Severe Consequences of Default Judgements at the CIT

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Mar. 1, 2021

Two back-to-back Court of International Trade decisions make apparent the consequences of a default judgment. In both United States v. E.G. Plastics, Inc. (Slip-Op 21-17) and United States v. Green Planet, Inc. (Slip-Op 21-16) the defendants failed to timely appear, plead, or otherwise defend against the government’s allegations. In both cases the ultimate result was that the government’s motion for a default judgment was granted, with large judgments entered against the defendants.

Once the government established that plaintiffs had failed to plead or otherwise defend, a default was entered. In each case, when a default is entered the defendant admits all well-pleaded factual allegations contained in the complaint. However, this admission is limited to the factual allegations and extend to an admission of the damages. In each case, in addition to the facts of the complaint, the government also had to establish damages. Then the court had the obligation take these claims to reach its on legal conclusions.

In United States v. E.G. Plastics, Inc., the government alleged that E.G. Plastics, Inc. an importer of plastic retail bags from Thailand failed to pay antidumping (“AD”) duties on twenty-five entries of plastic retail bags made during 2008 and 2009. After Customs liquidated these entries, two formal demands for payment of the unpaid AD duties were made in the amount of $1,171,226.70. E.G. Plastics did not pay the outstanding duty amounts or protest the liquidations. However, there was a partial payment of $50,000.00 towards the unpaid duties paid by E.G Plastics’ surety.

Because this was a default and all of the government’s factual allegations establish E.G. Plastics’ liability as a matter of law, the court granted the government’s motion for default judgment and a judgment was entered for the $1,123,178.69 in unpaid AD duties, plus pre-judgment interest on the unpaid duties, post-judgment interest, and costs.

In United States v. Green Planet, Inc. (Slip-Op 21-16) the government alleged that Token Group, LLC, an importer of cigarette rolling papers from China, entered five entries of cigarette rolling papers between 2011 and 2012. The entries were subject to excise taxes that Token Group failed to identify on its entry documents or pay for at entry. Token Group’s surety paid the excise tax for the first two entries, paid in part the excise tax for the third entry, and Token Group paid the excise tax for the fourth and fifth entries. Customs issued a formal demand for payment for unpaid excise taxes with respect to the third entry and there remained an outstanding balance of $5,296.37 in unpaid excise tax. When Token Group did not respond to Customs’ pre-penalty notice, Customs issued a penalty notice to Token Group in the amount of $239,946.40 for negligent culpability.

Again, because this was a default and the government reasonably alleged that Token Group entered merchandise using erroneous entry documents, the court granted the government’s motion for default judgment. The court found that the amount of the penalty fell within the statutory cap set and entered a judgment was entered for $245,242.77 ($5,296.37 in unpaid excise taxes plus $239,946.40 in penalty), plus post-judgment interest.

In both cases the defendants lost opportunities to respond to Customs’ allegations and potentially eliminate or mitigate liability by simply ignoring Customs and the subsequent litigation. If you have any questions about a penalty issued by Customs, contact an attorney at Barnes, Richardson & Colburn LLP.