National Fisheries Institute, Inc. v. United States Bureau of Customs & Border Protection

Slip Op. 09-89

UNITED STATES COURT OF INTERNATIONAL TRADE

NATIONAL FISHERIES INSTITUTE,

INC., ET AL.,

Plaintiffs,

Before: Timothy C. Stanceu, Judge

v.

Court No. 05-00683

UNITED STATES BUREAU OF

CUSTOMS AND BORDER

PROTECTION,

Defendant.

OPINION AND ORDER

[Granting in part plaintiffs’ motion for judgment upon the agency record and remanding for

redetermination of prior determinations of limits of liability for plaintiffs’ continuous entry

bonds]

Dated: August 25, 2009

Steptoe & Johnson LLP (Eric C. Emerson, Gregory S. McCue, and Michael A. Pass) for

plaintiffs.

Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Patricia M.

McCarthy, Assistant Director, Barbara S. Williams, Attorney in Charge, International Trade

Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice

(Stephen C. Tosini); Chi S. Choy, Customs and Border Protection, United States Department of

Homeland Security, of counsel, for defendant.

Stanceu, Judge: Plaintiffs National Fisheries Institute, Inc. (“NFI”), a non-profit trade

association, and twenty-seven of its members move, pursuant to USCIT Rule 56.1, for judgment

upon the agency record against United States Customs and Border Protection (“Customs,”

“CBP,” or the “Agency”). Pls.’ Mot. for J. on the Agency R. 1 (“Pls.’ Mot.”). Plaintiffs claim

that Customs contravened statutory provisions in imposing a new and more stringent bonding

Court No. 05-00683 Page 2

requirement (the “enhanced bonding requirement”) on importers of certain shrimp products that

are subject to antidumping duty liability. See Mem. of P. & A. in Supp. of Pls.’ Mot. for J. on

the Agency R. 1, 3-16 (“Public Mem. of P. & A.”). Plaintiffs also claim that Customs arbitrarily

and capriciously applied its enhanced bonding requirement to shrimp importers without any basis

for concluding that shrimp importers pose an increased risk of default, that Customs relied on

formulas without considering factors specific to each importer, and that requiring shrimp

importers to satisfy the enhanced bonding requirement is not a solution reasonably related to the

problem of under-collection of antidumping duties. Id. at 17-23. The twenty-seven plaintiff

importers contest individual bond sufficiency determinations in which Customs applied the

enhanced bonding requirement to govern their continuous entry bonds. Pls.’ Mot. 1.

The twenty-seven member plaintiffs are commercial importers of shrimp products that are

subject to six antidumping duty orders issued by the United States Department of Commerce

(“Commerce” or the “Department”).1 First Am. Compl. ¶¶ 1, 19. Earlier in these proceedings, in

November 2006, eight of the twenty-seven member plaintiffs obtained a preliminary injunction.

Nat’l Fisheries Inst., Inc. v. U.S. Bureau of Customs and Border Prot., 30 CIT 1838, 1842, 465

F. Supp. 2d 1300, 1305 (2006) (“Nat’l Fisheries I”). The twenty-seven member plaintiffs, in the

1

The member plaintiffs include Admiralty Island Fisheries, Inc., d.b.a. “Aqua Star”;

Berdex Seafood, Inc.; Censea Inc.; Crystal Cove Seafood Corp.; Eastern Fish Company, Inc.;

Harbor Seafood, Inc.; Icicle Seafoods, Inc.; International Gourmet Fisheries, Inc., d.b.a. “Mid

Pacific Seafoods”; Interocean Inc.; L.N. White & Co., Inc.; Mazzetta Company, LLC; McRoberts

Sales Co., Inc.; Mseafood Corporation; Newport International; Ocean Cuisine International, an

operating division of Fishery Products International, Inc., a wholly owned subsidiary of Fishery

Products International Limited; Ocean to Ocean Seafood, LLC; Ore-Cal Corp.; Oriental Foods,

Inc.; Pacific Seafood Group; Red Chamber Co.; Sea Port Products Corporation; Sea Snack Foods

Inc.; Southwind Foods LLC, d.b.a. “Great American Seafood Imports Co.”; Tampa Bay

Fisheries, Inc.; Thai Royal Frozen Foods Co., Inc.; The Seafood Exchange of Florida; and The

Talon Group LLC. See First Am. Compl., Attach. 1; Am. Form 13, Feb. 24, 2006.

Court No. 05-00683 Page 3

memorandum supporting their Rule 56.1 motion, seek additional equitable relief. Arguing that

Customs is statutorily precluded from considering antidumping duty liability in the determination

of bond sufficiency, they urge the court to order Customs to allow replacement of their bonds

with bonds for which the limit of liability is determined without regard to potential antidumping

duty liability. See Public Mem. of P. & A. 4, 28-30. They also seek a permanent injunction to

prohibit Customs from applying the enhanced bonding requirement to them in the future and

from considering potential antidumping duty liability when setting the liability limits for their

bonds. Pls.’ Mot., Attach. 1 at 2-4 (“Pls.’ Proposed Order”); see Public Mem. of P. & A. 30-31.

The court rejects plaintiffs’ argument that Customs lacks any statutory authority

whatsoever to consider potential antidumping duties when determining bond sufficiency but

concludes, nevertheless, that the authority Customs possesses in this subject area is narrowly

confined by the ministerial character of Customs’ role in the administration of the antidumping

duty laws. The court also rejects the government’s argument that the enhanced bonding

requirement, as related to the sufficiency determinations that Customs made on plaintiffs’ bonds,

is consistent with law. The court holds that the enhanced bonding requirement is arbitrary and

capricious in imposing greatly increased bond requirements only on importers of shrimp products

subject to antidumping duty orders. The court also holds that the enhanced bonding requirement

is unreasonable in applying a formula that secures potential antidumping duties at a substantial

amount over the required cash deposit. The court concludes that Commerce, as the agency to

which Congress delegated authority to determine estimated antidumping duty liability, is

required by law to set the cash deposit by estimating the final antidumping duty liability as

accurately as possible. For these reasons, the court sets aside as contrary to law the contested

Court No. 05-00683 Page 4

individual bond determinations that Customs made according to the enhanced bonding

requirement and orders relief, in the form of a remand order, appropriate to this case.

I. BACKGROUND

Background information is set forth in National Fisheries I, 30 CIT at 1843-47, 465 F.

Supp. 2d at 1305-09, in which the court granted preliminary injunctive relief, and is

supplemented below.

Directive 99-3510-004 (the “Bond Directive”), originally issued by Customs on July 23,

1991, established guidelines under which Customs port directors are to assess the adequacy of an

importer’s continuous entry bond. See Monetary Guidelines for Setting Bond Amounts,

Directive 99-3510-004 (July 23, 1991), available at

http://www.cbp.gov/linkhandler/cgov/trade/legal/directives/3510-004.ctt/3510-004.txt (last

visited Aug. 24, 2009) (“Bond Directive”). Prior to the amendment by Customs in 2004, the

Bond Directive set a non-discretionary, minimum continuous entry bond amount at $50,000 and

established a formula by which “the bond limit of liability amount shall be fixed in multiples of

$10,000 [or $100,000] nearest to 10 percent of duties, taxes and fees paid by the importer or

broker acting as importer of record during the calendar year preceding the date of the [bond]

application.” Id. (setting forth formulas under “Activity 1 - Importer or Broker - Continuous”).

Whether the bond limit was fixed in multiples of $10,000 or $100,000 depended upon whether

the total duty and tax liability for an importer during the calendar year preceding its bond

application exceeded $1,000,000. Id.

Court No. 05-00683 Page 5

A. Modifications of the Bond Directive and Its Application to Shrimp Importers

Customs, on July 9, 2004, posted on its website an amendment to the Bond Directive (the

“Amendment”), which set forth new formulas for calculating minimum continuous entry bond

amounts. See Amendment to Bond Directive 99-3510-004 for Certain Merchandise Subject to

Antidumping/Countervailing Duty Cases (July 9, 2004), available at

http://www.cbp.gov/xp/cgov/trade/priority_trade/revenue/bonds/07082004.xml (last visited

Aug. 24, 2009) (“Amendment”). The Amendment was neither published in the Federal Register

nor subjected to the established notice-and-comment procedures provided for under the

Administrative Procedure Act (“APA”), 5 U.S.C. § 553 (2000). Customs did not publish the

Amendment in the Customs Bulletin.

