DAK America, LLC v. United States , 2018 CIT 95 ( 2018 )

Slip Op 18-
UNITED STATES COURT OF INTERNATIONAL TRADE
DAK AMERICAS LLC and AURIGA
POLYMERS INC.,
Plaintiffs,
Before: Timothy C. Stanceu, Chief Judge
v.
Court No. 17-00195
UNITED STATES,
Defendant.
OPINION AND ORDER
[Denying Defendant’s Motion to Dismiss]
Dated:$XJXVW
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(“CDSOA” or “Byrd Amendment”). 19 U.S.C. § 1675c (2000) (repealed by Deficit Reduction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
Court No. 17-00195 Page 2
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
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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
1
In the Complaint, plaintiffs named as defendants the United States, U.S. Customs and
Border Protection, and Kevin K. McAleenan, Acting Commissioner of Customs. These parties
should be identified as a single defendant, the United States, and the court is ordering the caption
to be modified accordingly.
Court No. 17-00195 Page 4
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 distributions
2
Under the Customs regulations implementing the CDSOA, funds enter the Special
Accounts only after entries of the goods subject to the AD and/or CVD orders have been
liquidated, meaning that duties have been finalized, collected, and deposited. Before liquidation
occurs, duties collected by Customs (i.e., cash deposits) are placed in “clearing accounts.” See
(continued . . .)
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as 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).
(. . . continued)
19 C.F.R. § 159.64(a). When entries are liquidated, the corresponding funds in the clearing
accounts are transferred to Special Accounts, from which they are available for distribution to
ADPs. See 19 C.F.R. § 159.64(b)(1).
Court No. 17-00195 Page 6
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
entries of goods that as of December 8, 2010 were “(1) unliquidated; and (2)(A) not in litigation;
or (B) not under an order of liquidation from the Department of Commerce.” Claims Resolution
Act of 2010, Pub. L. No. 111-291, § 822, 124 Stat. 3064, 3162-63 (2010). The CDSOA was also
amended by the Trade Facilitation and Enforcement Act of 2015 to provide authority for the
government to deposit certain interest earned on antidumping and countervailing duties into
Special Accounts created under the CDSOA. Pub. L. 114-125, § 605, 130 Stat. 122, 187-88
(2016).
Court No. 17-00195 Page 7
D. The Nan Ya Litigation
Beginning with Fiscal Year 2001, the ITC compiled lists of potential ADPs under both
the Korea PSF Order and the Taiwan PSF Order, and Customs published the lists annually.
Plaintiffs—or their related or predecessor entities—appeared on these lists and have received
CDSOA disbursements for many of the years during which the Korea PSF Order and Taiwan
PSF Order have been in place.3 Nan Ya did not appear as a potential ADP under the Korea PSF
3
Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers,
66 Fed. Reg. 40,782, 40,799 (Aug. 3, 2001); Distribution of Continued Dumping and Subsidy
Offset to Affected Domestic Producers, 67 Fed. Reg. 44,722, 44,737 (July 3, 2002); Distribution
of Continued Dumping and Subsidy Offset to Affected Domestic Producers, 68 Fed. Reg. 41,597,
41,635-36 (July 14, 2003); Distribution of Continued Dumping and Subsidy Offset to Affected
Domestic Producers, 69 Fed. Reg. 31,162, 31,199 (June 2, 2004); Distribution of Continued
Dumping and Subsidy Offset to Affected Domestic Producers, 70 Fed. Reg. 31,566, 32,154
(June 1, 2005); Distribution of Continued Dumping and Subsidy Offset to Affected Domestic
Producers, 71 Fed. Reg. 31,336, 31,378, 31,380-81 (June 1, 2006); Distribution of Continued
Dumping and Subsidy Offset to Affected Domestic Producers, 72 Fed. Reg. 29,582, 29,625,
29,628 (May 29, 2007); Distribution of Continued Dumping and Subsidy Offset to Affected
Domestic Producers, 73 Fed. Reg. 31,196, 31,240 31,242 (May 30, 2008); Distribution of
Continued Dumping and Subsidy Offset to Affected Domestic Producers, 74 Fed. Reg. 25,814,
25,859, 25,861 (May 29, 2009); Distribution of Continued Dumping and Subsidy Offset to
Affected Domestic Producers, 75 Fed. Reg. 30,530, 30,575, 30,577 (June 1, 2010); Distribution
of Continued Dumping and Subsidy Offset to Affected Domestic Producers, 76 Fed. Reg. 31,020,
31,060, 31,062 (May 27, 2011); Distribution of Continued Dumping and Subsidy Offset to
Affected Domestic Producers, 77 Fed. Reg. 32,718, 32,759, 32,761 (June 1, 2012); see also U.S.
