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”.