The Amendment was the first issuance of several in which Customs set forth special

bonding requirements for importers of agricultural and aquacultural merchandise that is subject

to an antidumping or countervailing duty order. The Amendment required all Customs port

directors “to review continuous bonds for importers who import agriculture/aquaculture

merchandise subject to antidumping/countervailing duty cases and obtain larger bonds where

necessary.” Amendment. A formula contained in the Amendment directed that “in fixing the

limit of liability amount,” port directors will calculate the product of an importer’s antidumping

or countervailing duty rate and the value of merchandise subject to antidumping or

countervailing duties imported by that importer during the previous year. Id. (setting forth the

formula as the “[Commerce] rate at Order [multiplied by the] value of imports of merchandise

subject to the case by the importer during the previous year”). The Amendment also applied

Court No. 05-00683 Page 6

similar formulas to importers subject to provisional measures and to importers with no prior

history of importing agricultural or aquacultural merchandise. Id.

In the Amendment, Customs cited an “increasing concern regarding the collection of

antidumping and countervailing duties, the impact of these collections on the amount of

disbursements pursuant to the Continued Dumping and Subsidy Offset Act (CDSOA or Byrd

Amendment) and continued vigilance by CBP to ensure collection of all appropriate antidumping

and countervailing duties.” Id. Customs listed under-collections of antidumping duty liabilities

for imports of fresh garlic and crawfish as examples of why it deemed it necessary to change the

formula for determining minimum bond requirements. Id.

On January 24, 2005, Customs posted on its website a document entitled “Current Bond

Formulas,” which contained, inter alia, the formulas described in the Amendment. Current

Bond Formulas (Jan. 24, 2005), available at

http://www.cbp.gov/xp/cgov/trade/priority_trade/revenue/bonds/pilot_program/ (last visited

Aug. 24, 2009) (“Current Bond Formulas”). The document, which was not published in the

Federal Register or Customs Bulletin, also stated that a “new comprehensive CBP Directive will

be issued at a later date.” Id.

In February 2005, subsequent to the issuance of the Amendment and Current Bond

Formulas, Commerce issued antidumping duty orders for certain frozen warmwater shrimp

(“subject shrimp”) from Brazil, China, Ecuador, India, Thailand, and Vietnam.2 Pursuant to the

2

Notice of Am. Final Determination of Sales at Less Than Fair Value and Antidumping

Duty Order: Certain Frozen Warmwater Shrimp from Brazil, 70 Fed. Reg. 5143 (Feb. 1, 2005);

Notice of Am. Final Determination of Sales at Less Than Fair Value and Antidumping Duty

Order: Certain Frozen Warmwater Shrimp From the People’s Republic of China, 70 Fed. Reg.

(continued...)

Court No. 05-00683 Page 7

Amendment and Current Bond Formulas, Customs issued to all twenty-seven plaintiffs letters

advising that their continuous entry bonds have been deemed insufficient under the Customs

regulations, 19 C.F.R. Part 113 (2004), and required plaintiffs to obtain new continuous entry

bonds with substantially higher limits of liability. Nat’l Fisheries I, 30 CIT at 1845, 465 F. Supp.

2d at 1307.

After the application of the Amendment to shrimp importers’ bonds, Customs posted on

its website a clarification to the Amendment of the Bond Directive (the “Clarification”), which

established two classes of merchandise, “Special Categories” and “Covered Cases.” See

Clarification to July 9, 2004 Amended Monetary Guidelines for Setting Bond Amounts for

Special Categories of Merchandise Subject to Antidumping and/or Countervailing Duty Cases 3

(Aug. 10, 2005), available at http://www.cbp.gov/xp/cgov/trade/priority_trade/revenue/bonds/

(last visited Aug. 24, 2009) (“Clarification”). The Clarification was not published in the Federal

Register or the Customs Bulletin and was not the subject of a notice-and-comment proceeding.

As announced in the Clarification, Customs would select Special Categories or Covered

Cases and in doing so, Customs would consider several criteria. Id. at 3-4. “Special Categories

of merchandise can be designated where additional bond requirements in the form of greater

2

(...continued)

5149 (Feb. 1, 2005); Notice of Am. Final Determination of Sales at Less Than Fair Value and

Antidumping Duty Order: Certain Frozen Warmwater Shrimp from Ecuador, 70 Fed. Reg. 5156

(Feb. 1, 2005); Notice of Am. Final Determination of Sales at Less Than Fair Value and

Antidumping Duty Order: Certain Frozen Warmwater Shrimp from India, 70 Fed. Reg. 5147

(Feb. 1, 2005); Notice of Am. Final Determination of Sales at Less Than Fair Value and

Antidumping Duty Order: Certain Frozen Warmwater Shrimp from Thailand, 70 Fed. Reg. 5145

(Feb. 1, 2005); Notice of Am. Final Determination of Sales at Less Than Fair Value and

Antidumping Duty Order: Certain Frozen Warmwater Shrimp From the Socialist Republic of

Vietnam, 70 Fed. Reg. 5152 (Feb. 1, 2005).

Court No. 05-00683 Page 8

continuous entry bonds or other security, may be required.” Id. at 3. The Clarification

designated only agricultural/aquacultural merchandise as a Special Category. Id. The

Clarification explained that “[t]he term Covered Cases refers to merchandise within a previously

designated Special Category where different standards or formulas for determining the bond

amount will be applied.” Id. Antidumping and countervailing duty investigations and orders

pertaining to shrimp are the only Covered Cases that Customs designated as falling within the

agriculture/aquaculture Special Category. See id. The Clarification set forth criteria3 that

Customs would consider in determining whether imports designated as Special Categories or

Covered Cases should be subject to increased bond requirements. See id. at 3-4.

The Clarification also established the procedure for “Notice, Timing and Appeal” of

increased bond demands made by Customs for importers of Special Category and Covered Cases

merchandise. See id. at 5. Importers are provided thirty days from the mailing of the

insufficiency notice to reply with a request for a lower bond amount and to present Customs with

3

The Clarification lists the following criteria:

1. Previous collection problems concerning a specific case or industry involved;

2. The similarity to previous cases or industries experiencing uncollected revenue

problems;

3. Whether the merchandise in question had very low duty rates or was duty-free

prior to initiation of an antidumping or countervailing duty case;

4. The projected ability of the industry to pay future duty liabilities;

5. Low capitalization of the industry involved such that new or increased duty

liabilities create increased risk;

6. Whether the industry involved is highly leveraged such that new or increased

duty liabilities create increased risk;

7. Any other factors that are deemed relevant.

Clarification to July 9, 2004 Amended Monetary Guidelines for Setting Bond Amounts for

Special Categories of Merchandise Subject to Antidumping and/or Countervailing Duty

Cases 3-4 (Aug. 10, 2005), available at

http://www.cbp.gov/xp/cgov/trade/priority_trade/revenue/bonds/ (last visited Aug. 24, 2009).

Court No. 05-00683 Page 9

evidence supporting a lowering of the bond amount. Id. The Clarification stated that in

reviewing an importer’s response, Customs will consider the factors in 19 C.F.R. § 113.13(b)4

and also any other relevant factors. Id. at 6. “To provide openness and consistency, this

clarification allows for the consideration of certain factors that are relevant for determining duty

risk and modifying the amount of the bond required. All relevant factors will be appropriately

weighed by CBP when exercising its judgment and discretion in setting the bond amounts.” Id.

at 3.

In October 2006, more than a year after the issuance of the Clarification, and eight

months after plaintiffs had commenced their lawsuit on December 21, 2005, Customs published

a Federal Register notice (the “October 2006 Notice”) “to provide additional information on the

process used to determine bond amounts for importations involving elevated collection risks and

to seek public comment on that process.” Monetary Guidelines for Setting Bond Amounts for

Importations Subject to Enhanced Bonding Requirements, 71 Fed. Reg. 62,276, 62,276 (Oct. 24,

4

The guidelines provide that Customs, in making a determination of the limit of liability

on a continuous bond, should at least consider:

(1) The prior record of the principal in timely payment of duties, taxes, and

charges with respect to the transaction(s) involving such payments;

(2) The prior record of the principal in complying with Customs demands

for redelivery, the obligation to hold unexamined merchandise intact, and other

requirements relating to enforcement and administration of Customs and other

laws and regulations;

(3) The value and nature of the merchandise involved in the transaction(s)

to be secured;

(4) The degree and type of supervision that Customs will exercise over the

transaction(s);

(5) The prior record of the principal in honoring bond commitments,

including the payment of liquidated damages; and

(6) Any additional information contained in any application for a bond.

