Washington Intern. Ins. Co. v. U.S.
| Decision Date | 28 March 2001 |
| Docket Number | Slip Op. 01-33.,Court No. 92-11-00720. |
| Citation | 138 F.Supp.2d 1314 |
| Parties | WASHINGTON INTERNATIONAL INSURANCE CO., Plaintiff, v. UNITED STATES, Defendant. United States, Plaintiff, v. Washington International Insurance Co., Defendant. |
| Court | U.S. Court of International Trade |
Sandler, Travis & Rosenberg (Kenneth Wolf), New York City, for Plaintiff.
Stuart E. Schiffer, Acting Assistant Attorney General of the United States, Washington, DC; Joseph I. Liebman, Attorney-in-Charge, International Trade Field Office, New York City, Mikki Graves Walser, Commercial Litigation Branch, Civil Division, United States Department of Justice, New York City, for Defendant.
The consolidated action before this Court consists of two cases, Washington International Insurance Co. v. United States, CIT No. 92-11-00720, and United States v. Washington International Insurance Co., CIT No. 96-10-02466. At issue are forty-one bonded entries of antifriction bearings that were imported by General Bearing Corporation (General Bearing/Principal)1 into the United States between November 1988 and April 1990 subject to the terms of a 1988 antidumping duty order. Eleven of the forty-one entries are the subject of Washington International Insurance Company's (Washington International) complaint in CIT No. 92-11-00720.2 The remaining thirty entries are the subject of litigation in the United States' suit, CIT No. 96-10-02466. For ease of reference, the entries cited in CIT No. 92-11-00720 are referred to as the "Group I"3 entries and the entries cited in CIT No. 96-10-02466 are referred to as the "Group II"4 entries.
The events leading to and the legal claims underlying this consolidated action are unquestionably convoluted. Familiarity with the factual background is necessary to understand the parties' allegations. Accordingly, the following section provides a detailed discussion of events that precipitated this case. To provide clarity, the facts are divided into three sections, each corresponding to a specific series of events. The facts are undisputed, have been stipulated to by the parties, and are applicable to each of the motions discussed below.5
On November 9, 1988, the United States Department of Commerce (Commerce) published a preliminary determination that antifriction bearings from Japan were being sold at less than fair value. See Preliminary Determinations of Sales at Less Than Fair Value: Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Thereof from Japan, 53 Fed. Reg. 45343 (Nov. 9, 1988) (Preliminary Determination). Based on its initial investigation, Commerce established an estimated antidumping duty rate of 44.76 percent. See id. at 45,352. Commerce then directed the United States Customs Service (Customs) to suspend liquidation of all subject merchandise and to require importers to post either cash deposits or bonds securing the estimated antidumping duties. See id. at 45351.
General Bearing imported merchandise from Japan subject to the antidumping duty order. In the normal course of business, General Bearing imported entries that were secured by cash deposits and others that were secured by surety bond. Between November 1988 and April 1990, General Bearing imported forty-one bonded entries that are the subject of this consolidated action.6 As to these forty-one entries, Washington International served as surety and posted the requisite bonds.
On May 15, 1989, Commerce published notice of an antidumping duty order finalizing its determination that antifriction bearings from Japan were being sold at less than fair value and were materially injuring the United States industry. See Antidumping Duty Orders: Ball Bearings, Cylindrical Roller Bearings, and Spherical Plain Bearings, and Parts Thereof From Japan, 54 Fed.Reg. 20904 (May 15, 1989) (Final Determination). In June 1990, Commerce initiated the First Annual Administrative Review covering subject merchandise entered between November 9, 1988 and April 30, 1990. Commerce determined that merchandise produced by companies that participated in the first administrative review would be liquidated at a company specific rate. See Antifriction Bearings (Other Than Tapered Roller Bearings) and Parts Therefrom From Japan; Final Results of Antidumping Duty Administrative Reviews, 56 Fed.Reg. 31754, 31756 (July 11, 1991) (Administrative Review Results). The importers would bear the burden of providing documentary evidence establishing that individual manufacturers had participated in the administrative review. See id. Merchandise manufactured by companies not participating in the first administrative review would be liquidated at the "all others" rate applicable at the time the merchandise was entered. See id.
