CAFC Judges Question CBP's Refusal to Pay Out Delinquency Interest Under CDSOA

U.S. Court of Appeals for the Federal Circuit judges Alan Lourie, Kara Stoll and Tiffany Cunningham questioned both the position of the government and affected domestic producers in a Dec. 5 oral argument on whether CBP properly denied payouts of interest assessed after liquidation, known as delinquency interest, on antidumping and countervailing duties under the Continued Dumping and Subsidy Offset Act of 2000 (Adee Honey Farms v. United States, Fed. Cir. # 22-2105) (Hilex Poly Co. v. United States, Fed. Cir. # 22-2106).

The judges, Stoll in particular, focused on the government's statutory interpretation of particular words in the CDSOA. Under one provision, titled "Deposits Into Accounts," the law tells CBP to deposit into the affected domestic producers' accounts all AD/CVD "including interest earned on such duties." Another provision, covering "Distribution of Funds," says to distribute all funds "including all interest earned on the funds" from assessed duties to affected domestic producers. At issue was whether the phrase "including interest earned on such duties" includes delinquency interest.

The Court of International Trade deferred to CBP's reading, which excluded delinquency interest (see 2206160074). The trade court found ambiguity in the statute's terms, adding that because interest is put into a single sum after liquidation, it loses its "individual character" and is no longer interest earned on the duties, making CBP correct in not collecting it.

Stoll directly asked Beverly Farrell, DOJ's lead attorney, why delinquency interest is not considered an interest earned on the funds. Farrell responded that the plain language of the statute says that the money that rolls into the affected domestic producers' special accounts doesn't include delinquency interest, so this type of interest is not required to be provided.

In response, Stoll repeated the statutory language, which says that CBP shall provide all funds, including all interest earned on the funds. "Even if it's not in the fund, but it's an interest earned on the fund, why wouldn't it be provided?" the judge asked, seemingly perplexed at the government's justification. Farrell clarified in response that delinquency interest is not earned on the funds, and thus excluded from provision, because the interest runs after liquidation.

"Assessing duties means liquidation," Farrell said. "It can't be anything else when you're assessing duties. So at the time you're assessing duties, what interest is the only interest available is 1677g. And so at that point, that's what's being deposited in the accounts. The distribution of funds doesn't get into all the other things that occur afterwards." The DOJ attorney added that once liquidation has occurred, "we have the amount of money that's due and it's interest if it was an underpayment and with overpayment," explaining why the words "all funds" are included.

Adam Gordon, counsel for affected domestic producer Monterey Mushrooms, differentiated between the clearing accounts and special accounts as established under the statute, noting that the clearing accounts involve estimated duties while the special accounts include assessed duties. The estimated duties can go up and down depending on the AD/CVD reviews, though the parties don't know the "final fixed amount until liquidation." This must be read with the phrase "all funds without limitation," Gordon said, adding that Congress "knew full well" what this process involves. "If Congress intended to limit the kinds of interests that were to be paid, it would have done so here by referring specifically to" specific interest types, he said.

The appellate court also heard from Michael Taylor, counsel for affected parties led by Hilex Poly in a case that was decided concurrently by the trade court. Taylor claimed that Congress was "really unhappy" with CBP after it found out that the agency was not distributing delinquency interest, citing letters from a few individual senators expressing displeasure.

Stoll expressed skepticism at the remarks of a "few members." She said she "understands what you want me to take from that, that Congress intended a different interpretation, but it's a little awkward when you've just got a few members. I think the statute should say what it says, whatever that is."