19 C.F.R. § 113.13(b) (2008).

Court No. 05-00683 Page 10

2006) (“October 2006 Notice”). The October 2006 Notice announced changes to the process

discussed in the Amendment and the Clarification and, although inviting public comment, made

the changes in the process effective upon publication. Id. at 62,276-78. Despite the changes,

Customs retained the same basic formulas for calculating limits of liability for the continuous

entry bonds required of importers of merchandise in Special Categories. Id. at 62,277. The

October 2006 Notice stated, however, that Customs will provide for public notice and comment

on the designation of new Special Categories, which designation would occur according to

specified criteria, and that Customs also would provide for public notice of the removal of a

designation. Id.

The October 2006 Notice did not announce a change in the current designation of

aquaculture merchandise as a Special Category or the current designation of the shrimp

antidumping orders as Covered Cases, but it indicated that Customs no longer will designate

Covered Cases. “CBP will continue to evaluate on an industry wide basis those types of

merchandise where additional bond requirements may be needed.” Id. “However, because

importers are only affected when merchandise is subject to different bond requirements, CBP

will only designate Special Categories, that is, merchandise for which an enhanced bond amount

may be required.” Id. The October 2006 Notice stated, further, that importers of Special

Category merchandise “will be offered the opportunity to submit information on their financial

condition related to the risk of non-collection for that importer and CBP will determine bond

amounts based on that information, the importer’s compliance history and other relevant

information available to CBP.” Id. The October 2006 Notice indicated that absent exceptional

Court No. 05-00683 Page 11

circumstances, Customs will apply the formulas to determine the bond amounts where a

submission has not been made by a principal in response to a notice from Customs. Id.

The October 2006 Notice reiterated much of the procedure for appeal first set forth in the

Clarification. Compare Clarification 5-6 with October 2006 Notice, 71 Fed. Reg. at 62,278.

Unlike the Clarification, the October 2006 Notice was published in the Federal Register. As did

the Clarification, the October 2006 Notice procedure provides the principal with thirty days to

respond and to submit evidence supporting a lower bond amount, including financial information

relevant to the importer’s ability to pay, such as financial statements and tax returns. October

2006 Notice, 71 Fed. Reg. at 62,278. Customs stated that it will consider this information along

with the factors identified in the applicable Customs regulation, 19 C.F.R. § 113.13(b), in

determining a new bond requirement. Id. This new bond requirement “will not take effect with

respect to a principal until 14 days after the date of CBP’s reply to the principal’s response.” Id.

The October 2006 Notice indicated that Customs intends to exercise discretion in setting new

bond amounts. “If CBP determines that the principal has a record of compliance with customs

laws and regulations and that the principal has demonstrated an ability to pay, CBP may decide

not to require an increased bond amount even though the principal imports Special Category

merchandise.” Id. However, the October 2006 Notice also stated that “[a]t any time after CBP

determines a bond amount for a principal below that provided by the formula, if the principal

fails to remain compliant with customs laws and regulations, CBP will recalculate the principal’s

bond amount in accordance with the formulas outlined in this notice.” Id.

Considering the Bond Directive as modified by the Amendment, Current Bond Formulas,

and Clarification and as applied to shrimp importers, the court in November 2006 granted a

Court No. 05-00683 Page 12

preliminary injunction with respect to eight of the twenty-seven plaintiffs in this action. Nat’l

Fisheries I, 30 CIT at 1842, 465 F. Supp. 2d at 1305. The court issued the injunction to maintain

the status quo and limited the injunction to the eight plaintiffs who had testified before the court,

on the ground that only those eight plaintiffs had demonstrated immediate, irreparable harm. Id.

at 1883-84, 465 F. Supp. 2d at 1335-36. The court also ordered Customs to review, and modify

as appropriate, the sufficiency determinations it had made on certain of the bonds of the eight

plaintiffs addressed in the preliminary injunction order. Id. Since the issuance of that opinion

and order, Customs and the parties have filed numerous motions and status reports and have

participated in the court’s status conferences.

B. Procedural History Subsequent to the Issuance of National Fisheries I

After the ordering of the preliminary injunction, plaintiffs and defendant regularly

updated the court through the filing of reports and motions, filing their first round of status

reports with the court in December 2006. Status Report (Pls.), Dec. 4, 2006; Status Report

(Def.), Dec. 4, 2006. Soon thereafter, as directed in the preliminary injunction order, defendant

reported on the status of certain member plaintiffs with bonds for which the limit of liability was

$1.5 million or greater. See Status Report in Resp. to the Ct.’s Inj., Jan. 26, 2007.

Plaintiffs then filed several motions to compel defendant to file status reports with respect

to the continuous entry bonds of plaintiffs Mazzetta Company, LLC (“Mazzetta”), Ore-Cal

Corporation (“Ore-Cal”), and Eastern Fish Company, Inc. (“Eastern Fish”). See Mazzetta

Company LLC Mot. to Direct Def. to Provide Supplemental Status Report; Ore-Cal Corporation

Mot. to Direct Def. to Provide Supplemental Status Report; Eastern Fish Company’s Mot. to

Direct Def. to Provide Supplemental Status Report. Customs objected that Mazzetta did not

Court No. 05-00683 Page 13

obtain a preliminary injunction and therefore was not entitled to obtain review of its bonds.

Resp. to Mazzetta’s Mot. to Compel the Filing of a Supplemental Status Report 1-4. Regarding

Ore-Cal and Eastern Fish, Customs objected, inter alia, that it was not obliged under the

preliminary injunction to review bonds for which the term had expired. Resp. to Ore Cal’s Mot.

to Compel the Filing of a Supplemental Status Report 1-4; Resp. to Eastern Fish’s Mot. to

Compel the Filing of a Supplemental Status Report 5-8. In response to defendant’s motion “to

address a disagreement between the parties concerning the administration of the Court’s

preliminary injunction order,” the court held a telephonic status conference. See Consent Mot.

for a Telephonic Status Conference 1; Order, Feb. 26, 2007 (ordering that the court shall hold a

status conference on March 2, 2007). Pursuant to matters discussed during the status conference,

the court denied as moot all three of plaintiffs’ motions to compel. Order, June 19, 2007.

On January 18, 2007, plaintiffs moved for judgment upon the agency record pursuant to

USCIT Rule 56.1, which defendant opposed. Pls.’ Mot.; Def.’s Resp. in Opp’n to NFI’s Mot.

for J. Upon the Admin. R. (“Def.’s Resp.”). After the filing of plaintiffs’ motion, the Southern

Shrimp Alliance attempted to intervene on the side of defendant. Mot. to Intervene of Southern

Shrimp Alliance. The court denied the motion, concluding that “intervention at this [late] stage

of the proceedings would unduly delay or prejudice the adjudication of the rights of the parties.”

Order 1, Mar. 15, 2007.

The court held oral argument in April 2007. Oral Argument Tr., Apr. 17, 2007. In

response to issues raised in the parties’ pleadings and at oral argument, the court requested

additional briefing regarding Reorganization Plan No. 3 of 1979 (“Reorganization Plan”), which

the parties provided. Letter from U.S. Ct. Int’l Trade to Eric C. Emerson, Steptoe & Johnson,

Court No. 05-00683 Page 14

LLP and Stephen C. Tosini, U.S. Dep’t of Justice (Sept. 17, 2007); Br. in Resp. to the Ct.’s

Sept. 17, 2007 Letter, Oct. 31, 2007; Supplemental Br., Oct. 31, 2007; see Reorganization Plan

No. 3 of 1979, 44 Fed. Reg. 68,273 (1979) (effective as of January 2, 1980 under Exec. Order

No. 12,188 of January 2, 1980, 45 Fed. Reg. 989, 993 (1980)) (“Reorganization Plan”). In

March 2008, at defendant’s request, the court held an in camera status conference on the record,

during which plaintiffs further clarified the nature of their cause of action. Status Conference

Tr. (Confidential) 31-32, Mar. 28, 2008. Plaintiffs stated that they “are challenging any bond

determination for the 27 plaintiffs in this case to the extent that those bond determinations were

made based on Customs’ enhanced bonding practice.” Id. at 31. Plaintiffs urged the court,

“should [it] conclude that the enhanced bonding practice is contrary to statute or that . . . it was

an unreasonable practice applied only to one product,” to “take action with respect to all bond

determinations made for . . . [the] 27 plaintiffs.” Id. at 31-32. Additionally, plaintiffs set forth

the status of plaintiffs’ individual bonds, to which defendant did not object. Id. at 6-27.

