Dak Americas LLC v. United States

DAK AMERICAS LLC and AURIGA POLYMERS INC., Plaintiffs, v. UNITED STATES, Defendant.

Slip Op 18-95 Court No. 17-00195

UNITED STATES COURT OF INTERNATIONAL TRADE

August 6, 2018

Before: Timothy C. Stanceu, Chief Judge

OPINION AND ORDER

[Denying Defendant's Motion to Dismiss]

Paul C. Rosenthal, Kelley Drye & Warren, LLP, of Washington, D.C., for plaintiffs DAK Americas LLC and Auriga Polymers Inc. With him on the brief were David C. Smith, Cameron R. Argetsinger, and Joshua R. Morey.

Mikki Cottet, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for defendant. With her on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Of counsel on the brief were Suzanna Hartzell-Ballard and Jessica Plew, Office of Assistant Chief Counsel, U.S. Customs and Border Protection.

Stanceu, Chief Judge: Plaintiffs challenge administrative actions of U.S. Customs and Border Protection ("Customs" or "CBP") demanding partial repayment of monetary distributions plaintiffs previously received under the Continued Dumping and Subsidy Offset Act of 2000 ("CDSOA" or "Byrd Amendment"). 19 U.S.C. § 1675c (2000) (repealed by Deficit Reduction Act of 2005, Pub. L. No. 109-171, § 7601(a), 120 Stat. 4, 154 (2006)). Plaintiffs are "affected domestic producers" ("ADPs"), which are parties eligible under the CDSOA to receive monetary distributions paid from duties collected under an antidumping duty ("AD") order on certain polyester staple fiber ("PSF") from the Republic of Korea (the "Korea PSF Order") and an AD order on PSF from Taiwan (the "Taiwan PSF Order"). Specifically, plaintiffs challenge the actions Customs took in issuing four letters, three of which were dated March 10, 2017 and one of which was dated May 26, 2017, demanding payment of amounts Customs characterized as having been disbursed erroneously to plaintiffs. Compl. ¶¶ 28-30, 36, 42, (July 26, 2017), ECF No. 2 ("Compl."). Plaintiffs seek an order setting aside the demands as unlawful, compelling Customs to return a payment already made by one of the plaintiffs, and enjoining Customs from continuing to make such demands. Id., Relief Requested.

Before the court is defendant's motion to dismiss under USCIT Rule 12(b)(6) for failure to state a claim on which relief can be granted. Mem. in Support of Def.'s Mot. to Dismiss (Dec. 18, 2017), ECF No. 12 ("Def.'s Br."). The court denies the motion.

I. BACKGROUND

Customs issued the demand letters following the settlement of separate litigation before this Court, to which plaintiffs were not parties. See Compl. ¶¶ 28-32; Order of Dismissal, Nan Ya Plastics Corp., Am. v. United States, Ct. No. 08-00138 (June 15, 2015), ECF No. 140 (Order of Dismissal following parties' Stipulation of Dismissal) ("Nan Ya Dismissal Order"). Nan Ya Plastics Corp., Americas ("Nan Ya"), also a domestic producer of PSF, was added retroactively to the list of ADPs published by the U.S. International Trade Commission ("ITC") for the Korea and Taiwan PSF orders, effective as of Fiscal Year 2007. Compl. ¶ 32. In the demand letters, Customs identified the payment of government funds to Nan Ya as the basis for the demands upon plaintiffs. Compl. ¶ 31.

A. The Korea and Taiwan PSF Orders

The U.S. Department of Commerce ("Commerce" or the "Department") and the ITC initiated antidumping duty investigations of PSF from the Republic of Korea and PSF from Taiwan in April 1999. Initiation of Antidumping Duty Investigations: Certain Polyester Staple Fiber From the Republic of Korea and Taiwan, 64 Fed. Reg. 23,053 (Int'l Trade Admin. Apr. 29, 1999); Certain Polyester Staple Fiber From Korea and Taiwan, 64 Fed. Reg. 17,414 (Int'l Trade Comm'n Apr. 9, 1999). After the ITC gave Commerce notice of its affirmative injury determination on May 15, 2000, Commerce published its amended final determinations of sales at less than fair value on May 25, 2000 and issued the Korea PSF Order and the Taiwan PSF Order. Notice of Amended Final Determination of Sales at Less Than Fair Value: Certain Polyester Staple Fiber From the Republic of Korea and Antidumping Duty Orders: Certain Polyester Staple Fiber From the Republic of Korea and Taiwan, 65 Fed. Reg. 33,807-08 (Int'l Trade Admin. May 25, 2000). The Korea PSF Order and the Taiwan PSF Order remained in place as of May 2018. See Polyester Staple Fiber From the Republic of Korea and Taiwan: Final Results of Changed Circumstances Reviews, and Revocation of Antidumping Duty Orders, in Part, 83 Fed. Reg. 23,253 (Int'l Trade Admin. May 18, 2018).

