CIT Rejects US Bid for Default Judgment in Customs Penalty Suit on Innersprings
The Court of International Trade on Jan. 8 denied the government's bid for default judgment against importer Rayson Global and its owner and CEO Doris Cheng in a customs penalty case, with Judge Timothy Stanceu taking issue with the U.S. claim for a monetary penalty totaling nearly $3.4 million.
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The government provided "no supporting facts upon which the court may accept" that the domestic value of the merchandise imported by Rayson totals $3,381,607.03, the court said. Stanceu said that this value of the merchandise is over "three and one-half times the entered value of $945,922.00," finding that he can't reconcile the alleged value with the entered value based on the information provided.
The U.S. brought the customs penalty suit in 2023, alleging that Rayson and Cheng negligently entered innersprings by falsely declaring their country of origin to be Thailand, when the products were in fact from China. The result saw the company avoid ordinary, antidumping and Section 301 duties, the government alleged (see 2309220056).
The complaint said a company called Tower Grow, co-owned by Cheng, began importing innersprings from China in 2004. Four years later, CBP seized two of Tower Grow's shipments for evading textile quotas and smuggling various products. At that time, Cheng copped to double invoicing, undervaluing merchandise and providing fake documents to CBP. Later that year, the Commerce Department imposed AD on innerspring units from China. Rayson also was accused of falsely declaring the country of origin of the products to get duty-free treatment under the Generalized System of Preferences benefits program.
The U.S. moved for default judgment in the case after Rayson and Cheng failed to file an answer to the complaint (see 2405280055). Stanceu refused to grant the defendants a third motion for an extension of time to file an answer after he granted the previous two extensions, all three of which were filed out-of-time due to counsel's "serious health issues." Since no health issues existed for the third extension request, the court denied the bid.
For negligent customs law violations, the statute allows the government to collect a civil penalty in an amount not to exceed the lesser of the goods' domestic value or two times the government's lost revenue.
The U.S. alleged that the actual loss of revenue totaled $205,723.83, though the "potential" loss of revenue amounted to $2,225,501.10, for a total loss of revenue of $2,431.225.93. Multiplying this final figure by two went beyond the nearly $3.4 alleged domestic value of the merchandise, leading the government to seek a civil penalty totaling $3,381,607.03.
Stanceu rejected the government's valuation of the covered merchandise due to its lack of factual support. The judge declined to weigh in on the U.S. claim for unpaid duties in light of his rejection of the penalty claim.
(United States v. Rayson Global and Doris Cheng, Slip Op. 25-2, CIT # 23-00201, dated 01/08/25; Judge: Timothy Stanceu; Attorneys: Stephen Tosini for plaintiff U.S. government; Henry Ng of Law Office of Henry L. Ng for defendants Rayson Global and its CEO Doris Cheng)