Plaintiffs later submitted additional information on plaintiffs’ individual bonds. Pls.’ Submission

of Supplemental Information Requested by the Ct. During In Camera Proceedings on Mar. 28,

2008. In this and other status conferences with the parties held during the course of this

litigation, counsel for the parties have informed the court of developments affecting this

litigation, including the status of the various continuous bonds on which the plaintiffs in this case

are the principals. Some disputes between the parties concerning specific bonds have been

resolved during this process. However, the parties continue to disagree concerning the

reasonableness of the liability limits pertaining to other of the plaintiffs’ continuous bonds. The

latter group of bonds consists principally or entirely of those bonds (“previous” bonds) that apply

Court No. 05-00683 Page 15

to importations for past time periods but on which plaintiffs remain liable due to entries of

subject shrimp that remain unliquidated.

Plaintiffs moved to supplement the first amended complaint in May 2008 to inform the

court that two plaintiffs in this action had sold assets. Mot. to Supplement the First Am.

Compl. 1-2. After a telephone conference in August 2008 with the court and defendant,

plaintiffs withdrew their motion to supplement the first amended complaint. Order, Nov. 6, 2008.

Plaintiffs then submitted, in October 2008, a status report regarding a sale of assets by one

plaintiff and a motion to substitute a plaintiff. Mot. to Substitute Party; Status Report (Pls.),

October 14, 2008. Defendant opposed the motion to substitute a party. Def.’s Resp. to Mot. to

Substitute Parties 1-3. The court denied the motion to substitute without prejudice on grounds

unrelated to defendant’s opposition. Nat’l Fisheries Inst., Inc. v. U.S. Bureau of Customs and

Border Prot., 32 CIT __, Slip Op. 08-136 (Dec. 17, 2008).

C. Parallel Proceedings in the World Trade Organization

Earlier in 2009, Customs published a notice proposing to end the designation of shrimp

subject to antidumping or countervailing duty orders as a special category or covered case subject

to the “enhanced bonding requirement” (“January 2009 Notice”). Enhanced Bonding

Requirement for Certain Shrimp Importers, 74 Fed. Reg. 1224 (Jan. 12, 2009) (“January 2009

Notice”). The notice states that Customs proposes to end the designation because “[a] recent

World Trade Organization (WTO) Appellate Body Report has found that CBP’s application of

this requirement to shrimp from Thailand and India is inconsistent with U.S. WTO obligations.”

Id. at 1224. The Appellate Body Report resulted from requests in 2006 by India and Thailand

that the World Trade Organization (“WTO”) Dispute Settlement Body (“DSB”) establish panels

Court No. 05-00683 Page 16

to consider whether the application of the enhanced bonding requirement to importers of shrimp

was inconsistent with the international obligations of the United States under the WTO

agreements. Id. at 1225. In reports circulated on February 29, 2008, both panels concluded that

the application of the enhanced bonding requirement was an impermissible action against

dumping and did not constitute reasonable security. Id. India, Thailand, and the United States

appealed certain findings. Id. The Appellate Body affirmed the panels’ decisions that the

amended bond directive as applied to importers of shrimp from India and Thailand did not result

in a reasonable security requirement. Id. The United States indicated that it would comply with

the recommendations and rulings of the DSB. Id. Customs therefore “propose[d] to comply

with the recommendations and rulings of the DSB by ending the designation of shrimp covered

by antidumping . . . duty orders as a special category or covered case subject to the requirement

of additional bond amounts.” Id. Customs also stated that “shrimp importers may request

termination of existing continuous bonds pursuant to 19 C.F.R. [§] 113.27(a) and submit a new

continuous bond application pursuant to 19 C.F.R. [§] 113.12(b).” Id. Customs explained that

“[a]ny change to the designation of [shrimp] and the bond amounts required of importers of

[shrimp] will be effective for entries made on or after the date of publication of the final notice.”

Id.

The court held a telephonic status conference with the parties after granting defendant’s

motion for leave to file a status report addressing the January 2009 Notice. See Order, Feb. 17,

2009; Status Report (Def.), Feb. 17, 2009. In the conference, counsel for defendant responded to

the court’s question concerning the Agency’s intention regarding the various bonds that are the

subject of this litigation. The court asked, specifically, if Customs intended to take actions that

Court No. 05-00683 Page 17

could resolve the remaining disputes between the parties. Counsel for defendant clarified that the

January 2009 Notice did not signify an intent on the part of Customs to consider terminating, and

allowing substitution of, any bonds other than those on which importers of shrimp currently are

importing merchandise. In the conference, the parties confirmed to the court that the liability

limits on some continuous bonds for past periods of importations remained in dispute and that

the current proposal by Customs, if implemented, would not resolve the remaining issues in this

litigation. Therefore, the court is ruling on plaintiffs’ motion for judgment upon the agency

record.

On April 1, 2009, Customs published a second notice concerning its implementation of

the Appellate Body decision (“April 2009 Notice”). Enhanced Bonding Requirement for Certain

Shrimp Importers, 74 Fed. Reg. 14,809 (Apr. 1, 2009) (“April 2009 Notice”). Customs

announced that it was ending the designation of shrimp subject to antidumping or countervailing

duty orders as a special category or covered case subject to an enhanced bonding requirement.

Id. Customs announced that it would permit importers to seek termination of current bonds but

that it would take no action to alter the liability on bonds for previous terms. Id. at 14,811-12.

Customs gave several reasons for refusing to apply retroactively its rescission of the enhanced

bonding requirement. Customs mentioned its obligation to protect the revenue and ensure

compliance with law; its reluctance to interfere with the contractual relationship between

principals and sureties; its concern that the existence of two bonds for the same period could pose

legal confusion and lead to court action between competing sureties, resulting in serious risk to

the agency’s ability to collect duties lawfully owed; and that the court, in National Fisheries I,

did not order Customs to take any action on the previous bonds. Id.

Court No. 05-00683 Page 18

II. DISCUSSION

The court exercises jurisdiction under 28 U.S.C. § 1581(i) (2000), under which the cause

of action generally is considered to arise under the APA. See Motion Sys. Corp. v. Bush,

28 CIT 806, 818, 342 F. Supp. 2d 1247, 1258 (2004), aff’d per curiam, 437 F.3d 1356 (Fed.

Cir. 2006). In exercising jurisdiction in such cases under 28 U.S.C. § 1581(i), the court is to

review the matter as provided in the APA, 5 U.S.C. § 706. 28 U.S.C. § 2640(e) (2000). In

accordance with 5 U.S.C. § 706, the court must “hold unlawful and set aside agency action . . .

found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with

law.” 5 U.S.C. § 706(2)(A) (2006).

The court first addresses defendant’s argument that the modifications of the Bond

Directive and the individual bond sufficiency determinations made thereunder are matters

committed to agency discretion by law. See Def.’s Resp. 15-21. The court concludes, contrary

to defendant’s argument, that the individual bond determinations that Customs made according

to the enhanced bonding requirement are subject to judicial review under the APA “arbitrary,

capricious” standard of review. Second, the court considers whether plaintiffs are correct that

19 U.S.C. § 1623 (2000), when read in conjunction with 19 U.S.C. §§ 1673e(a)(3) or 1673g(a)

(2000), prohibits Customs from considering antidumping duty liability when setting limits of

liability on continuous bonds because security for potential antidumping duty liability is

specifically provided for in §§ 1673e(a)(3) or 1673g(a), which require posting of a cash deposit

to secure estimated antidumping duties. See Public Mem. of P. & A. 3-9. The court concludes

that these statutory provisions do not preclude Customs from considering potential antidumping

duty liability exceeding the amount of the required cash deposit. The court concludes, however,

Court No. 05-00683 Page 19

that in making actual bond sufficiency determinations under § 1623, Customs is constrained by

the limitations of its ministerial role in the administration of the antidumping duty laws. Third,

the court considers the competing arguments of the parties as to whether Customs acted in

accordance with law in calculating the limits of liability in plaintiffs’ continuous entry bonds

according to the enhanced bonding requirement. See id. at 17-26; Def.’s Resp. 21-28. The court

concludes that the bond sufficiency determinations at issue are not in accordance with law. The

enhanced bonding requirement was arbitrarily and capriciously applied only to importers of

shrimp subject to antidumping duties, and the bonding formula included in the Amendment and

Clarification sought to secure antidumping duties greatly exceeding the cash deposits. Finally,

the court considers defendants’ various arguments against the court’s ordering relief in this case,

including the fact that the sureties who issued the continuous entry bonds at issue are not parties

to this action. See Def.’s Resp. 28-30. The court rejects defendant’s arguments, concluding that

the court has the power to fashion a remedy that is appropriate to redress the Agency actions that

have been shown to be contrary to law.

