Clearon Corp. v. United States

Slip Op. 10-86
UNITED STATES COURT OF INTERNATIONAL TRADE
________________________________
:
CLEARON CORPORATION and :
OCCIDENTAL CHEMICAL :
CORPORATION, :
:
Plaintiffs, : Before: Richard K. Eaton, Judge
v. :
: Court No. 08-00364
UNITED STATES, :
:
Defendant, :
and :
:
ARCH CHEMICALS, INC. and HEBEI :
JIHENG CHEMICAL CO., LTD., :
:
Defendant–Intervenors.:
:
________________________________:
OPINION AND ORDER
[Defendant’s motion to dismiss denied.]
Dated: August 9, 2010
Gibson, Dunn & Crutcher LLP (Daniel J. Plaine, J.
Christopher Wood, and Andrea F. Farr) for plaintiffs.
Tony West, Assistant Attorney General; Jeanne E. Davidson,
Director, Franklin E. White, Jr., Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (David D’Alessandris); Office of the Chief Counsel for
Import Administration, United States Department of Commerce
(Brian Soiset), for defendant.
Eaton, Judge: This case is before the court on a motion to
dismiss, pursuant to USCIT Rule 12(b)(1), of defendant the United
States, acting on behalf of the United States Department of
Court No. 08-00364 Page 2
Commerce (“Commerce”). Defendant’s motion seeks the dismissal of
Count 3 of plaintiffs’ complaint in its entirety, and the
dismissal of Counts 1 and 2 as they pertain to Hebei Jiheng
Chemical Corporation (“Jiheng”). Def.’s Mot. to Dismiss in Part
as Moot (“Def.’s Mot.”) 1. If Commerce’s motion is granted,
Jiheng will be dismissed from the case.
By their complaint, Clearon Corporation and Occidental
Chemical Corporation (collectively, “plaintiffs” or “Clearon”)
contest certain aspects of Commerce’s final results in the second
administrative review of the antidumping duty order on
chlorinated isocyanurates covering the period June 1, 2006
through May 31, 2007. Compl. ¶ 3; see also Chlorinated
Isocyanurates from the People’s Republic of China, 73 Fed. Reg.
62,249 (Dep’t of Commerce Oct. 20, 2008) (amended final results
of antidumping duty administrative review)(the “Final Results”).
Plaintiffs are domestic producers of chlorinated isocyanurates
seeking to increase Jiheng’s dumping margins found in the Final
Results. See Compl. ¶ 5.
The basis for defendant’s motion is that the portions of the
complaint involving Jiheng’s merchandise have been rendered moot
because the merchandise was liquidated by operation of law in
accordance with 19 U.S.C. § 1504(d) (2006), commonly referred to
as the deemed liquidation provision. Def.’s Mot. 1. According
to defendant, plaintiffs’ failure to serve their injunction on
Court No. 08-00364 Page 3
named government officials at Commerce and United States Customs
and Border Protection (“Customs” or “CBP”) rendered the
injunction order incapable of preventing a deemed liquidation.
Def.’s Mot. 3. For the reasons set forth below, defendant’s
motion to dismiss is denied.
BACKGROUND
On June 24, 2005, following an investigation, Commerce
published an antidumping duty order on chlorinated isocyanurates.
Chlorinated Isocyanurates from the People’s Republic of China, 70
Fed. Reg. 36,561 (Dep’t of Commerce June 24, 2005) (notice of
antidumping duty order)(the “Order”). On July 26, 2007, at the
request of certain foreign producers, exporters, and domestic
producer Clearon, Commerce commenced the second periodic review
of the Order pursuant to 19 U.S.C. § 1675(a)(1) and 19 CFR
§ 351.213(b). Initiation of Antidumping and Countervailing Duty
Administrative Reviews and Request for Revocation in Part, 72
Fed. Reg. 41,057 (Dep’t of Commerce July 25, 2007). On September
10, 2008, Commerce published the final results of the review,
later amended on October 20, 2008. Chlorinated Isocyanurates
from the People's Republic of China, 73 Fed. Reg. 52,645 (Dep’t
of Commerce Sept. 10, 2008); Final Results, 73 Fed. Reg. at
62,249. Importantly, as a result of this publication, the
suspension of liquidation that had previously been in effect as a
Court No. 08-00364 Page 4
result of the review was lifted. See, e.g., Int’l Trading Co. v.
