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CIT Wrong That US Can’t Seek Reliquidation at Higher Duty Via Counterclaim, Government Says

The U.S. “respectfully disagree[d]” with recent Court of International Trade cases that have held that the government cannot hear counterclaims seeking to reclassify products under a new heading. These holdings, it said Sept. 13, go against 28 U.S.C. Section 1583, “its legislative history, and decades of consistent practice immediately following its enactment” (BASF Corp. v. U.S., CIT Consol. # 13-00318).

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BASF Corp., an importer of ethyl ester concentrates, brought its case to the trade court back in 2013. In a motion for judgment filed in May (see 2405020062) and a reply in August (see 2408220051), it argued that CIT lacks the jurisdiction to hear a U.S. counterclaim in its case that seeks to reclassify BASF’s products in a way that would increase its calculated antidumping and countervailing duty rates.

But CIT does have the jurisdiction for such counterclaims, which it called “contingent counterclaims,” the U.S. argued. It said that the trade court has “only recently” begun ruling otherwise, and it disagreed with the court’s reasoning in those cases.

“In redesignating counterclaims as defenses, the Court has held that the cause of action that Congress intended to provide the Government must be spelled out by a statute other than a jurisdictional one,” it said.

The government said that, first, 28 U.S.C. Section 1583 expressly grants the trade court exclusive jurisdiction over any counterclaim that “involves the imported merchandise” being litigated.

But in Congress’ own words, that statute was intended to let the government raise “a claim that would allow the court to make the proper determination and accordingly would enable the Government to collect the full amount of duties,” it said.

Counterclaims such as the present one “are more accurately termed ‘contingent counterclaims,’” meaning the U.S.’s claim to additional duties upon reliquidation only comes into existence if the court agrees with DOJ’s preferred classification. Contingent counterclaims are allowed by federal practice and procedure, it said.

Even if the U.S. wasn’t authorized by statute to bring its counterclaim, “which it is,” that power “can be recognized through federal common law to fill whatever gap Congress left in the statutory framework,” it said. Otherwise, it said, Section 1583 would be dead in the water, as it wouldn’t allow any claims for relief without another statute defining its causes of action.

“This is the circumstance where federal common law appropriately supplies a right of action,” DOJ said.

But it ultimately doesn’t matter to this case whether the government’s argument comes as a counterclaim or as an affirmative defense, it said. The court may still order reclassification of BASF’s imports independently of the headings preferred by each party, it said, despite the importer’s recent contention otherwise.

BASF now claims that the court cannot order reliquidation of an entry at a higher duty rate, the government said. But “the tortured interpretation” of 28 U.S.C. 2643 that BASF based its claim on, “apart from being waived or forfeited, fails to demonstrate that this Court lacks such power.”

Sections 2643(a)(1) and 2643(c)(1) allow the trade court to order any forms of appropriate relief either for or from the U.S., depending on case outcome, it said.

BASF Corp. is challenging classification of its imported ethyl ester concentrates as “chemical products and preparations” under the basket Harmonized Tariff Schedule heading 3824, with a 4.6% duty rate. The importer says its products are covered under the more specific HTS heading 1603 for fish extracts, which is duty-free. In its counterclaim, the U.S. says that the products should instead be classified under HTS heading 2106, which carries a 6.4% duty.