Customs and Border Protection, Continued Dumping and Subsidy Offset Act, CDSOA Data
Organized by Fiscal Year, available at https://www.cbp.gov/trade/priority-
issues/adcvd/continued-dumping-and-subsidy-offset-act-cdsoa-2000 (last accessed July 31,
2018). DAK Americas does not appear on the lists of potential ADPs published in the Federal
Register, but a related entity (“E.I. du Pont de Nemours”) does. E.I. du Pont de Nemours
appears to be a related entity of DAK Americas based on CBP’s annual CDSOA disbursement
report for 2002, which shows a distribution to “DAK Fibers LLC (E.I. du Pont de Nemours).”
See U.S. Customs and Border Protection, Continued Dumping and Subsidy Offset Act, CDSOA
Data Organized by Fiscal Year, “CDSOA FY2002 Disbursements FINAL,” available at
https://www.cbp.gov/sites/default/files/documents/fy2002_final_disb.pdf (last accessed July 31,
2018). DAK Americas appears as a recipient of CDSOA funds on all of Customs’ Annual
CDSOA Disbursement Reports for Fiscal Years 2002 to 2011, as alleged in the Complaint.
Compl. ¶ 2. The court need not rely on CBP’s reports because it credits the allegations in
plaintiffs’ Complaint for purposes of ruling on the motion to dismiss.
Court No. 17-00195 Page 8
Order or the Taiwan PSF Order in any of the Federal Register notices or annual CDSOA
disbursement reports issued by Customs for Fiscal Years 2001 through 2016.4 Nan Ya
nonetheless submitted a certification of eligibility as an ADP for Fiscal Year 2007 and on
April 18, 2008 commenced an action against the United States asserting entitlement to its pro
rata share of CDSOA disbursements issued under the Korea PSF Order and the Taiwan PSF
Order, beginning in Fiscal Year 2007. Compl. ¶ 26; Def.’s Br. 4-5; Pls.’ Mem. in Opp’n to
Def.’s Mot. to Dismiss 2 (Jan. 22, 2018), ECF No. 13 (“Pls.’ Br.”); see also Nan Ya Plastics
Corp., Am. v. United States¸ 36 CIT __, __, 853 F. Supp. 2d 1300, 1306-07 (2012) (“Nan Ya I”),
vacated in part, 37 CIT __, __, 916 F. Supp. 2d 1376, 1380-82 (2013) (“Nan Ya II”).
On July 12, 2012, a three judge panel of this Court granted the government’s motion to
dismiss the Nan Ya action for failure to state a claim upon which relief could be granted. Nan
Ya I, 36 CIT at __, 853 F. Supp. 2d at 1314. On the following day, July 13, 2012, the Court of
Appeals for the Federal Circuit (“Court of Appeals”) ruled in PS Chez Sidney, L.L.C. v. U.S. Int’l
Trade Comm’n, stating:
We hold that when a U.S. producer assists investigation by responding to
questionnaires but takes no other action probative of support or opposition, the
producer has supported the petition under [19 U.S.C.] § 1675c(d) and is eligible
4
Nan Ya first appeared as a potential ADP (under both the Korea PSF Order and the
Taiwan PSF Order) in the Federal Register publication providing notice of distributions for
Fiscal Year 2017. Distributions of Continued Dumping and Subsidy Offset to Affected Domestic
Producers, 82 Fed. Reg. 25,052, 25,093, 25,095 (May 31, 2017). Nan Ya also appeared on the
list published in the Federal Register for Fiscal Year 2018. Distributions of Continued Dumping
and Subsidy Offset to Affected Domestic Producers, 83 Fed. Reg. 25,116, 25,156, 25,159
(May 31, 2018). Nan Ya does not appear as a distributee under the Korea PSF Order or the
Taiwan PSF Order in any of Customs’ annual CDSOA disbursement reports, which stopped
including the Taiwan PSF Order after 2012 and the Korea PSF Order after 2014 (each following
multiple years of $0 in disbursements). See U.S. Customs and Border Protection, Continued
Dumping and Subsidy Offset Act, CDSOA Data Organized by Fiscal Year, available at
https://www.cbp.gov/trade/priority-issues/adcvd/continued-dumping-and-subsidy-offset-act-
cdsoa-2000 (last accessed July 31, 2018).
