70 F.Supp.3d 1369 (CIT. 2015), 14-00212, Kwo Lee, Inc. v. United States
|Citation:||70 F.Supp.3d 1369|
|Opinion Judge:||Pogue, Senior Judge:|
|Party Name:||KWO LEE, INC., Plaintiff, v. UNITED STATES, Defendant|
|Attorney:||No. 14-00212 Robert T. Hume, Hume & Associates, LLC, of Ojai, CA, for Plaintiff. Tara K. Hogan, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for Defendant. With her on the brief were Joyce R. Branda, Acting Assistant Attorney G...|
|Judge Panel:||Before: Donald C. Pogue, Senior Judge.|
|Case Date:||June 12, 2015|
|Court:||Court of International Trade|
Negative bonding sufficiency determination sustained.
In this action, Plaintiff, importer Kwo Lee, Inc., challenges the negative bond sufficiency determination made by U.S. Customs and Border Protection (" Customs" or " CBP" ) on certain entries of fresh garlic from the People's Republic of China (" PRC" ).1 Am. Compl., ECF No. 19, at ¶ 1. Specifically, Customs has determined that Plaintiff must post a single transaction bond for each such entry so that Plaintiff's total security is equal to Plaintiff's potential antidumping (" AD" ) duty liability as calculated at the PRC-wide rate (376.67 percent),2 rather than the substantially lower combination rate (32.78 percent)3 otherwise applicable to Plaintiff's putative exporter and producer, Qingdao Tiantaixing Foods Co., Ltd. (" QTF" ). Id. According to Customs, this enhanced bonding is required because Plaintiff's entry documents displayed a pattern of omissions and possible discrepancies that made
it impossible to verify the identity of the producer, and therefore impossible to verify Plaintiff's eligibility for QTF's special rate. Def.'s Resp. to Pl.'s Mot. for J. on the Admin. R., ECF No. 56 (" Def.'s Resp." ), at 11-12. Plaintiff argues that Customs' determination is invalid because it is not in accordance with law, is arbitrary and capricious, and is the result of inadequate process. Mem. in Supp. of Pl.'s Rule 56.1 Mot. for J. upon the Agency R., ECF No. 55 (" Pl.'s Br." ), at 4-6.
As explained below, because Customs' determination was in accordance with law, and neither arbitrary and capricious nor an abuse of discretion, it is sustained.
This action has its roots in the 1994 A.D. duty order on fresh garlic from the PRC (A-570-831). Garlic A.D. Duty Order, 59 Fed.Reg. at 59,209. There, the U.S. Department of Commerce (" Commerce" or " the Department" ) set the PRC-wide rate at 376.67 percent. Id. at 59,210. This rate is still in use today. See Undated Port of San Francisco Information Notice, reproduced in Apps. to Accompany [Pl.'s Br.] (" Apps. to Pl.'s Br." ), ECF No. 55-1 at app. 1 (" Information Notice" ).
In 2006, QTF began shipping fresh garlic to the United States. QTF requested and, following investigation, Commerce granted QTF a new shipper rate (" NSR" ) of 32.78 percent. Twelfth NSR, 73 Fed.Reg. at 56,552. This NSR was a " combination rate," in that it only applies where QTF is both the producer and exporter. Id. When QTF is only the exporter, the PRC-wide rate applies. Id. at 56,552-53.
Following the Twelfth NSR, QTF did not ship garlic to the United States again until 2014,4 with Plaintiff as importer. Decl. of Steven [Li] (Owner of Kwo Lee, Inc.), reproduced in Pl.'s Appl. for a TRO & Mot. for a Prelim. Inj., ECF No. 7-2 at ex. 5, at ¶ ¶ 4-5. These entries declared the garlic as subject to the antidumping duty order on fresh garlic from the PRC, A-570-831, with QTF as both the producer and exporter. Decl. of Brian Pilipavicius, Supervisory Imp. Specialist, Area Port of San Francisco, CBP, reproduced in [Con.] App. to [Def.'s Resp.], ECF No. 56-1 at tab 1 (" Pilipavicius Decl." ), at ¶ 6. This made the entries subject to the QTF NSR rate of 32.78 percent. Id.; Twelfth NSR, 73 Fed.Reg. at 56,552. However, because of a pattern of missing and possibly discrepant information, Customs was unable to determine whether QTF was the producer. Pilipavicius Decl., ECF No. 56-1 at tab 1, at ¶ ¶ 6-10; Decl. of Frank Djeng, Senior Imp. Specialist, Area Port of San Francisco, CBP, reproduced in [Con.] App. to [Def.'s Resp.], ECF No. 56-1 at tab 2 (" Djeng Decl." ), at ¶ ¶ 3-8; Decl. of Richard Edert, Int'l Trade Specialist, Nat'l
Targeting & Analysis Grp., Office of Int'l Trade, CBP, reproduced in [Con.] App. to [Def.'s Resp.], ECF No. 56-1 at tab 3 (" Edert Decl." ), at ¶ ¶ 8-10. Customs requested further documentation from Plaintiff to verify, by other means, the identity of the producer, and Plaintiff complied. E-mail from Nick Hong, Customs Broker, to Marc Dolor, Senior Imp. Specialist, Area Port of San Francisco, CBP, and Frank Djeng (Aug. 22, 2014, 02:25PM), reproduced in [Con.] App. to [Def.'s Resp.], ECF No. 56-1 at tab 5 (" E-mail from Hong to Dolor & Djeng" ), at AR-000007-08 (e-mail), AR-0000012 (attachment list); E-mail from Nick Hong to Frank Djeng (Aug. 25, 2014, 08:01AM), reproduced in [Con.] App. to [Def.'s Resp.], ECF No. 56-2 at tab 7, at AR-000170. Review of the responsive documents, however, suggested to Customs that QTF did not have the ability to produce all of the garlic at issue. Edert Decl., ECF No. 56-1 at tab 3, at ¶ 7.5
