United States Court of International Trade

 Partial Motion for Summary Judgment Granted in Plaintiff Government’s Favor

In this penalty case, United States v. Farhan Khan, Court No. 15-250, Slip Op. 17-85 (July 13, 2017), defendant imported three types of freezable products: (1) the beverage container bags (“CoolSack”); (2) the CanCooler for cans (“CanCooler”); and (3) the Wine Bottle Wrap for wine bottles (“Wine Bottle Wrap”). Defendant through his broker classified this merchandise under Harmonized Tariff Schedule of the United States Subheading 4202.92.1000, which covers “[i]nsulated food or beverage bags: With outer surface of sheeting of plastic or textile materials: Other” and carries a duty rate of 3.4 percent ad valorem.  Customs determined that the subject CoolSack bags should be classified under subheading 4202.92.90, HTSUS, which covers “Other [bags or cases]: With outer surface of sheeting of plastic or of textile materials: Other [than insulated food or beverage bags]: Other,” carrying a 17.6% ad valorem and rate advanced entries of the CoolSack bags. Because defendant had not paid the $8,228.20 in duties or the $45,374.21 penalties demanded by CBP, plaintiff initiated this case.

 The Court found that defendant provided no proof for its assertion that the CoolSack is an “insulated food or beverage bag,” nor did it show that the tariff term applies to items capable of maintaining the temperature or of chilling a beverage that is already cold. According to the Court, an “insulated food or beverage bag” as used in subheading 4202.92.1000 must be able to retard the passage of heat to or from a hot, as well as a cold, food, or beverage.  Accordingly, because defendant’s merchandise does not retard the passage of heat to and from a hot, as well as a cold, food or beverage it is not classifiable under 4202.92.1000, the Court held that defendant made material and false statements by classifying the goods under 4202.92.1000.

Moreover, defendant did not exercise reasonable care, by not seeking an additional expert opinion on the classification of the CoolSack or a binding ruling. The Court granted prejudgment interest on the unpaid duties in the amount of $8,228.20.  Finally, the Court denied summary judgment in regards to the appropriateness of the penalty, so that the Court may develop a record to address this issue.

For all these reasons, the Court granted plaintiff’s motion for summary judgment in part.

Remand Denying Issuance of Separate Sustained

Before the court, in Hebei Golden Bird Trading Co., Ltd., et al. v. United States et al., Court No. 15-182, Slip Op. 17-86 (July 17, 2017), is the U.S. Department of Commerce (“Commerce”)’s Final Redetermination Pursuant to Court Remand Order, ECF No. 74-1 (“Remand Results”) concerning the nineteenth periodic administrative review of the antidumping (“AD”) duty order on fresh garlic from the People’s Republic of China (“PRC”). The Court previously remanded to Commerce the issue of whether mandatory respondent Hebei Golden Bird Trading Co., Ltd. (“Golden Bird”) is eligible for a separate rate. In the Final Results, the PRC-wide rate was applied to Golden Bird as total adverse facts available (“AFA”) because it found that Golden Bird’s questionnaire responses were not credible, as Golden Bird failed to cooperate in providing Certain Export Declaration Forms and China Inspection Quality Bureau inspection certificates. Upon remand, Commerce reopened the record to consider evidence regarding alleged duty evasion by Golden Bird and allowed interested parties to submit information and comments.

The Court held that because Commerce found that most of Golden Bird’s exports were actually controlled by companies that received the PRC-wide rate and estimated its funneling activities to involve at minimum about one-third of the total export volume from companies subject to the PRC-wide rate, that Commerce’s determination that Golden Bird is ineligible for a separate rate was both reasonable and supported as many of Golden Bird’s alleged exports were apparently controlled by PRC entities.  Golden Bird could have rebutted these allegations, however it provided no substantive comments. Furthermore, Commerce’s protection of the identity of the declarant regarding Golden Bird’s activities was reasonable, and did not infringe Golden Bird’s right to due process.  For these reasons, the Court sustained Commerce’s decision not to provide Golden Bird a separate rate.

Determination Regarding Rebate Payment Adjustments Sustained

In Tension Steel Industries Co. Ltd. v. United States Slip Op. 17-84, Court No. 14-00218, (July 12, 2017), the Court reviewed Commerce’s determinations on remand.  In Commerce’s initial decision, the agency rejected adjustments for rebate payments made by Tension Steel. Final Decision regarding Certain Oil Country Tubular Goods from Taiwan, 79 Fed. Reg. 41,979 (Dep’t of Commerce July 18, 2014) (final LTFV determ.) Plaintiff challenged Commerce’s decision, and argued that Commerce’s practice regarding the rejection of rebates when Commerce is not satisfied that customers were aware of the terms and conditions of the rebate at the time of the sale violated Papierfabrik August Koehler AG v. United States, 38 CIT ___, 971 F. Supp. 2d 1246 (2014) (“Papierfabrik”), which held that Commerce’s practice contravened the plain language of Commerce’s regulations. The Court agreed and remanded to Commerce to fix any errors. On remand, Commerce fixed all errors in accordance with the Court ruling. However, petitioner Maverick, challenged the remand determinations arguing that the case law that the Court applied was an outlier. For the following reasons, the Court upheld Commerce’s determination on remand.

Petitioner argued that Commerce maintains broad discretion to reject any claimed price adjustments that are intended to evade or circumvent the antidumping duty law. The Court said the precedent that Maverick cited does not apply because the administrative record did not demonstrate “that any of Tension’s claimed rebates are either illusory or pose the risk of manipulation.” Slip Op., at 7.  “Maverick’s preferred arguments regarding Commerce’s practice of rejecting certain claimed rebate adjustments under the prior version of the applicable regulations were considered and rejected.” Id. at 7.  Petitioner also claimed that Commerce failed to adequately explain its determinations. The Court concluded that Maverick’s argument lacked merit, because the Court had provided the reasoning for the adjustments and ordered Commerce to make the necessary rebate adjustments pursuant to Papierfabrik.