US Says Statute of Limitations Has Not Run Out on Customs Fraud Case Involving Wire Hangers
The statute of limitations has not run out on a customs fraud case since the Court of International Trade has consistently found that the date of entry of merchandise is the date when the statute of limitations begins to run, the government told the trade court in a Jan. 17 reply brief. Responding to a motion to dismiss the penalty case from Zhe "John" Liu and his company GL Paper Distribution, the U.S. said that Liu's claim that the allegations are "legally insufficient" lacks merit since the complaint explains how the defendant carried out a multiyear fraud scheme via GL Paper in a way that is "plausible on its face" (United States v. Zhe "John" Liu, CIT # 22-00215).
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Liu is a Florida resident who operated or was an agent of multiple Florida-based companies, including GL Paper and NC Supply, NC Supply Group, CEK Group, Garment Cover Supply (GCS) and AB MA Distribution Corp. (ABMA). Liu began creating companies to import steel wire hangers from China in 2004. In 2008, though, an antidumping duty order was placed on the hangers, placing an 186.98% China-wide rate on the imports.
Liu created CEK Group in 2012, then participated in a new shipper review of two Chinese steel wire hanger manufacturers in 2013 as president of the new company. The U.S. said the defendant showed his "knowledge of antidumping duties" during the review. Liu then formed GCS in 2013 and GL Paper in 2016, allegedly using the company to import hangers he claimed were from Malaysia but were in fact made in China.
In 2017, an Alabama-based wire hanger maker filed an Enforce and Protect Act allegation against GL Paper, alleging that evasion of the AD duties was occurring via a Malaysian transshipment scheme. The EAPA case prompted a site visit from the U.S., where it was allegedly discovered that GL Paper was not making wire hangers. The company dissolved as a corporation in 2017. Liu then formed ABMA, using this firm to import wire hangers claimed to be from India and Thailand but that were made in China. Liu then caused CEK to import wire hangers he claimed were made in Thailand just a week after ABMA's last importation of steel wire hangers in 2019, the U.S. said.
While Liu filed for the case to be dismissed on the grounds that the statute of limitations has lapsed and that the allegations are insufficient to state a claim (see 2212130060), the U.S. said in reply that the above narrative lays out Liu's culpability in a plausible way. The government said that Liu "pendulates between arguing that the complaint" fails to lay out specific allegations and arguing that the claims are only in two paragraphs, to "semantic gamesmanship" by arguing that he cannot be both an agent and principal of GL Paper. The U.S. said this "wordplay and generalizations bely the hard fact that the complaint" has specific allegations about the defendant's involvement.
"There is no legal precedent for Mr. Liu’s lexical conjury that he cannot not be liable if he merely 'caused' GL Paper to submit false statements, and he offers none," the brief said. "Thus, Mr. Liu may be liable either because he personally caused the submission of false statements, or aided GL PAPER’s submission of false statements."
The government further defended its position that the statute of limitations has not run out on the matter. The date of the violation was the date of entry for the wire hanger entries at issue, and since the complaint was filed within five years of those dates, the case is not time-barred. Liu said that any violation of the statute must have happened when GL Paper first submitted false statements to CBP, meaning that the suit it time-barred. "Ironically, Mr. Liu claims that he does not know when these false statements were submitted, which leaves open the possibility that false statements were submitted before, on, or after the date of entry," the U.S. said. "This ambiguity alone dooms his argument."