United States, 281 F.3d 1268, 1272 (2002) (“Int’l Trading”)
(holding that “[t]he statutory scheme governing suspension of
liquidation supports the . . . conclusion that suspension of
liquidation [is] removed when the final results of the
administrative review [are] published in the Federal Register”).
Following publication of the Final Results, Clearon
commenced this lawsuit to contest the results of the review. On
November 12, 2008, Clearon, with defendant’s consent, sought an
injunction against liquidation, and on November 13, 2008, the
court granted the injunction. Def.’s Mot. 2; Clearon Corp. v.
United States, Court No. 08-00364, at 1-2 (Nov. 13, 2008)
(injunction order) (the “Injunction”). Among other things, the
Injunction provided that it would enjoin liquidation of
plaintiffs’ merchandise that remained:
unliquidated as of 5:00 p.m. on the fifth
business day after the day on which a copy of
this preliminary injunction is personally
served by Plaintiffs’ counsel by hand on the
following individuals or their delegates:
Attn: Ann Sebastian, APO Director,
U.S. Department of Commerce, Room 1870
International Trade Administration, Import
Administration,
14th Street and Constitution Avenue, N.W.,
Washington, DC 20230; and
Hon. W. Ralph Basham, Commissioner of Customs,
Attn: Alfonso Robles, Esq., Chief Counsel,
U.S. Bureau of Customs and Border Protection,
Room 4.4-B,
1300 Pennsylvania Avenue, N.W.,
Court No. 08-00364 Page 5
Washington, DC 20229
Injunction at 1-2 (emphasis added). While the Injunction was
served on defendant’s counsel, it was never served on either of
the named officials. Def.’s Mot. 3.
The case then proceeded in the usual fashion until December
14, 2009 when defendant filed its motion to dismiss, claiming
that all of Jiheng’s merchandise subject to the second
administrative review had been deemed liquidated pursuant to 19
U.S.C. § 1504(d), and as a result, the court had no jurisdiction
to hear unfair trade duty claims related to the Company’s
merchandise. Def.’s Mot. 4.
STANDARD OF REVIEW
“The party seeking to invoke this Court’s jurisdiction has
the burden of establishing such jurisdiction.” Autoalliance
Int’l, Inc. v. United States, 29 CIT 1082, 1088, 398 F. Supp. 2d
1326, 1332 (2005) (citations omitted). A case becomes moot when
it has “lost its character as a present, live controversy of the
kind that must exist if we are to avoid advisory opinions on
abstract propositions of law.” Hall v. Beals, 396 U.S. 45, 48
(1969) (citations omitted). This requirement of an actual
controversy exists at all stages of an action. Steffel v.
Thompson, 415 U.S. 452, 461 n.10 (1974).
Court No. 08-00364 Page 6
DISCUSSION
I. Contentions of the Parties
Defendant’s primary argument is that because plaintiffs
failed to serve the Injunction on Ms. Sebastian at Commerce and
Mr. Basham at Customs, the document did not effect a suspension
of liquidation that would prevent a deemed liquidation. Def.’s
Mot. 3. Defendant further insists that, by operation of law,
deemed liquidation of Jiheng’s merchandise occurred on April 20,
2009. Def.’s Mot. 3. According to defendant, this deemed
liquidation mooted Clearon’s case as to Jiheng’s merchandise,
thus denying the court subject-matter jurisdiction to hear the
substantive claims with respect to that merchandise. Def.’s Mot.
4. Thus, defendant argues that:
The clear terms of the injunction state
that the injunction will take effect “on the
fifth business day after the day on which a
copy of this preliminary injunction is
personally served by Plaintiffs’ counsel by
hand” on Commerce. The injunction was not
served, personally or otherwise, upon Commerce
and CBP [Customs]. Thus, nothing enjoined the
lifting of the suspension of liquidation
during the nearly 14 months since publication
of the Amended Final Results . . . .
