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CIT Reclassifies US Counterclaim in Customs Spat on Boronized Steel Tubing as Defense

The Court of International Trade on June 14 granted importer Maple Leaf Marketing's bid to redesignate the U.S.'s counterclaim as a defense in a customs spat on the classification of boronized steel tubing. Dismissing Maple Leaf's bid to dismiss as moot, Judge Claire Kelly cited the court's Cyber Power Systems (USA) v. U.S. decision to find that nowhere in Congress' scheme on the classification of goods does the legislative body explicitly let the U.S. "assert a counterclaim challenging CBP's classification."

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The U.S. said it was able to make a counterclaim since CBP is charged with collecting duties under the right classification under 19 U.S.C. Section 1202. Kelly ruled that nothing in the language of this law "creates a cause of action for the United States to challenge CBP's classification."

The judge said that the other laws put forth by the government also fall short. For instance, 19 U.S.C. Section 1503, the statute on reliquidations ordered by the trade court, relates to the valuation, as opposed to the classification, of imports, and "contains no language authorizing a counterclaim," the opinion said. Likewise, Sections 1582-83 are not applicable, the judge said. Section 1582 says that CIT has exclusive jurisdiction on claims from the U.S. to recover customs duties, and is "jurisdictional, and does not create any cause of action."

Section 1583, which gives the court jurisdiction on counterclaims," is also "purely jurisdiction," giving CIT exclusive rights to render judgment on any counterclaim, the judge said. "The statute empowers the Court, not the Defendant," the opinion said. DOJ's invocation of 28 U.S.C. Section 2643(b) and (c), regarding the court's ability to order a retrial or rehearing for all purposes, also fell short. "Defendant does not specify how this section creates substantive rights," Kelly said.

The counterclaim argued that the steel tubes, originally classified by CBP as duty-free U.S. goods returned after repairs, are subject to Section 301 tariffs and are correctly classified as unfinished steel tubes (see 2304030033).

The case marks the third time, including Cyber Power, when CIT found the government can't assert counterclaims in cases involving finally liquidated protests, said John Peterson of Neville Peterson, who represents Maple Leaf Marketing, as well as Cyber Power. The conversion of the claim into a defense "means that the government can still argue that the position taken in the counterclaim is legally correct," he said. "But if the Court agrees with the government, the government will not recover any money from the plaintiff. The decision will be for future guidance."

(Maple Leaf Marketing v. United States, Slip Op. 23-90, CIT # 20-03839, dated 06/14/23; Judge: Claire Kelly; Attorneys: John Peterson of Neville Peterson for plaintiff Maple Leaf; Justin Miller for defendant U.S. government)