B. The Parties to this Action

Plaintiffs DAK Americas LLC ("DAK Americas") and Auriga Polymers Inc. ("Auriga") are ADPs that were eligible to receive, and did receive, CDSOA distributions under the Korea PSF Order. DAK also received disbursements in its capacity as a successor-in-interest to Wellman Inc. ("Wellman"), another ADP, under both the Korea PSF Order and the Taiwan PSF Order. Compl. ¶ 3; see also 19 C.F.R. § 159.61(b)(1)(i) (providing for successor companies to be eligible to receive CDSOA disbursements). Defendant in this action is the United States.¹

C. The Continued Dumping and Subsidy Offset Act of 2000

In 2000, after the Korea and Taiwan PSF Orders were issued, Congress amended Title VII of the Tariff Act of 1930, adding section 754, the Continued Dumping and Subsidy Offset Act, codified at 19 U.S.C. § 1675c (2000). This "Byrd Amendment" was intended to strengthen the remedial effects of trade remedy laws. Trade remedies under the Tariff Act of 1930 were designed to neutralize the distortive effects of unfair trade practices (i.e., dumping and subsidization) by assessing equivalent duties that, prior to the passage of the CDSOA, were deposited to the U.S. Treasury and became available to pay general government expenses. See Huaiyin Foreign Trade Corp. v. United States, 322 F.3d 1369, 1379 (Fed. Cir. 2003) (explaining that, before the CDSOA, "the duties collected pursuant to the antidumping statute were deposited with the Treasury for general purposes"). In enacting the Byrd Amendment, Congress noted, among other findings, that "[t]he continued dumping or subsidization of imported products after the issuance of antidumping orders or findings or countervailing duty orders can frustrate the remedial purpose of the laws by preventing market prices from returning to fair levels." Continued Dumping and Subsidy Offset Act of 2000, Pub. L. No. 106-387, § 1(a), §1002(3), 114 Stat. 1549, 1549A-72 (2000). To afford further relief, the Byrd Amendment provided for duties assessed under AD and countervailing duty ("CVD") orders to be placed in "Special Accounts" established within the U.S. Treasury for each AD and CVD order and distributed to ADPs each fiscal year during which the relevant AD or CVD order remained in effect. 19 U.S.C. § 1675c(c)-(e) (2000); 19 C.F.R. § 159.64.² ADPs may receive CDSOA distributionsas reimbursement for "qualifying expenditures," i.e., specified business expenditures such as manufacturing facilities, equipment, input materials, health benefits for employees, and "[w]orking capital or other funds needed to maintain production." 19 U.S.C. §§ 1675c(b)(4) (2000), 1675c(d)(2)-(3) (2000); 19 C.F.R. §159.61(c).

The CDSOA provided that a party may be designated as an ADP only if it "was a petitioner or interested party in support of the petition with respect to which an antidumping duty order, a finding under the Antidumping Act of 1921, or a countervailing duty order has been entered." 19 U.S.C. § 1675c(b)(1)(A) (2000). The statute set out the process for designation of ADPs, beginning with the ITC's forwarding to Customs a list of persons potentially eligible for ADP status—i.e., "a list of petitioners and persons with respect to each order and finding and a list of persons that indicate support of the petition by letter or through questionnaire response"—within sixty days of the issuance of an AD or CVD order. Id. §1675c(d)(1) (2000). Customs publishes lists of potential ADPs in the Federal Register annually for each AD and CVD order prior to making distributions. Id. § 1675c(d)(2). After parties on the list of potential ADPs certify that they desire a distribution and meet the eligibility criteria for ADPs, including by certifying that they have not yet received disbursements for the qualifying expenditures claimed, Customs distributes the assessed duties in the amounts claimed by eligible ADPs, making a pro rata distribution according to qualifying expenditures claimed in cases where the total amount claimed by ADPs exceeds the available funds in the relevant Special Account. Id. § 1675c(d)(2)-(3) (2000).

Not long into the Byrd Amendment's existence, eleven foreign nations challenged the Byrd Amendment before the World Trade Organization ("WTO"). In WTO proceedings, panels of the Dispute Resolution Body and the Appellate Body found Byrd Amendment distributions to be inconsistent with the commitments made by the United States in the Uruguay Round Agreements. Panel Report, United States-Continued Dumping and Subsidy Offset Act of 2000, WTO Docs. WT/DS217/R, WTDS234/R (adopted Sept. 16, 2002); Appellate Body Report, United States-Continued Dumping and Subsidy Offset Act of 2000, WTO Docs. WT/DS217/AB/R, WTDS234/AB/R (adopted Jan. 16, 2003). In February 2006, Congress repealed the Byrd Amendment by means of a provision in the Deficit Reduction Act of 2005, subject to a savings provision. Deficit Reduction Act of 2005, Pub. L. No. 109-171, § 7601(a), 120 Stat. 4, 154 (2006). The repeal provided that "[a]ll duties on entries of goods made and filed before October 1, 2007, that would, but for [the repeal], be distributed . . . shall be distributed as if section 754 of the Tariff Act of 1930 [i.e., 19 U.S.C. § 1675c] had not been repealed." Id. In 2010, Congress further limited distributions under the CDSOA, prohibiting payments from...