Importers Fight to Keep Counterclaims Alive in Customs Penalty Suit
A group of importers opposed the government's motion to dismiss the companies' counterclaims in a customs penalty case for lack of jurisdiction or cause of action, arguing that their claims are properly being raised as counterclaims and don't need to independently qualify for the trade court's other jurisdictional grants (United States v. Lexjet, CIT # 23-00105).
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The spat arose in the government's $15 million penalty lawsuit against five companies -- Lexjet, Abaqa, BMG, S-One Nevada and S-One Holdings -- for their alleged failure to pay antidumping duties on artist canvases made in China (see 2305160068). From 2014 to 2017, the companies, allegedly operating in concert, evaded the duties on 167 entries.
In 2023, a separate company, Printing Textiles, got a final scope ruling that canvas banner matisse was within the scope of the AD order. Printing Textiles contested the ruling at the Court of International Trade, though its challenge came up short (see 2410090022). The company is litigating its appeal of the trade court's decision before the U.S. Court of Appeals for the Federal Circuit.
In the penalty suit, the companies filed four counterclaims, though the U.S. said the claims are the same as those at issue in the Printing Textiles case. Specifically, the companies' counterclaims say the AD order is "void for vagueness," Commerce's scope rulings have "unlawfully expanded the AD order," CBP failed to consider the "essential physical characteristics of their artist canvas entries" and that the importers get a partial refund for an "equitable recoupment of overpayments."
The U.S. moved to dismiss the counterclaims on the basis that the companies failed to preserve their rights and file a timely judicial challenge under Section 1581(c) (see 2512110038).
In response, the importers argued that their claims are valid counterclaims under Section 1583. The companies said the legislative history of the section "makes clear that Congress believed the administration of justice would be well served if the Court of International Trade entertained jurisdiction over cross-claims and third party actions arising out of a suit by the United States to recover on a bond." This section broadened the court's remedial powers and authorized money judgments against the U.S. through cross-claims "in civil actions relating to import transactions."
Cross-claims generally don't require "independent grounds of federal jurisdiction," the brief said.
The idea that the companies needed to timely request a scope ruling is "misplaced," since a precedential CIT decision is "binding precedent and cannot be overruled or avoided unless or until the court sits en banc." Thus, a ruling for the government in Printing Textiles "would necessarily give way to an equitable recoupment of overpayment," the brief said. The companies added that they aren't "simply sidestepping or circumventing traditional protest requirements as purported by" the government, since the companies "were left without an option to protest both duties and penalties under this 1592 action."
The importers also argued that they didn't fail to exhaust administrative remedies, since the U.S., by opening the penalty suit, submitted itself to CIT's jurisdiction "and its mandate to examine all claims and issues from a clean slate." Thus, the government has "waived its sovereign immunity from suit and is subject to any properly pleaded counterclaim that a defendant brings relating to the same transaction."
The companies added that a "de novo determination" from the court, as found in penalty cases, may allow the importers to "raise issues that would otherwise be barred from an importer initiated action."