Feb 5th, 2024

Deemed Liquidation? Not So Fast!

A comedy of errors involving the handling of softwood lumber entries ended with Customs in tears, courtesy of an interesting new Court of International Trade decision.

In Fraserview Remanufacturing Inc. v. United States, Slip Op 24-8 (January 25, 2024), a Canadian exporter of softwood lumber had some eighty (80) entries suspended while the Commerce Department conducted its first administrative review of the antidumping and countervailing duty orders against Softwood Lumber from Canada.  Even though the Commerce Department had directed Customs to suspend liquidation of the entries, the agency marked them for liquidation.  When CBP failed to follow through on the liquidations, it concluded that the entries were “deemed liquidated” by operation of 19 U.S.C. § 1504.  It later posted notice of the “deemed liquidations” on its Automated Commercial Environment.  Frasierview, the importer, contacted CBP in an effort to have the entries returned to suspended status but Customs told them that since the time for protesting the liquidations had expired, there was nothing they could do.

Fraserview then commenced suit in the CIT invoking the Court’s 28 U.S.C. §1581(i) “residual jurisdiction”.  The Government moved to dismiss for lack of subject matter jurisdiction, holding that the importer should have protested the deemed liquidation within 180 days of the liquidation date and proceeded to court upon denial of their protest pursuant to 28 U.S.C. §1581(a).

But Judge Timothy Reif was having none of it.  He noted that the CIT’s “residual jurisdiction” could only be used where no other remedy was available or the remedy was “manifestly inadequate”.  In this case, he ruled, the protest remedy was not available to the plaintiff because the entries had never liquidated, deemed or otherwise.

The Court pointed to the statutory scheme in 19 U.S.C. §1504, governing “deemed liquidation” of entries suspended pursuant to antidumping or countervailing duty orders.  That statute provides that the liquidation of entries continues to be suspended until the Commerce Department notifies CBP that the entries should be liquidated.  Thereafter, CBP has 180 days to liquidate the entries in accordance with Commerce’s directions.  If Customs fails to liquidate within the 180 day period, the entries are “deemed liquidated” as entered (which may be good or bad for the importer depending on what the Commerce Department decided).  In this case, the Court reasoned, Commerce had never instructed CBP to liquidate the entries and no “deemed liquidation” could have occurred pursuant to 19 U.S.C. §1504.  Furthermore, an importer could not protest a liquidation or reliquidation until one had occurred.  From this, the Court reasoned, the protest remedy was not available to Fraserview.

The Court not only denied the Government’s Motion to Dismiss, but entered a declaratory judgment in the Plaintiff’s favor, holding that the deemed liquidations were ineffective and directing Customs to return them to “suspended” status pending the outcome of any appeals before a court or a USMCA binational dispute resolution panel.  The Court ordered CBP to report back within 90 days.

The decision is yet another step in the Court’s recent movement to loosen the concept of “finality of liquidation” in order to do justice in exceptional circumstances.

If you have any questions concerning the decision or the subject matter covered therein, please contact a Neville Peterson professional.