US Seeks Over $234K in Default Judgment Against Korean Soju Importer
The U.S. filed a motion for default judgment on Aug. 7 against importer E-Dong, U.S.A. in pursuit of $234,748.30 in lost revenue due to the importer's negligent failure to pay a federal excise tax on its "Korean distilled beverage soju." The government said E-Dong lied on customs forms by misclassifying the distilled liquor as rice wine, adding that these misstatements "constitute negligent violations for failure to exercise reasonable care and competence" (United States v. E-Dong, U.S.A., CIT # 24-00066).
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From 2017 to 2021, E-Dong made 38 entries of merchandise it originally described as "Korean Rice Wine" under Harmonized Tariff Schedule subheading 2206.00.4500, which provides for rice wine free of duty. After CBP inspected the entries, it found they should have been classified as a distilled spirit under subheading 2208.90.7500.
While both subheadings are duty-free, they are subject to different levels of federal excise tax, the U.S. said. The excise tax rate for distilled spirits is $13.50 per proof gallon, while the tax rate for rice wine is $18 per barrel. After CBP told E-Dong and its customs broker about the misclassification, the broker said the importer didn't dispute CBP's reclassification of the merchandise, and the company's president sent a letter admitting the product was misrepresented as rice wine, the government said.
As a result of the misclassification, the U.S. said it was owed $361,479.92, $100,000 of which was paid by the surety. Since the statute of limitations had lapsed for 18 of the entries, CBP then issued a final bill for $261,479.92 for the remaining 20 entries.
Moving for default judgment after E-Dong failed to appear in court, the U.S. said E-Dong's failure to report any federal excise tax on its entries and to properly classify the imported goods as distilled spirits "constitute material false statements or omissions." Specifically, the government said the importer made two false statements that were material: it failed to report any federal excise tax on its entries and it "initially incorrectly classified the merchandise from the subject entries under HTSUS subheading 2206.00.4500 as rice wine."
These material misstatements amount to negligence, since E-Dong "failed to use reasonable care and competence in filing entry documents when entering its distilled spirits," the brief said. While the customs broker told CBP E-Dong failed to assess any federal excise tax on the entries due to software issues that required manual entry of the excise tax on each entry, the U.S. said this is "unpersuasive." E-Dong imported goods for over four years "without examination of whether the entries met [federal excise tax] reporting requirements," the brief said.
In addition, E-Dong and the customs broker "should be aware that any importation of alcohol should include [federal excise tax] on entry documents," the government argued. Failure to check whether excise tax is included on the documents, "knowing that the merchandise is a form of alcohol, is unreasonable, especially when information is readily available on U.S. Government websites that describe the importation requirements of alcohol and federal excise tax," the brief said.
The U.S. added that E-Dong also negligently failed to use the proper HTS number in classifying its goods. The brief noted that the company's own "Certificate of Label Approval," product label and "manufacturing process flowchart" established the proper classification would have been under subheading 2208.90.7500.