Unable to ascertain the identity of the producer, Customs applied the A.D. duty rate for QTF as exporter with another or an unknown producer, that is, the PRC-wide rate. Customs denied entry pending the posting of additional security, in the form of a series of single transaction bonds (" STBs" ), equal to this potential A.D. duty liability. CBP Form 4647, reproduced in [Con.] App. to [Def.'s Resp.], ECF No. 56-2 at tabs 11 & 14 (" CBP Form 4647" ), at AR-000187-88, AR-000199-200; Undated Port of San Francisco Information Notice, reproduced in [Con.] App. to [Def.'s Resp.], ECF No. 56-2 at tabs 11 & 14 (" Information Notice" ), at AR-000189, AR-000201.6
Plaintiff sought to preliminarily enjoin Customs from requiring additional bonding. Pl.'s Appl. for a TRO & Mot. for a Prelim. Inj., ECF No. 7, at 1. Because Plaintiff showed likely irreparable harm and raised serious and substantial questions as to the merits, with the balance of the equities and the public interest in his favor, the court granted Plaintiff's motion. Kwo Lee, __CIT___, 24 F.Supp.3d 1322 (2014). Instead of the STBs required by Customs, the court required Plaintiff to provide security in the amount of one million dollars ($1,000,000.00) held by the court. Id. at 1332.
Plaintiff now moves for judgment on the agency record pursuant to USCIT Rule 56.1. Mot. of Pl. Kwo Lee, Inc. for J. upon the Agency R., ECF No. 55.
STANDARD OF REVIEW
The court has jurisdiction pursuant to 28 U.S.C. § 1581(i) (2012) and will therefore uphold Customs' enhanced bonding determination unless it is " arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A).7
I. Customs' Determination Was Within Its Statutory Authority
A. Customs' Statutory Authority to Make Bond Sufficiency Determinations and Require Additional Bonding
Customs has broad statutory authority to protect the revenue of the United States through the imposition of bonding requirements on imports. See 19 U.S.C. § § 66, 1623.8 Pursuant to this authority, Customs has promulgated extensive regulations, see Customs Bond Structure; Revision, 49 Fed.Reg. at 41,152 (amending Customs regulations " to revise the Customs bond structure by consolidating and reducing the number of bond forms in use" ), in an effort to specify and structure the bonding application, approval, and execution process. 19 C.F.R. § 113.0 (2014).
The statute specifically provides that even where a " bond or other security is not specifically required by law," Customs may " by regulation or specific instruction require, or authorize customs officers to require, such bonds or other security as he, or they, may deem necessary for the protection of the revenue or to assure compliance with any provision of law, regulation, or instruction which [Customs] may be authorized to enforce." 19 U.S.C. § 1623(a).9 Under the corresponding Customs' regulations, port directors are instructed to determine whether a bond " is in proper form and provides adequate security" for the entries at issue. 19 C.F.R. § 113.11.10 If he or she, or the drawback office, " believes that acceptance of a transaction secured by a continuous bond would place the revenue in jeopardy or otherwise hamper the enforcement of Customs laws or regulations," he or she may " require additional security." 19 C.F.R. § 113.13(d).
Because " the statute is silent on the specific method," and " expressly delegate[s] broad authority to Customs to prescribe all regulations necessary," these resultant regulations are entitled to " controlling weight," Chrysler Corp. v. United States, 592 F.3d 1330, 1335-36 (Fed. Cir. 2010), and will be sustained so long as they are " reasonably related to the purposes of the enabling legislation." Mourning v. Family Publ'ns Serv., Inc., 411 U.S. 356, 369, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973) (quoting Thorpe v. Hous. Auth. of City of Durham, 393 U.S. 268, 280-81, 89 S.Ct. 518, 21 L.Ed.2d 474 (1969)) (internal quotation marks omitted).11
The statute allows for such bonds as " deem[ed] necessary for the protection of the revenue" of the United States or " to assure compliance with any provision of law." 19 U.S.C. § 1623(a). This is reflected in the language of the regulation, which provides that " if a port director or drawback office believes" that...
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