A. Customs’ Determinations Are Not Beyond APA Review as Actions “Committed

to Agency Discretion by Law”

In National Fisheries I, the court concluded that plaintiffs had shown a likelihood of

succeeding on the merits on their claim that Customs’ actions in imposing on plaintiffs increased

bond requirements pursuant to the Amendment and Clarification were arbitrary, capricious, or an

abuse of discretion and therefore contrary to law. Nat’l Fisheries I, 30 CIT at 1864-75,

465 F. Supp. 2d at 1320-29. In reaching this conclusion, the court rejected defendant’s

arguments that the “arbitrary, capricious” standard of review did not apply. Id. at 1865-70, 465

Court No. 05-00683 Page 20

F. Supp. 2d at 1321-25. In again arguing this point, defendant repeats and augments the

arguments it made previously. The court again rejects defendant’s arguments and concludes that

the arbitrary, capricious standard of review applies to the administrative actions that are contested

in this case.

Defendant argues that the contested modifications of the Bond Directive and bond

determinations made thereunder fall within the category of actions committed to agency

discretion under the APA and that, therefore, “[t]he standard of review applicable to the bond

requirements at issue here is not the ‘abuse of discretion’ or ‘arbitrary and capricious’ standards

contained in 5 U.S.C. § 706.” Def.’s Resp. 15. Instead, according to defendant, “review is

limited to whether: (1) CBP exceeded its statutory authority; (2) there was a constitutional

violation; or (3) CBP violated its own regulation,” and because none of these three scenarios

arises, plaintiffs have no recourse under the APA or otherwise. Id. at 16 (citing Heckler v.

Chaney, 470 U.S. 821, 830-31 (1985)). Defendant maintains that the statute is drafted in a way

that provides no meaningful standard by which the court can judge the agency’s exercise of

discretion thereunder. Id. at 18-21. The court rejects defendant’s argument concerning the

applicable standard of review.

Defendant relies principally on Heckler in arguing that the contested bond determinations

fall within the exception to APA review under which “agency action is committed to agency

discretion by law.” 5 U.S.C. § 701(a)(2) (2006); see Def.’s Resp. 15-18. Defendant’s reliance

on Heckler is misplaced. In Heckler, plaintiffs challenged the refusal of the Food and Drug

Administration (“FDA”) to conduct enforcement proceedings to stop the use of certain drugs as

lethal injections in state death penalty proceedings, a use the FDA had not approved. Heckler,

Court No. 05-00683 Page 21

470 U.S. at 823-24. The plaintiffs in that case requested that the FDA instruct prisons to halt the

unapproved use, seize the drugs, and prosecute the persons involved. Id. at 824. The FDA

refused, explaining that even were it to assume it has jurisdiction over the issue, it would not

commence enforcement proceedings because such proceedings “[g]enerally . . . are initiated only

when there is a serious danger to the public health or a blatant scheme to defraud.” Id. at 824-25

(internal quotation marks omitted). The FDA perceived no such dangers in the state lethal

injection laws, which it described as “duly authorized statutory enactments in furtherance of

proper State functions.” Id. at 825 (internal quotation marks omitted). The Supreme Court

viewed the agency’s declining to act as a decision committed to agency discretion, explaining

that “recognition of the existence of discretion is attributable in no small part to the general

unsuitability for judicial review of agency decisions to refuse enforcement.” Id. at 831. In

contrast to Heckler, which arose from an agency’s refusal to act, this case arose from actions

Customs took as an exercise of its authority over importers. In Heckler, the Supreme Court drew

a pertinent distinction:

[W]hen an agency refuses to act it generally does not exercise its coercive power

over an individual’s liberty or property rights, and thus does not infringe upon

areas that courts often are called upon to protect. Similarly, when an agency does

act to enforce, that action itself provides a focus for judicial review, inasmuch as

the agency must have exercised its power in some manner. The action at least can

be reviewed to determine whether the agency exceeded its statutory powers.

Id. at 832 (citation omitted).

In Citizens to Preserve Overton Park, Inc. v. Volpe, the Supreme Court declined to hold

an agency action exempt from APA review, stating that “the exception for action ‘committed to

agency discretion’ . . . is a very narrow exception.” Citizens to Preserve Overton Park, Inc. v.

Court No. 05-00683 Page 22

Volpe, 401 U.S. 402, 410 (1971) (emphasis added and footnote omitted). As the Court

explained, “[t]he legislative history of the Administrative Procedure Act indicates that [the

exception] is applicable in those rare instances where ‘statutes are drawn in such broad terms that

in a given case there is no law to apply.’” Id. at 410 (quoting S. Rep. No. 79-752, at 26 (1945)).

The Supreme Court in Overton Park reasoned that the statute at issue, which gave paramount

importance to park protection and disfavored the use of public parkland for highway

construction, when viewed in the context in which it was enacted, i.e., the relatively low cost of

building highways on public parkland due to the publicly owned right-of-way and the minimal

disruption of local residences and businesses, provided law to apply that was sufficient for

judicial review under the APA. Id. at 412-13.

As in Overton Park, there is law for a court to apply in this case. Congress enacted

19 U.S.C. § 1623 among its various other measures that regulate, and collect revenue on,

imports. Under § 1623(a), “the Secretary of the Treasury may by regulation or specific

instruction require, or authorize customs officers to require, such bonds or other security as he, or

they, may deem necessary for the protection of the revenue or to assure compliance with any

provision of law, regulation, or instruction.” 19 U.S.C. § 1623(a). The authority to require

bonds includes the authority to set bond conditions and limits of liability. See id. § 1623(b)(1).

The statute grants discretion to accept different types of bonds, including “term,” i.e., continuous,

bonds and consolidated bonds. See id. § 1623(b)(3)-(4).

The discretion granted to the Agency by § 1623 is not boundless. Congress delegated

authority to require such bonds as Customs “may deem necessary” for the protection of the

revenue or to ensure compliance with law. See id. § 1623(a). Under the plain meaning of the

Court No. 05-00683 Page 23

provision, Customs is not free to set bonding requirements so onerous as to be unjustified by the

statutory purpose of ensuring compliance or securing collection of the revenue. Overly

burdensome bond requirements are not “necessary” to the fulfillment of either of those two

statutory purposes. Yet, defendant’s arguments would suggest, contrary to the congressional

intent of the APA as construed in Overton Park, that Customs could impose any bond

requirements it desires, whether or not Customs adequately considered relevant factors, and be

sustained upon judicial review so long as Customs does not exceed its discretion under 19 U.S.C.

§ 1623, which defendant views as sufficiently broad to justify all actions contested in this

litigation. In this case, defendant advances a construction of 19 U.S.C. § 1623 and 5 U.S.C.

§ 701(a)(2) under which the Agency’s bond determinations are, in a practical sense,

unreviewable.5

The Court of International Trade previously has observed that Customs’ bond

determinations are reviewable. In Hera Shipping, Inc. v. Carnes, 10 CIT 493, 640 F. Supp. 266

(1986), the court granted summary judgment for Customs after rejecting plaintiffs’ claim that

Customs was required to conduct a full administrative hearing before increasing a bond amount.

In upholding Customs’ determination, however, the court cautioned that “[o]bviously, the power

to set bonds can be abused to put people out of business without reasonable justification” and

that such an “extreme possibility is guarded against by the requirement that the notice provide

sufficient information as to the basis for the change to allow it to be challenged in court.” Hera

5

Customs itself has published guidelines on the exercise of its discretion under 19 U.S.C.

§ 1623 (2000). As set forth in the preceding footnote, the guidelines set forth several factors that

Customs, in making a determination of the limit of liability on a continuous bond, should at least

consider. See 19 C.F.R. § 113.13(b).

Court No. 05-00683 Page 24

Shipping, Inc., 10 CIT at 496, 640 F. Supp. at 269. The opinion adds that “[i]t must be

emphasized that a party is not entirely helpless when its bond is increased” and that “[t]he

question of whether the increase was based on a reasonable belief as to the existence of the

necessary justifying conditions will always be open, as will the reasonableness of the increase in

relation to the objectives sought to be secured.” Id. at 497, 640 F. Supp. at 269.