In this case, the removal of suspension
of liquidation, as well as notice to CBP of
that removal, occurred when the Amended Final
Results were published in the Federal Register
on October 20, 2008. Thus, the entries at
issue in this case became liquidated by
operation of law on April 20, 2009.
Def.’s Mot. 6-7 (citations omitted).
Court No. 08-00364 Page 7
Clearon, on the other hand, insists that the motion should
be denied, primarily because:
[T]he absence of any prejudice to Defendant or
any other party from the alleged service
defect places this case squarely within the
ambit of the harmless error rule. . . . Under
these circumstances, the Court should give
effect to the clear intent and agreement of
the parties and the order of this Court that
the entries subject to the appeal would be
enjoined and deny Defendant’s motion to
partially dismiss Plaintiffs’ claims as moot.
Memo. of Clearon Corp. and Occidental Chem. Corp. in Opp. to
Def.’s Part. Mot. to Dismiss (“Pls.’ Resp.”) 2.
II. Suspension of Liquidation and Injunction
Suspensions of liquidation and court-ordered injunctions are
important tools used in the statutory scheme providing for the
application of the proper duties under our unfair trade regime.1
1
The United States uses a “retrospective” assessment
system where the importer makes a cash deposit of the estimated
dumping duties when the subject merchandise enters the United
States, but the actual duty is not necessarily determined until
after entry, and is not paid until the entries are liquidated by
Customs. 19 C.F.R. § 351.212(a) (2009); 19 C.F.R. §§ 141.101,
103. If no request for a review is made, Commerce instructs
Customs to liquidate the entries at the estimated antidumping
duties at the time of entry (the “entered rate”). 19 C.F.R.
§ 351.212(c)(i). If a timely request for review is made,
Commerce publishes the notice of initiation of the review in the
Federal Register and commences the review, during which time
liquidation is suspended. 19 C.F.R. § 351.212(c)(2); 19 C.F.R.
§ 351.221(b); see also American Permac, Inc. v. United States, 10
CIT 535, 539, 642 F. Supp. 1187, 1191 (1986) (“Because 19 U.S.C.
§ 1675(a)(2) expressly calls for the retrospective application of
antidumping review determinations . . . suspension of liquidation
during the pendency of a periodic antidumping review is
Court No. 08-00364 Page 8
The suspension of liquidation is terminated, however, when final
results of an investigation are published in the Federal Register
so that Customs may liquidate the merchandise at the final rate.
Int’l Trading, 281 F.3d at 1272; see also 19 U.S.C. §
1673e(a)(providing that an antidumping duty order should set
forth the antidumping duty rate). Often, however, a party will
request a periodic review to test the applicability of the rate
to entered merchandise. See 19 U.S.C. § 1675(a)(2)(c) (providing
that the final results of an administrative review should set
forth the determination of antidumping duty rates that “shall be
the basis for the assessment of countervailing or antidumping
duties” on the subject entries). Liquidation is suspended during
the review so the liquidation will take place in accordance with
a review’s result. See 19 U.S.C. § 1673b(d)(2).
When the results of a review are challenged in this Court, a
party will typically seek to further halt liquidation by
requesting an injunction. 19 U.S.C. § 1516a(c)(2) (“The United
States Court of International Trade may enjoin the liquidation of
some or all entries of merchandise covered by a determination of
the . . . administering authority . . . upon a request by an
interested party for such relief and a proper showing that the
unquestionably ‘required by statute[].’”). Following the review,
Commerce publishes the final results of the review, and the
entries are liquidated in accordance with those final results,
unless there is an appeal to this Court. 19 C.F.R. § 351.221(b).
Court No. 08-00364 Page 9
requested relief should be granted under the circumstances.”).
The purpose of the injunction is to prevent liquidation and to
preserve merchandise for liquidation at the rate finally
determined following judicial review.
Were an injunction not entered, Customs would be free to
actually liquidate the merchandise pursuant to 19 U.S.C.
§ 1500(c)-(d), which provides that the “Customs Service shall . .
. fix the final amount of duty to be paid on such merchandise . .
. [and] liquidate the entry . . . of such merchandise . . . .”
