United States v. Am. Home Assurance Co.

• Decision Date: 23 January 2014
• Docket Number: Court No. 10–00185.,Slip Op. 14–7.
• Parties: UNITED STATES of America, Plaintiff, v. AMERICAN HOME ASSURANCE CO., Defendant.
• Court: U.S. Court of International Trade

964 F.Supp.2d 1342

UNITED STATES of America, Plaintiff,

v.AMERICAN HOME ASSURANCE CO., Defendant.

Slip Op. 14–7. Court No. 10–00185.

United States Court of International Trade.

Jan. 23, 2014.

Edward F. Kenny, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY, argued for plaintiff. With him on the brief were Stuart F. Delery, Principal Acting Assistant Attorney General, and Barbara S. Williams, Attorney in Charge of International Trade Field Office. Of counsel on the brief was Beth C. Brotman, Attorney, Office of Assistant Chief Counsel for International Trade Litigation, U.S. Customs and Border Protection, of Washington, DC.

Herbert C. Shelley, Steptoe & Johnson LLP, of Washington, DC, argued for defendant. On the brief were Taylor Pillsbury, Meeks, Sheppard, Leo & Pillsbury, of Newport Beach, CA, and Ralph Sheppard, Meeks, Sheppard, Leo & Pillsbury, of Fairfield, CT.

OPINION

GOLDBERG, Senior Judge:

This case is before the court on competing cross-motions for summary judgment. In this action on a bond, Plaintiff, the United States (“United States” or “the Government”), seeks recovery of unpaid antidumping duties from surety Defendant American Home Assurance Company (“AHAC”). The parties dispute (1) whether AHAC is liable for the unpaid duties as the surety on a continuous bond, and (2) assuming AHAC is liable, whether AHAC owes the Government both prejudgment interest in the form of equitable interest and interest pursuant to 19 U.S.C. § 580 (2006). For reasons set forth below, the court finds that AHAC is liable under the bond, but that the Government is only entitled to equitable prejudgment interest. Accordingly, summary judgment as to the United States is granted in part and denied in part, and summary judgment as to AHAC is granted in part and denied in part.

SUBJECT MATTER JURISDICTION AND STANDARD OF REVIEW

In 2001, AHAC entered into a continuous bond with importer JCOF (USA) International, Inc. (“JCOF”). The Government now seeks recovery on the bond for unpaid antidumping duties. Thus, jurisdiction is proper pursuant to 28 U.S.C. § 1582(2).

Both parties have moved for summary judgment. Summary judgment is available when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” USCIT R. 56(a). To make the requisite showing, the movant must cite “particular parts of materials in the record” and “show[ ] that the materials cited do not establish the absence or presence of a genuine dispute.” USCIT R. 56(c). A fact is material if it could affect the outcome of the action. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine dispute as to a material fact exists if, based on the evidence, a reasonable factfinder could return a verdict for the nonmoving party. Id.

UNDISPUTED FACTS

Importers must generally post security before U.S. Customs and Border Protection (“Customs”) will release imported merchandise from its custody. Hartford Fire Ins. Co. v. United States, 648 F.3d 1371, 1372 (Fed.Cir.2011). Importers often use surety companies to post the required security. Id. A “surety bond creates a three-party relationship, in which the surety becomes liable for the principal's debt or duty to the third party obligee.” Ins. Co. of the W. v. United States, 243 F.3d 1367, 1370 (Fed.Cir.2001).

AHAC is a surety company authorized to issue surety bonds. Pl.'s Statement of Material Facts as to Which There Are No Genuine Issues to Be Tried, ECF No. 27 (“Pl.'s Facts”) ¶ 1; Def.'s Resp. to Pl.'s Statement of Material Facts as to Which There Are No Genuine Issues to Be Tried, ECF No. 30 (“Def.'s Resp.”) ¶ 1. AHAC issued the surety bond at issue in this case pursuant to an arrangement with U.S. importer JCOF. Pl.'s Facts ¶ 2; Def.'s Resp. ¶ 2. The bond, on which JCOF and AHAC were jointly and severally obligated, had a limit of liability of $600,000 per bond period. Pl.'s Facts ¶ 3; Def.'s Resp. ¶ 3.¹

During the period covered by the continuous bond, JCOF imported two entries of crawfish tail meat from Yangzhou Lakebest Foods Company, Ltd. (“Yangzhou Lakebest”)—a Chinese exporter. Pl.'s Mot. & Mem. in Supp. of Mot. for Summ. J., ECF No. 27 (“Pl.'s Br.”), at Ex. D, Resp. 4. The entries occurred on November 1, 2001 and November 2, 2001 and were identified as entry numbers M42–1164064–2 and M42–1164065–9, respectively. Pl.'s Facts ¶¶ 4–5; Def.'s Resp. ¶¶ 4–5. JCOF declared a zero percent ad valorem antidumping duty rate for both entries at importation. Pl.'s Br. at Ex. D, Resp. 4.

On February 13, 2004, the U.S. Department of Commerce (“Commerce”) published the final results of an administrative review of the order on crawfish tail meat from the People's Republic of China. Freshwater Crawfish Tail Meat from the People's Republic of China, 69 Fed.Reg. 7193 (Dep't Commerce Feb. 13, 2004) (“ Final Results ”). In those results, Commerce assigned Yangzhou Lakebest an antidumping duty rate of 223.01% ad valorem. Id. at 7197. The review period spanned from September 1, 2001 to August 31, 2002. Id. at 7194.