Relying on Webster v. Doe, 486 U.S. 592, 600 (1988), defendant argues that “the

‘protection of the revenue’ standard is much like the ‘necessary or advisable in the interests of

the United States[]’ standard that the Supreme Court concluded was ‘drawn in such broad terms

that in a given case there is no law to apply.’” Def.’s Resp. 19 (quoting Webster, 486 U.S.

at 599-600). The Supreme Court in Webster, 486 U.S. at 599-601, considered the availability of

APA review for an employee’s discharge from the Central Intelligence Agency (“CIA”) under

section 102(c) of the National Security Act, which provides that “the Director of Central

Intelligence may, in his discretion, terminate the employment of any officer or employee of the

Agency whenever he shall deem such termination necessary or advisable in the interests of the

United States.” Id. at 594 (quoting section 102(c) of the National Security Act of 1947,

61 Stat. 495, 498, 50 U.S.C. § 403(c) (1982)). The Supreme Court concluded that Congress, in

enacting section 102(c), “meant to commit individual employee discharges to the Director’s

discretion, and that [5 U.S.C.] § 701(a)(2) accordingly precludes judicial review of these

decisions under the APA.” Id. at 601. The Supreme Court reached this conclusion based on the

language of § 102(c), which the Court concluded “fairly exudes deference to the Director,” and

the structure of the National Security Act, which created the CIA and gave the Director of

Central Intelligence the responsibility for protecting intelligence sources and methods from

Court No. 05-00683 Page 25

unauthorized disclosure. Id. at 600-01. Other than the use of the words “deem” and “necessary,”

the court does not find in the language of 19 U.S.C. § 1623(a) enough that is in common with

§ 102(c) of the National Security Act to accept the premise of defendant’s argument. The stated

purpose of § 1623(a), i.e., to provide for bonding requirements that are necessary for the

protection of the revenue and to ensure compliance with law, guides a Customs officer’s exercise

of discretion to set the limit of liability on a continuous entry bond. Therefore, the breadth of

discretion granted by 19 U.S.C. § 1623(a) is not analogous or comparable to that granted to the

CIA Director under section 102(c) to discharge an employee engaged in critical national security

functions whenever the CIA Director deems it “necessary or advisable in the interests of the

United States.” The court concludes instead that § 1623 provides law to apply when reviewing a

bond sufficiency determination according to the “arbitrary, capricious” standard of review.

B. Customs Acted Unlawfully in Imposing the Enhanced Bonding Requirement on Plaintiffs

The court will review Customs’ actions under the “arbitrary, capricious” standard of

review. The standard of review is a narrow one under which the court is not empowered to

substitute its judgment for that of the agency. Bowman Transp., Inc. v. Arkansas-Best Freight

Sys., Inc., 419 U.S. 281, 285-86 (1974). In reviewing agency action under this standard, a court

“must consider whether the decision was based on a consideration of the relevant factors and

whether there has been a clear error of judgment.” Overton Park, 401 U.S. at 416 (citations

omitted). To uphold an agency action under this standard, the court must conclude that Customs

articulated a “‘rational connection between the facts found and the choice made.’” Bowman,

419 U.S. at 285 (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)).

Although the court will uphold a decision of less than ideal clarity if the court reasonably can

Court No. 05-00683 Page 26

discern the agency’s path, the court will not advance reasoning that the agency has not itself

provided. Id. at 285-86. Agency actions are held to be arbitrary and capricious if the agency,

inter alia, “entirely failed to consider an important aspect of the problem, offered an explanation

for its decision that runs counter to the evidence before the agency, or [offered an explanation

that] is so implausible that it could not be ascribed to a difference in view or the product of

agency expertise.” Motor Vehicle Mfrs. Ass’n of the United States, Inc. v. State Farm Mut. Auto.

Ins. Co., 463 U.S. 29, 43 (1983).

Plaintiffs argue that Customs lacks the statutory authority to consider antidumping duty

liability when determining the sufficiency of an importer’s bond. They view the effect of several

statutory provisions, 19 U.S.C. §§ 1623, 1673e(a)(3), and 1673g(a), as vesting in Commerce the

sole authority to decide how to secure collection of antidumping duties. See Public Mem. of

P. & A. 3-9. Plaintiffs maintain that 19 U.S.C. § 1673e(a)(3) limits to the cash deposit the

security required of importers upon issuance of an antidumping duty order. Id. at 3. They also

argue that the role of Customs under the antidumping laws is ministerial, citing legislative

history, the Reorganization Plan,6 and various precedents. Id. at 4-16. Plaintiffs argue, further,

that the bond formulas under which the bond determinations were made are not reasonably

related to the problem of under-collection of duties that Customs identified as the problem it

sought to resolve. Id. at 22-23. Plaintiffs contend that Customs, in rigidly applying the formula

in the Amendment, declined to exercise discretion and thereby acted arbitrarily and capriciously.

6

Reorganization Plan No. 3 of 1979, 44 Fed. Reg. 69,273 (1979), transferred authority

over antidumping and countervailing duty proceedings from the Department of the Treasury to

Commerce. It was in effect as of January 2, 1980 under Exec. Order No. 12,188 of January 2,

1980, 45 Fed. Reg. 989, 993 (1980).

Court No. 05-00683 Page 27

Id. at 20-22. Plaintiffs submit, in addition, that Customs applied the modified Bond Directive to

shrimp importers without any basis for concluding that shrimp importers pose an increased risk

of default. Id. at 17-20.

Defendant responds that the actions Customs has taken are within its statutory authority

and that neither the cash deposit provisions of 19 U.S.C. §§ 1673e(a)(3) and 1673g(a) nor the

Reorganization Plan precludes Customs from imposing bond requirements to protect the revenue

generated by antidumping duties. Def.’s Resp. 9-15. Defendant points to the longstanding

authority of Customs to administer “‘provisions of law relating to raising revenue from imports,

or to duties on imports,’” id. at 5-6 (quoting 19 U.S.C. § 66 (2000)), and argues that § 1623, an

early version of which was enacted by Congress as part of the Tariff Act of 1930, Pub. L.

No. 71-361, § 623, 46 Stat. 590, 759 (1930), specifically grants Customs expansive bonding

authority to ensure the collection of revenue raised from imports. Id. at 6-7 (quoting 19 U.S.C.

§ 1623). In enacting the Homeland Security Act of 2002, defendant explains, Congress affirmed

Customs’ authority over the collection of antidumping duties through certain statutory provisions

such as 6 U.S.C. § 211, which established Customs within the Department of Homeland

Security, and 6 U.S.C. § 215, which conferred “customs revenue authority” upon Customs that

includes “[a]ssessing and collecting customs duties (including antidumping and countervailing

duties . . .).” Id. at 6 (quoting 6 U.S.C. § 215(1)); 6 U.S.C. §§ 211, 215 (Supp. V 2005).

To the extent that Customs has construed statutory provisions, particularly 19 U.S.C.

§ 1623, in applying the enhanced bonding requirement, the court recognizes that an agency’s

interpretations of a statute may merit deference even where that interpretation does not issue

from formal rulemaking or an adjudicative process. See Skidmore v. Swift & Co., 323 U.S. 134

Court No. 05-00683 Page 28

(1944). The degree of deference accorded “to an agency administering its own statute has been

understood to vary with circumstances, and courts have looked to the degree of the agency’s care,

its consistency, formality, and relative expertness, and to the persuasiveness of the agency’s

position.” United States v. Mead Corp., 533 U.S. 218, 228 (2001) (footnotes omitted) (citing

Skidmore, 323 U.S. at 139-40).

In this case, Customs has not articulated clearly a construction of 19 U.S.C. § 1623 and

related provisions of law in the context of the specific issues to be decided in this litigation. The

Agency’s issuances do not persuade the court that Customs, in taking the actions contested in this

case, considered the appropriate factors and recognized the limitations on its authority. For

reasons discussed in the remainder of this Opinion and Order, the court concludes that the

individual bond sufficiency determinations at issue must be set aside under the applicable

standard of review.

1. Section 623 of the Tariff Act Provides Broad Authority to Require Bonds to Protect the

Revenue in Import Transactions

In National Fisheries I, the court concluded that plaintiffs had not shown a likelihood of

success on the merits on their claim that the statute precludes Customs from considering

potential antidumping liability in the sufficiency of a continuous bond. Nat’l Fisheries I, 30 CIT

at 1862-64, 465 F. Supp. 2d at 1318-20. In reaching this conclusion, the court rejected plaintiffs’

argument that 19 U.S.C. § 1623(a), by limiting Customs’ authority to require importers to post

bonds to “case[s] in which bond or other security is not specifically required by law,” precluded

Customs from requiring additional security for antidumping and countervailing duty liability

because the collection of cash deposits for such circumstances is already provided for in

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19 U.S.C. §§ 1671e(a)(3) and 1673e(a)(3). Id. at 1862-63, 465 F. Supp. 2d at 1318-19. The

court reasoned that § 1623(a) primarily “addresses the matter of when a bond or other security

may be required” and that while plaintiffs “would have the court construe the introductory phrase

as a limitation on the authority of the Secretary and Customs to set the limit of liability of a term

bond,” the “only language in subsection (a) that specifically relates to the limit of liability of a

term bond allows for bonds ‘necessary for the protection of the revenue.’” Id. at 1863, 465 F.