III. Deemed Liquidation
If no injunction is entered and Customs does not act,
however, another provision comes into play. By statute, entries
of merchandise not liquidated by Customs within six months of the
removal of suspension of liquidation are deemed liquidated at the
entered rate:
Any entry (other than an entry with respect to
which liquidation has been extended under
subsection (b) [relating to an extension of
the six month period by the Secretary of
Commerce] of this section) not liquidated by
the Customs Service within 6 months after
receiving such notice shall be treated as
having been liquidated at the rate of duty,
value, quantity, and amount of duty asserted
by the importer of record . . . .
19 U.S.C. § 1504(d).
Thus, for a deemed liquidation to take place, three
conditions must be met: “(1) the suspension of liquidation that
Court No. 08-00364 Page 10
was in place must have been removed; (2) Customs must have
received notice of the removal of the suspension; and (3) Customs
must not liquidate the entry at issue within six months of
receiving such notice.” Fujitsu Gen. Am., Inc. v. United States,
283 F.3d 1364, 1376 (Fed. Cir. 2002) (“Fujitsu”). Because they
take place by operation of law, Customs plays no role in
effectuating deemed liquidations.
IV. Mootness
The “mootness doctrine” results from the case or controversy
requirement found in Article III of the United States
Constitution. See 13B Charles Alan Wright, Arthur R. Miller &
Edward H. Cooper, Federal Practice and Procedure § 3533 (3d ed.
2008). In the context of an unfair trade case, courts have
generally found that once entries have been liquidated, there is
no case or controversy with respect to the duty rate to be
applied to them. As a result, liquidation moots a court
challenge to the duty rate imposed in an administrative review.
“Once liquidation occurs, it permanently deprives a party of the
opportunity to contest Commerce’s results for the administrative
review by rendering the party’s cause of action moot.” SKF USA
Inc. v. United States, 28 CIT 170, 173, 316 F. Supp. 2d 1322,
1327 (2004) (citing Zenith Radio Corp. v. United States, 710 F.2d
806, 809-10 (Fed. Cir. 1983) (“Zenith”)); see also Fujitsu, 283
Court No. 08-00364 Page 11
F.3d at 1376. This applies to entries deemed liquidated by
operation of 19 U.S.C. § 1504(d). Ames True Temper v. United
States, 34 CIT __, __, __ F. Supp. 2d __, __, Slip Op. 10-33 at 6
(Mar. 30, 2010) (citation omitted).
V. Special Provision of CIT Injunctions
Consent injunctions in the Court of International Trade
generally contain two special provisions not normally found in
other injunction orders. In ordinary practice, it is the duty of
the lawyer for the party being enjoined to inform those who might
violate the injunction of its existence, e.g., officers of a
corporation. See, e.g., USCIT Rule 65(d)(2) (stating that an
injunction binds various categories of individuals working for or
with the parties “who receive actual notice of it by personal
service or otherwise”); Anthony Marano Co. v. MS-Grand
Bridgeview, Inc., No. 08 C 4244, 2009 WL 1904403, at *3 (N.D.
Ill. July 1, 2009) (providing that the enjoined party, whose
employees violated a preliminary injunction, cannot claim that
the “notice of the injunction ‘was not fully transmitted’ to all
of [its employees]” when its counsel has been notified of the
injunction).
Starting sometime after Zenith,2 however, it became common
2
This case, which is generally the initial point of
reference for cases dealing with injunctions in the context of
unfair trade laws, held that liquidation of entries of
Court No. 08-00364 Page 12
in this Court for a consent injunction to contain language
requiring the party that obtained the injunction to serve it on
officers of the United States government. The agreed upon reason
for this service was to give actual notice sufficient to prevent
Commerce and Customs from taking any inadvertent action to
actually liquidate the subject merchandise while the injunction
was in force. Pls.’ Resp. 5. At oral argument, defendant’s
counsel explained that because these agencies are large, the
correct person must be served to ensure proper compliance with an
injunction. Tr. of Civ. Cause for Or. Arg. at 6:1-7.
