US Files 2nd Bid for Default Judgment in Customs Penalty Case on Innersprings
The U.S. filed a second motion for default judgment against importer Rayson Global and its owner, Doris Cheng, in a customs penalty case after the Court of International Trade rejected the first bid for default judgment for failing to support its claim for a nearly $3.4 million penalty. In its second attempt to secure default judgment, the U.S. defended its claim that the merchandise at issue is valued at nearly $3.4 million (United States v. Rayson Global, CIT # 23-00201).
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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 government moved for default judgment in the case after Rayson and Cheng failed to file an answer to the complaint (see 2405280055). The U.S. initially 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 million alleged domestic value of the merchandise, leading the government to seek a civil penalty totaling $3,381,607.03.
CIT Judge Timothy Stanceu rejected the government's valuation of the merchandise due to its lack of factual support (see 2501090041).
Filing for default judgment a second time, the U.S. said that since Rayson and Cheng defaulted, the government's allegations "are taken as true." The total loss of revenue amounted to $2,431,225.93, and the court should thus "issue a judgment for that amount of lost revenue," the brief said.
The U.S. added that even if the court were to review the mitigation factors articulated in U.S. v. Complex Machine Works, which is a CIT case on the proper customs penalty amount against importer Complex Machine Works, "the evidence established that mitigation is unwarranted." In Complex Machine Works, the court identified various mitigation factors that could lighten the penalty, including the defendant's "good faith effort to comply with the statute," the history of past violations and the nature of the violations at issue.
The government said Cheng's actions have been subject to CBP scrutiny since at least 2004, and her other alleged customs violations include "misclassification, quota evasion, uninvoiced goods, and undervaluation." As a result, even if the court were to weigh the mitigation factors, "there is no basis to mitigate the penalty here given Ms. Cheng’s history of previous violations," the brief said.
The U.S. also said the nearly $3.4 million penalty amount, which is based on a "reduced domestic value of $3,381,607.03 for the subject entries," is lawful. The government cited the declaration of a CBP employee that the valuation is "consistent with, but more lenient than," CBP policy, since it doesn't include "freight and other incidental costs that are allowed under the directive." The court has previously said that use of this policy for appraising the domestic value of imports for a civil penalty action is lawful, the U.S. claimed.
The government is seeking over $2.4 million in lost revenue and nearly $3.4 million as a penalty.