Supp. 2d at 1319 (quoting 19 U.S.C. § 1623(a)). The court explained, moreover, that the

provisions of subsection (b) of § 1623 “appear to provide Customs considerable discretion in

setting the requirements for term bonds so as to protect the revenue.” Id.

In support of their motion for judgment upon the agency record, plaintiffs express the

view that “the Court’s reading of [19 U.S.C. § 1623] is too broad.” Public Mem. of P. & A. 3.

Plaintiffs augment their previous argument by pointing out that 19 U.S.C. § 1623(b)(1) “states

that CBP has the discretion to establish the terms and conditions of bonds ‘[e]xcept as otherwise

specifically provided by law.’” Id. (quoting 19 U.S.C. § 1623(b)(1)). Plaintiffs argue that “this

provision must be read in conjunction with other acts of Congress that limit CBP’s authority,”

id., and that Customs therefore lacks authority to set the amount of bond with respect to potential

antidumping duty liability because security for this liability is specifically set by 19 U.S.C.

§§ 1673e(a)(3) and 1673g(a), which provide for a cash deposit in an amount determined by

Commerce, not Customs. See id. at 3-9; Oral Argument Tr. 35, Apr. 17, 2007 (according to

plaintiffs’ counsel, plaintiffs, pursuant to 19 U.S.C. § 1623(b)(1) “are not arguing that no bond

whatsoever is permissible . . . just that in setting the amount of that bond [Customs] cannot

include potential antidumping duty liability.”). Plaintiffs construe §§ 1673e(a)(3) and 1673g(a)

Court No. 05-00683 Page 30

to mean that the cash deposit is the only security for antidumping duty liability that may be

required of importers after issuance of an antidumping duty order. Public Mem. of P. & A. 3-5.

In § 1673e(a)(3), Congress specified the contents of an antidumping duty order, providing

as follows:

(a) Publication of antidumping duty order

Within 7 days after being notified by the [International Trade] Commission of

an affirmative determination under section 1673d(b) of this title, the administering

authority shall publish an antidumping duty order which—

...

(3) requires the deposit of estimated antidumping duties pending

liquidation of entries of merchandise at the same time as estimated normal

customs duties on that merchandise are deposited.

19 U.S.C. § 1673e(a)(3) (emphasis added). Similarly, in § 1673g(a), Congress provided that:

For all entries, or withdrawals from warehouse, for consumption of merchandise

subject to an antidumping duty order on or after the date of publication of such

order, no customs officer may deliver merchandise of that class or kind to the

person by whom or for whose account it was imported unless that person . . .

deposits with the appropriate customs officer an estimated antidumping duty in an

amount determined by [Commerce].

Id. § 1673g(a). Plaintiffs’ argument correctly recognizes that under 19 U.S.C. §§ 1673e(a)(3)

and 1673g(a), only Commerce, and not Customs, is empowered to set the cash deposit

requirement based on the estimated antidumping duty, and that Customs has the role of collecting

that cash deposit before releasing subject merchandise. Plaintiffs’ argument is unconvincing,

however, in insisting that the introductory phrases in § 1623(a) and (b)(1) preclude Customs,

when determining a bond amount, from requiring security to guarantee collection, upon

liquidation, of any antidumping duties in excess of the cash deposit. Nor do plaintiffs point to

anything in §§ 1673e(a)(3) or 1673g(a) connoting that Congress intended the cash deposits

Court No. 05-00683 Page 31

required thereunder to be the sole security that the government may require for potential

antidumping duty liability.

Section 623(a) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1623(a), provides that

[i]n any case in which bond or other security is not specifically required by law,

the Secretary of the Treasury may by regulation or specific instruction require, or

authorize customs officers to require, such bonds or other security as he, or they,

may deem necessary for the protection of the revenue or to assure compliance

with any provision of law, regulation, or instruction which the Secretary of the

Treasury or the Customs Service may be authorized to enforce.

Id. § 1623(a). It is admittedly plausible to construe the introductory phrase in 19 U.S.C.

§ 1623(a), “[i]n any case in which bond or other security is not specifically required by law,” to

mean that Congress intended to place entirely beyond the scope of the “bonds or other security”

authority conferred upon Customs by § 1623 any import transaction for which security is

required elsewhere in law. Such, however, is not the only plausible construction. It is at least

equally plausible to construe the introductory phrase such that potential antidumping duties

exceeding the cash deposit, which are not secured by §§ 1673e(a)(3) and 1673g(a), constitute a

“case” in which Customs may require additional security under subsection (a) of § 1623.

Moreover, legislative history casts doubt on plaintiffs’ preferred construction of 19 U.S.C.

§ 1623. The House report associated with the enactment of Section 623 of the Tariff Act of 1930

explained the new provision as follows:

In order to provide for more uniformity in these matters [i.e., matters in the tariff

laws pertaining to bonds] and for more elasticity in the requirements for bonds,

there is included in the bill as section 623 a provision authorizing the Secretary of

the Treasury by regulations to require or to authorize collectors to require such

bonds or other security as he or they may deem necessary for the protection of the

revenue and to assure compliance with the customs laws and regulations. A

number of specific provisions of Titles III and IV requiring bonds in particular

cases have been eliminated to correspond with this amendment. The new

Court No. 05-00683 Page 32

provision will authorize the requirement of a bond wherever not specifically

required by the law, but will not permit of the waiving of a bond where an express

requirement occurs.

H.R. Rep. No. 71-7, at 186 (1929). The sense of the quoted passage is that Congress, in enacting

§ 1623, wanted to broaden the existing authority of Customs to require security to protect the

revenue. There is no indication of an intent to narrow the scope of existing authority, and

Congress made clear that the new statutory framework would authorize Customs to require a

bond even if the law did not specifically require one. In also explaining that Customs could not

waive a bond requirement where the law did require one, the passage indicates that along with

providing Customs more discretion (as suggested by the reference to “elasticity in the

requirements for bonds”), providing security for the collection of revenue was a primary

congressional concern. The legislative history of § 1623 does not support plaintiffs’ preferred

construction of subsection (a) of that statute.

Nor does the court construe the introductory provision of subsection (b)(1) of § 1623 as

precluding Customs, in setting the amount of a term bond, from considering potential

antidumping duty liability. Subsection (b) of § 1623 provides that

[w]henever a bond is required or authorized by a law, regulation, or

instruction which the Secretary of the Treasury or the Customs Service is

authorized to enforce, the Secretary of the Treasury may—

(1) Except as otherwise specifically provided by law, prescribe the

conditions and form of such bond and the manner in which the bond may be

filed . . . and fix the amount of penalty thereof, whether for the payment of

liquidated damages or of a penal sum . . . .

(2) Provide for the approval of the sureties on such bond, without regard to

any general provision of law.

(3) Authorize the execution of a term bond the conditions of which shall

extend to and cover similar cases of importations over such period of time, not

to exceed one year, or such longer period as he may fix when in his opinion

Court No. 05-00683 Page 33

special circumstances existing in a particular instance require such longer

period.

19 U.S.C. § 1623(b)(1)-(3). While plaintiffs correctly point out that the agency has wide

discretion to set the conditions and form of a bond “[e]xcept as otherwise specifically provided

by law,” the court does not construe the provisions in the antidumping law that govern cash

deposits as “specifically provid[ing]” the conditions and form of a bond used to secure potential

antidumping duty liability that could exist above the cash deposit. Although Commerce, not

Customs, determines the amount of the cash deposit under 19 U.S.C. §§ 1673e(a)(3) and

1673g(a), nothing in these provisions specifies that the cash deposit is the sole form of security

that the government may require for potential antidumping duty liability following issuance of an

antidumping duty order, such that bonding to guarantee payment of potential liability exceeding

the cash deposit under 19 U.S.C. § 1623 is impermissible. When two or more statutes are

capable of co-existence, it is the duty of the courts, absent a clearly expressed congressional

intention to the contrary, to regard each as effective. Cathedral Candle Co. v. U.S. Int’l Trade

Comm., 400 F.3d 1352, 1365 (Fed. Cir. 2005); see County of Yakima v. Confederated Tribes &

Bands of the Yakima Indian Nation, 502 U.S. 251, 255-56 (1992).