The other special provision often found in consent
injunctions in this Court is the five-day grace period. In
accordance with this provision, a consent injunction does not
become effective until “the fifth business day after the day on
which a copy of [the] preliminary injunction is personally served
by Plaintiffs’ counsel by hand” on the specified individuals at
Commerce and Customs. See, e.g., Injunction at 1. This
provision has recently been the subject of litigation. See Agro
merchandise subject to administrative review renders court
challenges moot, and therefore, a domestic manufacturer
challenging the result of the review would suffer irreparable
harm if liquidation were not enjoined. Zenith, 710 F.2d at 810.
Hence, the court established a “per se right to a preliminary
injunction enjoining liquidation of unliquidated entries pending
final judicial review of administrative review determinations.”
NMB Sing. Ltd. v. United States, 24 CIT 1239, 1242 n.4, 120 F.
Supp. 2d 1135, 1138 n.4 (2000) (citing Zenith).
Court No. 08-00364 Page 13
Dutch Indus. Ltd. v. United States, 589 F.3d 1187, 1189 (Fed.
Cir. 2009) (“Agro Dutch”).
VI. Agro Dutch
In Agro Dutch, this Court granted a consent injunction that
included the five-day grace period. Thus, in accordance with its
terms, the injunction would not take effect until five days after
it was served on the specified individuals at Commerce and
Customs. 589 F.3d at 1189. The Federal Circuit noted that the
purpose of the grace period was “to ensure against subjecting
Customs officials to contempt sanctions for an inadvertent
liquidation.” Id. at 1193. The Agro Dutch injunction was served
on the named officials. Id. at 1189. Customs, however,
liquidated the entries during the five-day grace period. Id.Because Commerce acted to liquidate during the grace period,
nothing in the terms of the injunction prevented the liquidation
from taking place. Nonetheless, both this Court and the Federal
Circuit found that the “original understanding and intent of the
court and the parties” that the entries be preserved for
liquidation at the final rate overrode the lesser intention that
there should be a safe harbor period. Id. at 1192, 1194. The
Federal Circuit emphasized the importance of “effecting the
intent of the parties and the court to prevent a premature
liquidation while judicial review is ongoing.” Id. at 1193-94.
Court No. 08-00364 Page 14
In reaching its decision, the Agro Dutch court stressed the
equitable power of a Court of International Trade judge and the
importance of complying with the parties’ original intent:
The trial court’s discretion is not limited to
the correction of clerical or typographical
errors but encompasses the correction of errors
needed to comport the order with the original
understandings and intent of the court and the
parties.
. . . [I]t was the purpose of the
injunction and the understanding and intent of
all the parties to suspend liquidation pending
a decision on the merits of [plaintiff’s]
challenge. . . .
. . . .
While finality is an important goal, the
interest in finality must give way in the face
of a more compelling interest in this case:
namely, effecting the intent of the parties and
the court to prevent a premature liquidation
while judicial review is ongoing. . . . No valid
interest in finality is served by foreclosing
judicial review in a case such as this one,
where the parties and trial court agreed that
finality was not warranted, and where an
injunction was entered for the very purpose of
preventing the antidumping duty from becoming
final.
Id. at 1192-94.
VII. The Injunction Was In Effect at the Time of Deemed
Liquidation
Here, the Injunction was entered by this Court on November
13, 2008, and Customs claims that deemed liquidation took place
on April 20, 2009. Def.’s Mot. 2-3. As in Agro Dutch, the
Court No. 08-00364 Page 15
parties agreed to a special term in the Injunction, i.e., the
requirement that Clearon serve Commerce and Customs. As noted,
the purpose of this service was to reduce the chance of these
entities’ taking action to liquidate the subject merchandise. It
is important to keep in mind, however, that the notice resulting
from service on the named officials was designed to prevent
either Commerce or Customs from taking any action that would
result in an actual liquidation. No party claims, nor could it,
that this service would put either agency on notice with respect
to any action it might take to effectuate a deemed liquidation.
This is because, as has been seen, a deemed liquidation is the
result of the operation of law upon the satisfaction of several
conditions. Fujitsu, 283 F.3d at 1376. Under the circumstances
of the case, neither Commerce nor Customs was empowered to act in
any way in furtherance of a deemed liquidation. An examination
of the preconditions for a deemed liquidation will serve to
illustrate why this is the case.
