy Stanceu. Attorneys: Andrew Caridas of Perkins Coie for plaintiff Oman Fasteners; Meen Geu Oh for defendant U.S. government)