On May 12, 2004, Commerce directed Customs to liquidate entries of the subject crawfish meat at the rates set forth in its Final Results.² Pl.'s Facts ¶ 9; Def.'s Resp. ¶ 9. Because Commerce's review period included November 2001, JCOF's two entries were subject to Yangzhou Lakebest's 223.01% ad valorem antidumping duty rate plus interest. See Pl.'s Facts ¶ 6; Def.'s Resp. ¶ 6. On June 25, 2004, Customs liquidated the entries accordingly (“June 2004 liquidations”). See Pl.'s Facts ¶ 11; Def.'s Resp. ¶ 11. When JCOF did not timely pay the duties, Customs made a formal demand on AHAC. Pl.'s Br. at Ex. G. AHAC then filed Protest Number 2704–04–102655. Pl.'s Facts ¶ 12; Def.'s Facts ¶ 12. Customs denied that protest on July 8, 2005, and AHAC did not institute litigation challenging the protest denial. See Pl.'s Facts ¶ 15; Def.'s Facts ¶ 15.

Much of the confusion in this case stems from litigation that an exporter other than Yangzhou Lakebest instituted in response to the Final Results. Due to the pendency of litigation, the court preliminarily enjoined the Government from liquidating entries exported by Shanghai Taoen International Trading Co., Ltd. (“Shanghai Taoen”) during the period of review. Pl.'s Facts ¶ 8; Def.'s Facts ¶ 8. The preliminary injunction did not affect JCOF's imports, as the imports came from Yangzhou Lakebest and Yangzhou Lakebest was not a party to the pending litigation. See Def.'s Statement of Add'l Material Facts as to Which There Are No Genuine Issues to Be Tried, ECF No. 30 (“Def.'s Facts”) ¶ 3; Pl.'s Resp. to Def.'s Statement of Add'l Facts as to Which There Are No Genuine Issues to Be Tried, ECF No. 37 (“Pl.'s Resp.”) ¶ 3. Nonetheless, when the Shanghai Taoen litigation concluded, Customs reliquidated JCOF's two entries on June 3, 2005 (“June 2005 reliquidations”). See Pl.'s Facts ¶ 14; Def.'s Resp. ¶ 14. The June 2005 reliquidations resulted in new bills with a total bill amount $51,997.31 greater than the bills associated with the June 2004 liquidations. See Pl.'s Br. at Exs. G, H.³ After Customs made a second demand on AHAC, AHAC filed protest number 2704–05–102579. See Pl.'s Facts ¶ 16; Def.'s Resp. ¶ 16. Again, AHAC did not institute litigation when Customs denied the protest.

Customs sent AHAC a demand letter on February 9, 2007, seeking total payment of $1,157,898.22 for unpaid duties plus interest in connection with JCOF's two entries. Pl.'s Facts ¶ 18; Def.'s Facts ¶ 18. AHAC denied liability on grounds unrelated to those it raises in the instant action. Pl.'s Facts ¶ 19; Def.'s Facts ¶ 19; Pl.'s Br. at Ex. K. The Government then instituted this action on a bond on June 21, 2010. Summons & Compl., ECF Nos. 1–2. In its answer, AHAC asserts multiple affirmative defenses hinging on its belief that JCOF's two entries were deemed liquidated at the rate in effect at the time of entry—i.e., zero percent. See Answer to Compl., ECF No. 8. AHAC, thus, believes it is not liable under the surety bond.

DISCUSSION

The parties raise two issues in their summary judgment briefing. First, AHAC argues that the bills underlying the Government's collection action “are legally void” and that AHAC is not obligated to pay under continuous bond number 270114235. See Def.'s Cross–Mot. & Mem. in Supp. of Summ. J. & in Opp'n to Pl.'s Mot. for Summ. J., ECF No. 30 (“Def.'s Br.”), at 5. Second, the parties dispute whether the Government is entitled to equitable and statutory interest on any recovery. Id. at 9. As set forth below, the court finds that the Government is entitled to recovery on the bond and awards equitable interest, but not statutory interest.

I. AHAC is legally obligated to pay under continuous bond number 270114235

The first issue in this case turns on the parties' divergent interpretations of the legal effect of the June 2005 reliquidations. AHAC essentially argues that the untimely June 2005 reliquidations superseded and canceled the timely June 2004 liquidations. Def.'s Br. at 6–7 (citing Mitsubishi Elecs. Am., Inc. v. United States, 18 CIT 929, 931, 865 F.Supp. 877, 879 (1994)). Because the reliquidations occurred more than ninety days after the June 2004 liquidations, AHAC further avers that the June 2005 voluntary reliquidations were invalid under 19 U.S.C. § 1501. Def.'s Br. at 7. As a result, AHAC believes there were no valid liquidations.

Without any valid liquidations, AHAC asserts that the entries were deemed liquidated by operation of law at the rate asserted by the importer of record. Id. at 8 (citing 19 U.S.C. § 1504(d)). 19 U.S.C. § 1504(d) compels Commerce to liquidate previously suspended entries “within 6 months after receiving notice of the removal [of the suspension] from the Department of Commerce.” For purposes of this case, the six-month clock began running when Commerce published its ...