Court No. 17-00195 Page 9
for distributions if it can otherwise make the required certification that it has been
injured.
684 F.3d 1374, 1382 (Fed. Cir. 2012). The Court of Appeals in Chez Sidney noted that
implementing its decision “may be as simple as directing the ITC to release funds from the
special account,” but that it also “may require the Court of International Trade to exercise its
power to award a money judgment” against the United States. Id. 684 F.3d at 1384 (internal
citations omitted). Following the decision of the Court of Appeals in Chez Sidney, this Court
vacated its July 12, 2012 judgment dismissing the action in Nan Ya and issued a new judgment
pursuant to USCIT Rule 54(b) dismissing only Nan Ya’s constitutional claims and allowing Nan
Ya’s statutory claims to proceed upon a third amended complaint. In the third amended
complaint, Nan Ya alleged that Nan Ya, like Chez Sidney, had selected the “support” box in
responding to the ITC’s preliminary questionnaire and the “take no position” box in responding
to the ITC’s final questionnaire. See Nan Ya II, 916 F. Supp. 2d at 1381-82. Nan Ya claimed
that it could not be denied status as an ADP merely because it had selected the “take no position”
options on the petition support portions of its questionnaire responses submitted to Commerce in
relation to the investigations resulting in the Korea and Taiwan PSF Orders. See id., 916 F.
Supp. 2d at 1379-81; Compl. ¶¶ 26-27. Nan Ya argued that denial of ADP status was unjustified
because Nan Ya had never actually opposed the petitions and had in fact chosen the “support”
option at the earlier preliminary stage. See Nan Ya II, 916 F. Supp. 2d at 1379-81.
Following the filing of the third amended complaint in Nan Ya, the United States and Nan
Ya agreed to a settlement of the Nan Ya lawsuit. Compl. ¶ 32; see also Nan Ya Dismissal Order.
Defendant, citing the Complaint in this case, states that because the remaining funds in the
Special Accounts corresponding to the AD orders were insufficient to pay the entire settlement,
Court No. 17-00195 Page 10
the balance of the Nan Ya settlement was funded by drawing from the judgment fund of the U.S.
Treasury. Def.’s Br. 5 n.4 (citing Compl. ¶ 32).
E. Procedural History of this Action
Customs issued the demand letters to DAK Americas, Auriga, and Wellman nearly two
years after the Nan Ya settlement, in March and May 2017. Compl. ¶¶ 28-32. Customs sought
from DAK Americas a total of $674,449.34, comprising $231,148.82 in CDSOA distributions
DAK Americas received under the Korea PSF Order as well as $219,662.91 Wellman received
under the Korea PSF order and $223,637.61 Wellman received under the Taiwan PSF Order.
Compl. ¶¶ 28-29. From Auriga, Customs demanded repayment of $11,548.84 received under the
Korea PSF Order. Id. ¶ 30. Customs sent another letter to Auriga in May 2017 demanding an
additional repayment of $95,079.75 in CDSOA distributions Auriga received under the Korea
PSF Order for Fiscal Year 2010, which Customs noted “should have been included” in its earlier
letter to Auriga. Compl. ¶ 30. As authority for the repayment demands contained in the four
letters, Customs provided citations to 19 C.F.R. § 159.64(b)(3) and the Nan Ya lawsuit. Id.
¶¶ 30-32. Auriga has repaid the sum of $11,548.84 demanded by Customs in its initial March
2017 letter. Id. ¶ 33. Other than this payment, neither DAK nor Auriga has repaid to Customs
any of the amounts demanded. Id. ¶¶ 33-34.
Plaintiffs commenced this action on July 26, 2017. Compl. Plaintiffs claim the demands
for repayment are unlawful because the CDSOA distributions received by plaintiffs have become
“final and conclusive” under the Customs regulation. Id. ¶¶ 35-42 (citing 19 C.F.R. § 159.64(f)).
