DAK Ams. LLC v. United States

422 F.Supp.3d 1372

DAK AMERICAS LLC and Auriga Polymers Inc., Plaintiffs,

v.UNITED STATES, Defendant.

Slip Op. 19-172

Court No. 17-00195

United States Court of International Trade.

Dated: December 27, 2019

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 were Suzanna Hartzell-Ballard and Jessica Plew, Office of Assistant Chief Counsel, U.S. Customs and Border Protection.

OPINION

Stanceu, Chief Judge:

Plaintiffs brought this action to contest written demands by U.S. Customs and Border Protection ("Customs" or "CBP") for the return to the government of certain monetary payments plaintiffs previously received from Customs under the Continued Dumping and Subsidy Offset Act of 2000 ("CDSOA"). 19 U.S.C. § 1675c, Pub. L. No. 106-387, §§ 1001-03, 114 Stat. 1549 (2000) (repealed by Deficit Reduction Act of 2005, Pub. L. No. 109-171, § 7601(a), 120 Stat. 4, 154 (Feb. 8, 2006)). Before the court is plaintiffs' motion for judgment on the agency record under USCIT Rule 56.1. The court denies the motion.

BACKGROUND I.

Background is presented in the court's previous opinion in this case and is supplemented herein. DAK Americas LLC v. United States. , 42 CIT ––––, Slip Op. 18-95, 2018 WL 3758166 (Aug. 6, 2018) (" DAK Americas I ").

Plaintiffs are "affected domestic producers" ("ADPs"), which is the term used in the CDSOA to identify parties eligible to receive monetary distributions that are paid under the CDSOA as compensation for qualifying expenses from duties collected under an antidumping duty ("AD") or countervailing duty order. Plaintiffs DAK Americas LLC ("DAK Americas") and Auriga Polymers Inc. ("Auriga") received annual CDSOA distributions under an AD order on polyester staple fiber ("PSF") from the Republic of Korea; DAK Americas also received distributions in its capacity as a successor-in-interest to Wellman Inc. ("Wellman"), another ADP under that order and an AD order on PSF from Taiwan.¹ Compl. ¶¶ 2-4.

1. The Demand Letters

In 2017, Customs issued letters (the "demand letters") to DAK Americas, Wellman, and Auriga demanding the partial repayment of certain monetary distributions that Customs paid to these parties under the CDSOA. The demand letters identified as the reason for the repayment demands the settlement of litigation (the "Nan Ya " litigation) before this Court, to which plaintiffs were not parties. See 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"). The Nan Ya litigation involved the issue of whether Nan Ya Plastics Corp., Americas ("Nan Ya"), also a domestic producer of PSF, qualified as an ADP under the CDSOA. This litigation did not proceed to a judgment and resulted in a settlement agreement. Nan Ya Settlement Agreement (Feb. 12, 2015) (Admin.R.Doc. No. 1 at 5-11) ("Settlement Agreement"). Further to the settlement, Nan Ya 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 and for subsequent fiscal years. Letter from ITC to Customs (Feb. 25, 2015) (Admin.R.Doc. No. 5 at 84) ("Letter from ITC"). In the demand letters, Customs characterized the repayments it sought from the plaintiffs in this case as plaintiffs' pro-rata shares of the payments the government made to Nan Ya as a result of the settlement of the Nan Ya litigation, which were not otherwise available in CDSOA accounts.

Customs issued the four demand letters nearly two years after the Nan Ya settlement, as follows.

The March 10,2017 letter Customs sent to DAK Americas sought claimed overpayments of $231,148.82 made under the Korea AD Order for Fiscal Years 2007 through 2011. Customs Demand Letter to DAK Americas (Mar. 10, 2017) (Admin.R.Doc. 6 at 86-87) ("Demand Letter to DAK Americas").

The March 10,2017 letter to Wellman (sent to the address of affiliate DAK Americas) sought $443,300.52 for claimed overpayments under both AD orders for Fiscal Years 2007 and 2008 ($223,637.61 under the Taiwan AD Order and $219,662.91 under the Korea AD Order). Customs Demand Letter to Wellman (Mar. 10, 2017) (Admin.R.Doc. 7 at 89-90) ("Demand Letter to Wellman").

The March 10, 2017 letter to Auriga sought repayment of $11,548.84 received under the Korea AD Order for Fiscal Year 2011. Customs Demand Letter to Auriga (Mar. 10, 2017) (Admin.R.Doc. 8 at 92-93) ("First Demand Letter to Auriga").

