United States Court of International Trade

Slip Op. 22-30

In United States v. Katana Racing, Inc., Slip Op 22-30 (March 28, 2022), an importer of tires, unwilling to assume liability for “safeguard” tariffs the administration had imposed on Chinese tires between 2009 and 2012, agreed to purchase Chinese tires on a “delivered duty paid” (DDP) basis from two Chinese suppliers. Given the sales term, the importer reasonably expected that the seller would handle Customs’ clearance and payment of the duties which the seller did, but, unbeknownst to Katana, listing Katana as the importer of record.

When, a few years later, Customs initiated a “quick response audit” of Katana’s entries, the company reported that it had no record of any of the sixty (60) entries CBP initially wanted to look at. Nonetheless, the company cooperated with Customs, and ultimately helped Customs dig up records concerning some 362 entries of merchandise which the company had purchased on DDP terms, and for which the company had no records. Katana had not advanced any of the duties deposited at entry, received any bills for Customs brokerage services, nor dealt with any of the dozens of Customs brokers making the entries – most of whom were strangers to it.

The CBP auditors ultimately calculated that, due to false statements made by the persons who filed the entries, duties had been underpaid by some $5.7 million. Katana requested, and was promised, the opportunity to receive notice of a penalty of a withheld duty claim and to make a presentation of its position before CBP. The company issued several statutes of limitation waivers while waiting for that process to begin. After a couple of year’s delay, Katana was contacted by new Customs officials at the automotive Center of Excellence and Expertise (CEE), who demanded payment of the $5.7 million and indicated that Katana would not be given the promised hearing to explain its position. Katana then withdrew its most recent statute of limitations waiver and CBP rushed to court with a lawsuit to collect the $5.7 million it claimed was due.

However, Senior Judge Thomas Aquilino dismissed the case, holding that CBP’s retraction of its promise to give Katana notice of violations and an opportunity to present its case justified the company’s revocation of its SOL waiver. As a result, Customs’ suit was untimely and was dismissed. The Court noted with some concern that while the evidence clearly showed that Katana had been defrauded by a supplier or freight forwarder, the agency had little curiosity in pursuing or even identifying those parties which had actually made the false statements submitted to CBP in entry forms. That Katana was named as the importer of record was not sufficient, the court held. CBP had not even alleged in its lawsuit papers that Katana was the party who made the false statements presented to the government.

Neville Peterson LLP represented defendant, Katana Racing, Inc. in this litigation.