Plaintiffs contend that the demand letters issued by Customs are “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law, within the meaning of the Administrative
Procedure Act, 5 U.S.C. § 706.” Id. ¶ 42. Plaintiffs seek an order (1) declaring that Customs
Court No. 17-00195 Page 11
does not have authority to demand repayment of the CDSOA distributions, (2) declaring that
existing distributions to the plaintiffs are final and conclusive, and (3) ordering Customs to
refund to Auriga the $11,548.84 repayment that Auriga made in response to a demand by
Customs. See id., Relief Requested.
On July 19, 2018, the court held oral argument on defendant’s motion to dismiss. Oral
Argument (July 19, 2018), ECF No. 17.
II. DISCUSSION
A. Motions to Dismiss for Failure to State a Claim on which Relief Can Be Granted
In ruling on a USCIT Rule 12(b)(6) motion to dismiss for failure to state a claim upon
which relief can be granted, the court accepts as true all well-pled factual allegations and draws
all reasonable inferences in a plaintiff’s favor. United States v. Nitek Elecs., Inc., 844 F. Supp.
2d 1298, 1302 (Fed. Cir. 2012) (citing Cedars–Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1584
n.13 (Fed. Cir. 1993)). A plaintiff’s factual allegations must be “enough to raise a right to relief
above the speculative level . . . on the assumption that all the allegations in the complaint are true
(even if doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Furthermore, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Although a court primarily
considers the allegations as set out in the complaint, it “may also look to matters incorporated by
reference or integral to the claim, items subject to judicial notice, [and] matters of public record.”
Dimare Fresh, Inc. v. United States, 808 F.3d 1301, 1306 (Fed. Cir. 2015) (internal quotation
marks and citation omitted).
Court No. 17-00195 Page 12
B. This Action Cannot Be Dismissed According to USCIT Rule 12(b)(6)
Defendant argues, first, that the court must dismiss plaintiffs’ case because “plaintiffs
have failed to allege facts upon which the Court can conclude that Customs acted unlawfully”
according to the standard set forth in the Administrative Procedure Act (“APA”). Def.’s Br. 9
(citing the APA, 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). In
support of this argument, defendant submits that “plaintiffs’ claim fails as a matter of law
because the Appropriations Clause of the United States Constitution, coupled with the language
of the CDSOA, authorizes and requires Customs to seek repayment of CDSOA overpayments.”
Id.
Defendant’s first argument does not convince the court that this action must be dismissed.
The case, brought under the jurisdictional grant of 28 U.S.C. § 1581(i), arises under the APA.
Accordingly, the court must construe plaintiffs’ claims as presenting the narrow question of
whether the four actions taken by means of the demand letters were contrary to law according to
the APA standard. The larger and more general question of whether the United States is
authorized, or required, by the Constitution or the CDSOA to seek repayment of CDSOA
payments extends beyond the claims in this case and, potentially, beyond the reach of the court’s
subject matter jurisdiction. Plaintiffs’ claims are directed to actions Customs has taken, not to
other types of actions the United States might take in the future. Even were the court to presume,
arguendo, that Customs is authorized to seek repayment of CDSOA overpayments, the court
could not conclude at this early stage of the litigation that Customs necessarily acted lawfully in
taking the actions that are being challenged in this litigation.
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Defendant’s second argument in favor of dismissal is that “[e]ven assuming, for the sake
of argument, the Appropriations Clause did not prohibit retention of CDSOA overpayments, the
plaintiffs’ claims would still fail as a matter of law because the plain language of 19 C.F.R.
§ 159.64 does not prohibit or otherwise constrain Customs from seeking collection of any
CDSOA overpayments.” Id. at 9-10. This, too, is not the issue presented by plaintiffs’ claims.
According to a fact pled in the Complaint, which for purposes of ruling on defendant’s motion
the court must presume to be true, Customs cited § 159.64(b)(3) as authority for its demands.
Compl. ¶ 31. In a challenge to agency action under section 706 of the APA, “[t]he grounds upon
which an administrative order must be judged are those upon which the record discloses that its
action was based.” Changzhou Wujin Fine Chem. Factory Co. v. United States, 701 F.3d 1367,
1377 (Fed. Cir. 2012) (quoting SEC v. Chenery Corp., 318 U.S. 80, 87 (1943)) (internal
quotation marks omitted). Therefore, the question presented by this case is not, as defendant
would have it, whether § 159.64 prohibits or otherwise constrains Customs from seeking
collection of any CDSOA overpayments but whether that regulatory provision authorizes the
particular actions Customs took by issuing the four demand letters.