Customs sent a second demand letter to Auriga, dated May 26, 2017, seeking repayment of an additional $95,079.75 in CDSOA distributions Auriga received "due to a supplemental distribution" under the Korea PSF Order for Fiscal Year 2010, which Customs stated "should have been included" in its earlier demand letter to Auriga (for a total demand of $106,628.79). Customs Updated Demand Letter to Auriga (May 26, 2017) (Admin.R.Doc. 9 at 95-95) ("Second Demand Letter to Auriga").

On May 31,2017, Auriga repaid the sum of $11,548.84 demanded by Customs in the First Demand Letter to Auriga. Check from Auriga to Customs (May 31, 2017) (Admin.R.Doc. 10 at 109). No plaintiff has paid any other portion of the amounts demanded by Customs. Compl. ¶¶ 33-34.

2. The Denial of Defendant's Motion to Dismiss

In DAK Americas I , the court denied a Rule 12(b)(6) motion by the government seeking dismissal of this action for failure to state a claim on which relief can be granted. 42 CIT at ––––, Slip Op. 18-95 at 15.

3. The Pending Motion and Related Proceedings

Plaintiffs filed the motion before the court, for judgment on the agency record under USCIT Rule 56.1, on December 28, 2018. Pls.' Rule 56.1 Mot. for J. on the Agency R. (Dec. 28, 2018), ECF No. 31 ("Pls.' Mot."); Pls.' Mem. of Points and Authorities (Dec. 31, 2018), ECF No. 32 ("Pls. Mem."). Defendant responded on March 22, 2019. Def.'s Resp. in Opp. to Pls.' 56.1 Mot. for J. on the Agency R. (Mar. 22, 2019), ECF No. 37 ("Def.'s Resp."). Plaintiffs replied on April 19, 2019. Reply in Supp. of Pls.' Rule 56.1 Mot. for J. on the Agency R. (Apr. 19, 2019), ECF No. 38 ("Pls.' Reply"). The court held oral argument on plaintiffs' motion on July 23, 2019. See Oral Argument (July 23, 2019), ECF No. 43.

DISCUSSION II.

A. Subject Matter Jurisdiction

The court exercises jurisdiction according to 28 U.S.C. § 1581(i), the "residual" jurisdiction provided by section 201 of the Customs Courts Act of 1980, 28 U.S.C. § 1581(i).² Paragraph (2) of § 1581(i) provides the Court of International Trade jurisdiction of "any civil action commenced against the United States ... that arises out of any law of the United States providing for ... tariffs, duties, fees, or other taxes on the importation of merchandise for reasons other than the raising of revenue." 28 U.S.C. § 1581(i)(2). Paragraph (4) of subsection (i) provides for jurisdiction of "any civil action commenced against the United States ... that arises out of any law of the United States providing for ... administration and enforcement with respect to the matters referred to in paragraphs (1)-(3) of this subsection .... " Id. § 1581(i)(4).

B. Standard of Review

In an action brought under 28 U.S.C. § 1581(i), the court conducts its review according to the standard of review set forth in the Administrative Procedure Act, 5 U.S.C. § 706, under which a court must hold unlawful agency action found to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 28 U.S.C. § 2640(e).

C. Plaintiffs' Claims and Demands for Relief

Plaintiffs claim that each of the CBP's letters demanding recovery, or "clawback," of their previously paid CDSOA distributions are invalid agency actions that must be set aside. They base their claims in large part on their construction of two provisions in the Customs Regulations implementing the CDSOA.

They contend that section 159.64(b)(3) of the regulations, 19 C.F.R. § 159.64(b)(3), which addresses the return to Customs of overpayments of CDSOA distributions, is applicable only where Customs seeks to recoup distributions to account for refunds of antidumping and countervailing duties made to importers arising from import entries. Pls.' Mem. 12-18. They maintain that this provision, therefore, does not support a demand for the return of past CDSOA payments made to affected domestic producers and, specifically, does not apply in the specific situation where, as here, a settlement of litigation against the government resulted in the addition of a new ADP. Id.

Plaintiffs argue, further, that CBP's demands are precluded by another provision in the Customs Regulations implementing the CDSOA, 19 C.F.R. § 159.64(f). Pls.' Mem. 18. This provision creates a general rule, subject to certain exceptions, that "any distribution made to an affected domestic producer under this section shall be final and conclusive on the affected domestic producer." 19 C.F.R. § 159.64(f).

Additionally, plaintiffs argue that the CDSOA does not allow Customs to reallocate CDSOA distributions retroactively among ADPs in an attempt to seek clawback of previously-paid distributions. They emphasize, in particular, the lengths of time elapsing since the original payments (dating back to Fiscal Year 2007) and the issuance of the demand letters in 2017. Pls.' Mem. 1.

Plaintiffs seek three forms of relief. They seek, first, to have the demand letters set aside as unlawful agency actions. Pls.' Mot. 1. Second, they would have the court enjoin Customs "from...