The first condition is that the “suspension required by
statute or court order is removed.” 19 U.S.C. § 1504(d). As
noted, this lifting of the suspension of liquidation took place
when Commerce published the Final Results. See Int’l Trading,
281 F.3d at 1272. In other words, the only action that Commerce
is authorized to take leading up to a deemed liquidation took
place here, and always takes place, prior to a party’s seeking an
Court No. 08-00364 Page 16
injunction against liquidation in this Court. Thus, the service
of the Injunction on Commerce, as provided for in the document,
had no meaning under these circumstances, because Commerce was
powerless to take further action that would result in a deemed
liquidation. Likewise, Customs could take no act nor make any
finding to further a deemed liquidation because it had no power
to do so. Thus, with respect to a deemed liquidation, the
service requirement at issue here merely demands a meaningless
act.
With this in mind, the court finds that the holding in Agro
Dutch directs the outcome of this case. Indeed, as compelling as
the case was in Agro Dutch for reforming the injunction order to
eliminate the five-day grace period, here, the case for
dispensing with the service requirement is even more compelling.
In Agro Dutch, the five-day provision was designed to address
precisely the set of facts that actually came to pass—that is,
the liquidation of merchandise during the grace period. 589 F.3d
at 1189. As has been noted, the provision at issue in Agro Dutch
specifically placed no bar on actual liquidation during the five-
day period. Id. In other words, the parties agreed, and the
court ordered, that a liquidation during this period would remain
undisturbed. Nonetheless, the Federal Circuit found that it was
the primary “intent of the parties and the court to prevent a
premature liquidation while judicial review is ongoing” and
Court No. 08-00364 Page 17
therefore, authorized the court to use its equitable powers to
eliminate the grace period provision. Id. at 1193-94.
Here, the service provisions were designed to provide
notice sufficient to stop the served agencies from inadvertently
taking steps to liquidate the entries of subject merchandise
while the injunction was in effect. Pls.’ Resp. 5. It is
important to keep in mind, however, that an actual liquidation,
not a deemed liquidation, was the object of the provision. As
has been seen, in this case, neither served official could take
lawful action to effectuate a deemed liquidation. Thus, the
service provision served no purpose with respect to preventing a
deemed liquidation.
Thus, as in Agro Dutch, the primary intention of the
parties was to stop, during the pendency of the lawsuit, a
liquidation, deemed or otherwise. As such, the court is required
to give meaning to the parties’ primary intention that no
liquidation should take place, and use its equitable powers to
eliminate the notice provision. See Agro Dutch, 589 F.3d at 1192(providing that “[t]he trial court’s discretion is not limited to
the correction of clerical or typographical errors but
encompasses the correction of errors needed to comport the order
with the original understandings and intent of the court and the
parties”).
Court No. 08-00364 Page 18
CONCLUSION
For the foregoing reasons, the court denies the defendant’s
motion to dismiss. Further, the court amends the Injunction to
eliminate the service requirement and thus, finds that the
Injunction served to suspend the liquidation of Jiheng’s
merchandise by action of law pursuant to 19 U.S.C. § 1516a(c)(2).
As a result, Counts 1 and 2 of Clearon’s complaint as they
pertain to Jiheng’s merchandise and Count 3 in its entirety are
not moot.
/s/ Richard K. Eaton
Richard K. Eaton
Dated: August 9, 2010
New York, New York
Errata
Clearon Corp. v. United States, Court No. 08-00364, Slip Op. 10-
86 (Aug. 9, 2010)
Page 2, line 19: Insert “its contention” between
“is” and “that”.
Page 4, line 15: Replace “plaintiffs’” with
“Jiheng’s”.
Page 6, lines 5-6: Remove “effect a suspension of
liquidation that would prevent” and
replace with “enjoin”.
Page 7, line 15: Add an “s” to the end of
“Suspension” and “Injunction”.
Page 7, footnote 1, line 14: Replace “American” with “Am.”.
Page 11, line 5: Add an “s” to the end of
“Provision”; replace “of” with
“in”.
Page 17, line 6: Capitalize the first letter of
“injunction”.
Page 18, line 5: Replace “suspend” with “prevent”.