The court cannot conclude that the Customs actions challenged in this litigation either
were, or were not, authorized by § 159.64(b)(3) by considering only the factual allegations in the
Complaint, the text of the regulation, and such other public documents as the court may consider.
The first sentence in the cited provision reads as follows:
Overpayments to affected domestic producers. Overpayments to affected
domestic producers resulting from subsequent reliquidations and/or court actions
and determined by Customs to be not otherwise recoverable from corresponding
Special Account as set out in paragraph (b)(2) of this section will be collected
from the affected domestic producers.
Court No. 17-00195 Page 14
19 C.F.R. § 159.64(b)(3).5 The parties disagree on whether § 159.64(b), which in paragraph (2)
refers to refunds to importers following reliquidations of “underlying entries composing a prior
distribution” and “refunds to importers resulting from any court action involving those entries,”
authorized the demand letters at issue in this case, which did not arise from refunds to importers
but instead from what Customs apparently concluded were overpayments to ADPs resulting from
the retroactive designation of an additional ADP. But even were the court to presume that the
regulation, in paragraph (b)(3), authorizes Customs to make demands upon ADPs to recover
payments arising from the retroactive designation of an additional ADP, the court still could not
conclude that plaintiffs’ action must be dismissed. Without viewing the demand letters and
related record documents, the court cannot examine the underlying determinations Customs
made, nor can it consider the “grounds” on “which the record discloses that” the agency’s
“action[s] w[ere] based.” Changzhou Wujin, 701 F.3d at 1377. For example, plaintiffs allege
that the demand letters contained “a citation to the Nan Ya lawsuit,” Compl. ¶ 31, but the court
cannot determine at this stage of the litigation that the Nan Ya lawsuit, or a particular aspect of
that lawsuit, was what Customs determined to be the “court action” that it considered to
constitute the basis for the recovery of “overpayments,” as those terms are used in 19 U.S.C.
§ 159.64(b)(3).
5
Paragraph (b)(2) of the section provides as follows:
Refunds resulting from reliquidation or court action. If any of the
underlying entries composing a prior distribution should reliquidate for a refund,
such refund will be recovered from the corresponding Special Account.
Similarly, refunds to importers resulting from any court action involving those
entries will also be recovered from the corresponding Special Account. Refunds
to importers will not be delayed pending the recovery of overpayments from
domestic producers as set out in paragraph (b)(3) of this section.
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Defendant’s final argument in favor of dismissal is that “to the extent that any ambiguity
exists in the CDSOA and 19 U.S.C. § 159.64, Customs’ interpretation of the statute and
regulation must be afforded deference and applied to authorize collection of any CDSOA
overpayments.” Def.’s Br. 10. Defendant summarizes its arguments by stating that “plaintiffs’
claim does not rest upon a plausible legal theory” and that plaintiffs “can prove no set of facts
that would demonstrate that Customs acted unlawfully or that would entitle them to relief.” Id.
at 24. As the court has explained, defendant has not shown that dismissal would be required
even were the court to presume, arguendo, that 19 U.S.C. § 159.64, as a general matter,
authorizes demand letters such as those at issue in this case. Adjudicating plaintiffs’ claims will
require judicial review on the agency record, which has not yet been filed.
III. CONCLUSION AND ORDER
For the reasons discussed above, the court may not dismiss this action according to
USCIT Rule 12(b)(6) for failure to state a claim on which relief can be granted. Therefore, the
court must deny defendant’s motion.
Upon consideration of defendant’s motion to dismiss, upon all papers and proceedings
had herein, and upon due deliberation, it is hereby
ORDERED that Defendant’s Motion to Dismiss (Dec. 18, 2017), ECF No. 12, be, and
hereby is, denied; it is further
ORDERED that the parties shall file, on or before August 31, 2018, a proposed schedule
in accordance with USCIT Rule 56.1 to govern further proceedings in this case; and it is further
ORDERED that the caption be amended to read as it appears on this Opinion and Order.
/s/ Timothy C. Stanceu
Timothy C. Stanceu, Chief Judge
Dated: "VHVTU



New York, New York