The Group I entries and three of the Group II entries were liquidated between October 1991 and December 1991. The remaining Group II entries were liquidated on July 16, 1993.7 At the time the Group I entries were liquidated, Customs was under the impression that General Bearing's entries were manufactured by companies that had not participated in the first administrative review. Accordingly, these entries were liquidated at the "all others" rate of 44.76 percent. In January 1992, Customs demanded that General Bearing pay the applicable duties owed on the Group I entries. Almost immediately, General Bearing protested, asserting that the merchandise had been manufactured by companies participating in the first administrative review and, therefore, was entitled to the company-specific duty rate.8
In February 1992, General Bearing refused to pay the outstanding duties on the Group I entries and, pursuant to the terms of the surety agreement, Customs sought payment from Washington International.9 Washington International timely protested the rate at which the Group I entries were liquidated and Custom's demand for payment. The protest alleged grounds identical to those put forth by General Bearing in its protest — i.e. the bonded entries had been manufactured by companies participating in the first administrative review thereby making them eligible for liquidation at the company-specific duty rate.
Customs denied Washington International's protest on May 5, 1992, stating that its original liquidation determinations were correct. Following the denial of its protest, in May 1992, Washington International paid the duties demanded on twelve of the Group I entries.10
On July 16, 1993, Customs liquidated the thirty Group II entries. Bills were issued to Washington International and demand for payment was made. Washington International refused to pay the demanded duties, but did not protest Custom's liquidation. To date, the duties on the Group II entries have not been paid.
On September 16, 1991, subsequent to the dates of importation but prior to the liquidation of the entries involved in this action, General Bearing filed a Chapter 11 bankruptcy petition with the United States Bankruptcy Court for the Southern District of New York. See In re General Bearing Corp., 136 B.R. 361 (Bankr.S.D.N.Y. 1992). General Bearing informed Customs that its pending bankruptcy proceedings precluded it from paying any duties owed on the Group I entries. Based on this information, Customs seized approximately $4.4 million in cash deposits posted by General Bearing to secure certain of its entries and issued bills to General Bearing for the thirteen bonded entries in Group I.11 As indicated above, Washington International paid the duties demanded on twelve of these entries.
General Bearing, as debtor-in-possession, sought to overturn Customs' seizure of its cash deposits. To this end, General Bearing initiated an adversary proceeding against the United States seeking to recover the cash deposits. See Bankr.Adv. No. 92-5067A (Bankr.S.D.N.Y. March 3, 1992). General Bearing argued that because Customs had not liquidated the entries secured by the cash deposits prior to initiation of the bankruptcy proceedings, the cash deposits belonged to the bankruptcy estate. Additionally, General Bearing argued Customs' seizure of the cash deposits violated the automatic stay imposed by 11 U.S.C. § 362(a) freezing any and all collection actions initiated by General Bearing's creditors.12 On May 20, 1992, the United States denied General Bearing's allegations and asserted various affirmative defenses, including the right to offset General Bearing's outstanding duty obligation with any property held by the United States. Washington International neither had notice of, nor was a party to, this action.
In September 1992, General Bearing and the United States agreed to a stipulation and settlement order terminating the adversary proceeding. The settlement order was approved and "So-ordered" by the bankruptcy court. Under the terms of the settlement, the United States agreed Customs would reliquidate the entries secured both by cash deposit and surety bond. The company-specific rate of 23.88% would be applied if documentation could be produced verifying the company's participation in the first administrative review. The settlement order established a payment scheme to refund General Bearing any excess duties due it as a result of the reliquidation, conditioned on the premise that the United States received full payment from Washington International of all outstanding duties. Pursuant to the settlement order, the United States would make demand to Washington International for all duties owed on any outstanding entries for which Washington International served as surety. If Washington International refused to pay the duties, the United States would use a portion of General Bearing's refund to offset the debt owed on the bonded entries. The settlement order...
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