Florida Businessman Moves to Toss Fraud Case at CIT Over Statute of Limitations

The Court of International Trade should dismiss a Section 592 penalty case against defendant Zhe "John" Liu since the statute of limitations has run out and the "action is untimely," Liu said in a Dec. 13 motion. The fraud case brought by the U.S. was not brought within five years from the date of the alleged violation because the defendant was not involved in the transaction at issue, as he was neither an owner, officer or director of GL Paper Distribution -- the company that committed the alleged fraud and a co-defendant in the action, the brief said. Liu also argued that the U.S. failed to state a claim against the defendant. As a result, Liu should be severed and dismissed from the case, the brief said (United States v. Zhe "John" Liu, CIT #22-00215).

Liu is a Florida resident who operated or was an agent of multiple Florida-based companies, including co-defendant GL Paper Distribution and NC Supply, NC Supply Group, CEK Group, Garment Cover Supply (GCS) and AB MA Distribution Corp. (ABMA). Liu began creating companies to import steel wire hangers from China in 2004. In 2008, though, an antidumping duty order was placed on the hangers, placing an 186.98% China-wide rate on the imports.

Liu created CEK in 2012, then participated in a new shipper review of two Chinese steel wire hanger manufacturers in 2013 as president of the new company. The U.S. said the defendant showed his "thorough knowledge of antidumping duties" during the review. Liu then formed GCS in 2013 and GL Paper in 2016, allegedly using the company to import hangers he claimed were from Malaysia but were in fact made in China.

In 2017, an Alabama-based wire hanger maker filed an Enforce and Protect Act allegation against GL Paper, alleging that evasion of the antidumping duties was occurring via a Malaysian transshipment scheme. The EAPA case prompted a site visit from the U.S. where it was purportedly discovered that GL Paper was not making wire hangers. GL Paper dissolved as a corporation in 2017. Liu then formed ABMA, using this company to allegedly import wire hangers claimed to be from India and Thailand but that were made in China. Liu then caused CEK to import wire hangers he claimed were made in Thailand just a week after ABMA's last importation of steel wire hangers in 2019, the U.S. said.

The U.S. complaint, however, while detailing the workings of many of Liu's businesses, only seeks to collect penalties on GL Paper's imports, which the U.S. claims skirted antidumping duties as a result of negligence by Liu and GL Paper (see 2207220042). Liu now seeks dismissal of the case for failure to state a claim and on the grounds that the statute of limitations has run out.

"Based on the foregoing, it is clear that the statute of limitations has run and that the action was untimely filed," the brief said. "The purported act or acts of Defendant Liu, as clearly stated in the complaint, was not the filing of the entry, it was an event which occurred prior to entry when Defendant Liu purportedly caused Defendant GL Paper to file an entry with a false statement. Such action necessarily occurred at some unspecified period prior to the date of entry. As the United States has admitted that all entries were filed 5 years before the filing of this Court matter, and as the statute of limitation period is five years, such action was necessarily untimely filed."

In arguing that the U.S. failed to state a claim against Liu, the defendant likened the case to a similar matter, U.S. v. Greenlight Organic, in which the trade court denied the defendant's motion for judgment because the statute of limitations had run out based on the date CBP discovered the violation (see 2208040056). In Greenlight, the U.S. failed to identify any specific false statement made by the defendant, as is the case in Liu's action, the brief said. The U.S. in the present action is 'legally insufficient" since it "does not have sufficient factual content to support a conclusion that defendant is liable for the misconduct alleged."