Government Can't Make Counterclaims After Liquidation, Importer Says in Dried Botanicals Case

The Court of International Trade should dismiss a government counterclaim of unpaid duties in a classification case on dried botanicals imported by Second Nature Designs because DOJ pointed to no authority that gave it a cause of action to assert a claim to collect duties in excess of those assessed during final liquidation, Second Nature said in a May 17 brief in support of its motion to dismiss the counterclaim (Second Nature Designs v. U.S., CIT # 18-00131).

The finality of liquidation bars any government counterclaim, Second Nature said. The finality of liquidation and its exceptions ensures that the liquidation process remains stable and predictable for importers. The governing statute is "designed exclusively for correcting determinations adverse to the importer" by allowing for correction of errors that resulted in unfavorable treatment, Second Nature said. "It is not intended as a means for the Government to rectify actions that may be detrimental to CBP."

The filing of a protest does not delay the finality of liquidation, as DOJ argued in its April motion, Second Nature said (see 2304070027). Congress granted only a limited counterclaim jurisdiction to CIT, which the government did not meet, it said. If CIT were to assess a duty in excess of those assessed by CBP, it would create "significant separation of powers issues," Second Nature said.

The counterclaim also "potentially infringes" on the Constitution by stating that a cause of action arose from Second Nature's decision to contest the protest denial. This raises "serious questions about the denial of equal protection" for parties that exercise their right to seek judicial review, Second Nature said. If the filing of an action grants the government a previously non-existent cause of action, that would effectively deny equal protection to those who seek judicial review, it said. Second Nature's counsel raised similar constitutional issues in another case concerning the classification of steel tubes (see 2305150056).

Second Nature also asked the court to dismiss one entry from the case, saying that there is no standing to challenge agency action when the competing provisions are both duty free or where no possibility of a refund.