CBP's Agreement to Statute of Limitations Waivers Was Made Under False Pretenses, Importer Says

The Court of International Trade's March dismissal of a case seeking the collection of over $5.7 million in unpaid duties on passenger vehicle and light truck tires from China was correct because the importer properly revoked its statute of limitations waiver, Katana Racing said in an Oct. 24 brief filed at the U.S. Court of Appeals for the Federal Circuit (United States v. Katana Racing, Fed. Cir. #22-1832).

In its March decision, CIT ruled that the government's suit to collect the unpaid duties was untimely, due to an expired statute of limitations. CIT Judge Thomas Aquilino ruled that Katana was allowed to revoke an earlier statute of limitations waiver on the basis that CBP procured it under false pretenses (see 2203280047).

Katana's brief came in response to a Sept. 13 opening appeal brief from DOJ, which argued that the Court of International Trade was wrong to dismiss the government's case against Katana (see 2209140064).

The case involves 386 entries of tires between 2009 and 2012 that Katana claims were the result of identity theft. The company said individuals taking advantage of them used identifying information to falsely declare Katana as the importer of record on hundreds of entries. Following the 2009 imposition of safeguard tariffs on tires from China, Katana said, it was persuaded by Chinese suppliers to enter into a delivered duty paid (DDP) contract, which obligated the suppliers to pay all import duties. Katana proceeded without suspicion until 2012, when CBP contacted Katana in order to conduct a quick response audit on 61 entries. Katana then concluded that it had been the victim of fraud and voluntarily notified CBP.

In 2014, Katana executed a two-year waiver of the statute of limitations period in response to CBP’s request. In 2016, CBP issued a revised duty demand, requesting payment of a revenue loss of $5.7 million. Katana submitted another waiver of the statute of limitations, good through July 15, 2019, so that the importer could carry out any administrative proceeding. CBP in 2019 then issued a summary demand for the duties with just 25 days remaining in the waived limitations period. Katana then revoked its 2016 waiver of the statute of limitations, arguing that it had been procured under false pretenses and that CBP hadn't intended to conclude any administrative proceeding, to which CIT agreed, dismissing the case.

The government then appealed to CAFC, where it argued that Katana's statute of limitations waiver was irrevocable and that no law allows CIT's finding that Katana could revoke its waiver retroactively without misconduct on the part of the government, which was not alleged. "The trial court’s rationale leads to absurd results," DOJ's brief said. "If a statute of limitations waiver could be revoked effectively at any time after the original expiration of the statute of limitations, the Government could never rely on [waivers]."

In its response brief, Katana argued that CIT correctly noted that “withheld duties” can be collected "only if that person violated the proscription in § 1592(a)," which the government never alleged. Further, Katana argued that CBP's conduct surrounding the granting of the third SoL waiver was made under false pretenses, which should have allowed Katana to revoke the waiver, thus making the government's suit out of time. Finally, Katana argued that CIT's dismissal of the underlying waiver was made on the narrow grounds that the government’s complaint was untimely filed, which the company says is not in dispute.