US Fights Off Importer's Motion to Strike Parts of Complaint in Negligence Action at CIT
The Court of International Trade should reject a motion from defendant Zhe "John" Liu to strike various paragraphs of the U.S.'s complaint in a Section 592 penalty case, the U.S. argued in a Sept. 8 reply brief. DOJ argued that Liu cannot show that his knowledge and experience -- the content of the paragraphs contested by Liu -- are not material to the issues in the case and thus should not be struck (United States v. Zhe "John" Liu, CIT #22-00215).
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Liu is a Florida resident who operated or was an agent of multiple Florida-based companies, including co-defendant GL Paper Distribution and NC Supply, NC Supply Group, CEK Group, Garment Cover Supply (GCS) and AB MA Distribution Corp. (ABMA). Liu began creating companies to import steel wire hangers from China in 2004. In 2008, though, an antidumping duty order was placed on the hangers, placing an 186.98% China-wide rate on the imports.
Liu created CEK in 2012, then participated in a new shipper review of two Chinese steel wire hanger manufacturers in 2013 as president of the new company. The U.S. said the defendant showed his "thorough knowledge of antidumping duties" during the review. Liu then formed GCS in 2013 and GL Paper in 2016, allegedly using the company to import hangers he claimed were from Malaysia but were in fact made in China.
In 2017, an Alabama-based wire hanger maker filed an Enforce and Protect Act allegation against GL Paper, alleging that evasion of the antidumping duties was occurring via a Malaysian transshipment scheme. The EAPA case prompted a site visit from the U.S. where it was purportedly discovered that GL Paper was not making wire hangers. GL Paper dissolved as a corporation in 2017. Liu then formed ABMA, using this company to allegedly import wire hangers claimed to be from India and Thailand but that were made in China. Liu then caused CEK to import wire hangers he claimed were made in Thailand just a week after ABMA's last importation of steel wire hangers in 2019, the U.S. said.
The U.S.'s complaint, however, while detailing the workings of many of Liu's businesses, only seeks to collect penalties on GL Paper's imports, which the U.S. claims skirted antidumping duties as a result of negligence by Liu and GL Paper (see 2207220042). Liu then moved to strike 12 paragraphs from the complaint, arguing that the allegations have no impact on negligence, are potentially prejudicial and were not made in good faith.
In its reply, the U.S. said that Liu's motion fails to meet the standard laid out in court rule 12(f). which governs striking motions. This rule says that a paragraph may be struck if it is redundant, immaterial, impertinent or scandalous. DOJ said that the contested paragraphs are none of these things and are actually "directly relevant" to Liu's negligence since they show his knowledge of customs rules, the wire hanger industry and his resolve to import wire hangers while ignoring past COO issues with his prior companies.
The U.S. added that striking paragraphs from a complaint is a disfavored and drastic move and that Rule 12(f) does not contain the term "potentially prejudicial." As a result, Liu's motion is more akin to a motion to exclude evidence under Federal Rule of Evidence 403, rather than Rule 12(f).
Liu, in particular, contested paragraphs 5-10, 14 and 16-17 in the complaint, among others. DOJ addressed the claim that these parts of the complaint are immaterial or impertinent to the negligence claim. The U.S. said these paragraphs "each parlay LIU’s experience in the wire hanger industry, his familiarity with customs issues, and his operation of companies that were alleged to have misstated the country of origin. At a minimum, these experiences heightened LIU’s awareness of the obligation to properly state the country of origin of wire hangers imported by GL PAPER. LIU’s prior conduct and knowledge form the circumstances under which the jury will assess whether he exercised reasonable care at GL PAPER."