CAFC Says Statute of Limitations Not Jurisdictional, Reverses CIT Dismissal of Customs Penalty Suit

The Court of International Trade improperly dismissed for lack of jurisdiction a $5.7 million customs penalty suit against importer Katana Racing, the U.S. Court of Appeals for the Federal Circuit said in an Aug. 3 opinion. While the trade court said Katana properly revoked a statute of limitations waiver making the U.S. government's suit untimely, Judges Sharon Prost, Alvin Schall and Todd Hughes said the statute of limitations "is not a jurisdictional time limit." Instead, it provides an "affirmative defense" that can be waived.

Schall, the author of the opinion, ruled that Katana is still free to claim that the statute of limitations waiver was void as part of an affirmative argument that the U.S. failed to state a claim. However, the judge noted the importer will not be able to claim, as it has in the appeal, that CBP was required by law to follow the "penalty assessment procedures" set out in the law since they "were not statutorily required."

Part of the Tariff Act of 1930, Section 1592(b), lays out the "applicable procedures for issuing a pre-penalty and penalty notice" when the government looks to collect penalties for customs violations. However, Section 1592(d) says CBP shall require that duties, taxes or fees lost due to these violations "be restored, whether or not a monetary penalty is assessed." As a result, when a penalty is not assessed, as was the case for Katana, the statute does not call for the "performance of the procedures," as the importer claimed, the court ruled.

The customs violations stem from 386 entries of tires between 2009 and 2012 for which duties had not been paid. Katana said the entries were the result of identity theft, with suppliers or individuals falsely declaring Katana as the importer of record. Following the imposition of safeguard duties on tires from China, Katana says it was persuaded by Chinese suppliers to enter into a delivered duty paid contract. Katana theorized that it had been the victim of fraud and notified CBP via a voluntary prior disclosure.

Working with the agency, the importer was eventually assessed $5.7 million for the unpaid duties, though the company waived the statute of limitations on the basis that it would be part of an administrative proceeding with CBP in lieu of the payment demand.

CIT said the importer properly revoked the statute of limitations waiver, dismissing the case for lack of jurisdiction (see 2203280047). At oral argument on appeal, counsel for Katana conceded that the court's order could not stand since statute of limitations is not a jurisdictional principle (see 2306080063). The Federal Circuit listened and dismissed the case, stopping short of also ruling on the importer's affirmative defense claims to give the trade court a chance to rule on them first. Schall noted its finding that the statute of limitations is not jurisdictional is in line with U.S. Supreme Court decisions, including the 2023 ruling in Wilkins v. U.S.

(U.S. v. Katana Racing, Fed. Cir. # 22-1832, dated 08/03/23; Judges: Sharon Prost, Alvin Schall and Todd Hughes; Attorneys: Emma Bond for plaintiff-appellant U.S. government; Pratik Shah of Akin Gump for defendant-appellee Katana Racing)