Plaintiffs also cite legislative history from the Trade Agreements Act of 1979, which

required collection of the cash deposit for estimated antidumping duties on entries made after

issuance of an antidumping duty order. Public Mem. of P. & A. 5. Plaintiffs cite to language

from the report of the Committee on Ways and Means accompanying the Trade Agreements Act,

in which “Congress stated that it ‘recognize[d] the effect that the requirement of a cash deposit of

estimated duties may have on importers, particularly small businesses, and does not wish to

Court No. 05-00683 Page 34

unduly burden those importers who have, in fact, taken steps to eliminate dumping.’” Id.

(quoting H.R. Rep. No. 96-317, at 69 (1979)). Plaintiffs also argue that Congress understood

that there was a risk that the cash deposit would be lower than the final antidumping duties owed

and that therefore, “CBP’s decision to make a policy decision contrary to congressional intent is

improper.” Id. at 8 (citing 19 U.S.C. § 1673f(b)(1) (2000)).

The legislative history to which plaintiffs cite does not compel the conclusion that

Congress intended to preclude bonding to secure potential antidumping duties in excess of the

cash deposits. In the Trade Agreements Act of 1979, Congress imposed the cash deposit

requirement despite recognizing that requiring cash deposits might unduly burden importers who

are not dumping. In changing the security measure from bonds to cash deposits, Congress could

have provided by statute, or at least opined in the legislative history, that the cash deposit is, or

should be, the only security required. Congress did neither. Moreover, the same House report on

which plaintiffs rely identified a purpose for the new cash deposit requirement that is in addition

to the purpose of security for the collection of antidumping duties. The Committee on Ways and

Means expressed its belief that the then-current practice of allowing merchandise subject to an

order to enter under a bond “does not sufficiently deter dumping. Rather, it provides an incentive

to exporters and importers to delay in submitting the information necessary to form the basis of

an assessment.” H.R. Rep. No. 96-317, at 69. The Committee concluded that a cash deposit

requirement would better ensure the cooperation of importers. Id. (stating “that the requirement

of cash deposits will ensure that complete information will be submitted to the Authority in a

timely manner”).

Court No. 05-00683 Page 35

Plaintiffs also rely on judicial precedent to support their argument that Customs lacks

authority over security for antidumping duty liability. They argue that the Court of Appeals for

the Federal Circuit (“Court of Appeals”) and the Court of International Trade “have emphasized

the importance of accuracy in setting this cash deposit rate.” Public Mem. of P. & A. 5. In

support, plaintiffs cite Allegheny Ludlum Corp. v. United States, 346 F.3d 1368, 1373 (Fed.

Cir. 2003), Decca Hospitality Furnishings, LLC v. United States, 30 CIT 357, 427 F. Supp.

2d 1249 (2006), Decca Hospitality Furnishings, LLC v. United States, 29 CIT 1504, 412 F.

Supp. 2d 1311 (2005), and Badger-Powhatan v. United States, 10 CIT 241, 250, 633 F.

Supp. 1364, 1373 (1996). Id. at 5-6. “Plaintiffs submit that this concern for accuracy is in part

an expression of Congress’s concern that U.S. importers not be unfairly and unduly burdened by

excessive cash deposit requirements.” Id. at 7. Accordingly, plaintiffs urge, any security

required of importers to secure potential antidumping duties must be limited to the cash deposit

rate. Id. Plaintiffs are correct that courts have noted the importance of cash deposits that are

based on estimates of the antidumping duty liability that are as accurate as reasonably possible.

See Allegheny Ludlum, 346 F.3d at 1373 (stating that “there is a clear congressional intent that

cash deposit rates be as accurate and current as possible”); Badger-Powhatan, 10 CIT at 250, 633

F. Supp. at 1373 (“[T]he statutory scheme requires that estimated antidumping duties be as

closely tailored to actual antidumping duties as is reasonable given data available to [the

International Trade Administration, Department of Commerce] at the time the antidumping order

is issued.” (footnote omitted)). In addition, as discussed previously, Congress envisioned that the

cash deposit requirement would serve the purpose of encouraging exporters and importers to

submit complete information to Commerce in a timely manner, a purpose that is in addition to

Court No. 05-00683 Page 36

the securing of payment of antidumping duties later determined upon liquidation. See H.R. Rep.

No. 96-317, at 69. Cash deposits that are inflated estimates of potential antidumping duty

prejudice foreign producers and exporters and U.S. importers, while improperly low cash

deposits do not serve the purposes Congress intended. Nevertheless, the cases plaintiffs cite do

not address the narrow question of whether Customs lacks any authority to address potential

antidumping duty liability when making a determination of the sufficiency of a continuous bond.

In summary, based on its consideration of the statutory provisions that plaintiff cites, i.e.

19 U.S.C. §§ 1623, 1673e(a)(3) and 1673g(a), the court concludes that these provisions, standing

alone, do not rule out the exercise of authority under § 1623 to secure potential antidumping duty

liability when a determination of bond sufficiency is made under § 1623. This conclusion,

however, does not resolve entirely the question that the court must address in applying the

standard of review to the administrative actions that are contested in this litigation. That

question is whether Customs acted in accordance with law in determining the limits of liability

on plaintiffs’ continuous entry bonds according to the enhanced bonding requirement. For the

reasons discussed below, the court concludes that the contested bond sufficiency determinations

may not be sustained under the arbitrary, capricious standard of review.

2. Customs Is Confined by Its Ministerial Role under the Antidumping Laws

Even though the court is unable to agree with plaintiffs’ argument construing 19 U.S.C.

§§ 1623, 1673e(a)(3) and 1673g(a), the court concludes that other points made by plaintiffs have

merit in the larger context of this case and relate specifically to the question of whether Customs

acted lawfully in exercising its bonding authority under 19 U.S.C. § 1623. Plaintiffs identify the

Reorganization Plan as demonstrating the “axiom that Customs’ role in the antidumping duty

Court No. 05-00683 Page 37

process is only ministerial.” Public Mem. of P. & A. 10; see Reorganization Plan, 44 Fed.

Reg. 68,273. Plaintiffs submit that by transferring from the Department of the Treasury to

Commerce the responsibility for administration and enforcement of the antidumping duty law,

Congress divested the Treasury Department, and thereby Customs, of any authority over security

required for estimated antidumping duties. Public Mem. of P. & A. 10-12. Plaintiffs contend

that “Congress also expressed its desire to have a single political appointee responsible for the

administration of the antidumping duty laws” because Congress was displeased with the Treasury

Department’s administration of those laws. Id. at 16. Plaintiffs quote legislative history related

to the Reorganization Plan, stating that the “reorganization places responsibility for the statutes

under an Assistant Secretary who will be appointed by the President, and confirmed by the

Senate. This will allow Congress to hold this Assistant Secretary directly responsible for the

administration of these laws.” Id. (quoting S. Rep. No. 96-402, at 24 (1979)) (internal quotation

marks omitted). Defendant responds that the Reorganization Plan did not deny to Customs the

authority to set the amounts of liability on continuous entry bonds. Def.’s Resp. 13. Defendant

acknowledges that there was a “transfer of specific statutory functions” but asserts that this

transfer did not include the transfer of authority under 19 U.S.C. §§ 3, 66, or 1623. Def.’s

Resp. 13; see 19 U.S.C. § 3 (2000) (entitled “Superintendence of collection of import duties”);

id. § 66 (entitled “Rules and forms prescribed by Secretary”); id. § 1623 (entitled “Bonds and

other security”).

Plaintiffs are correct in their view that under the statutory scheme in general, and the

Reorganization Plan in particular, the role of Customs in effectuating the antidumping laws is

ministerial in nature. Section 5 of the Reorganization Plan provides, in pertinent part, as follows:

Court No. 05-00683 Page 38

There are transferred to the Secretary [of Commerce] all functions of the Secretary

of the Treasury, the General Counsel of the Department of the Treasury, or the

Department of the Treasury pursuant to the following:

....

(C) section 303 and title VII (including section 771(1) of the Tariff Act of 1930

(19 U.S.C. 1303, 1671 et. seq.), except that the Customs Service of the

Department of the Treasury shall accept such deposits, bonds, or other security as

deemed appropriate by the Secretary, and shall assess and collect such duties as

may be directed by the Secretary [of Commerce], and shall furnish such of its

important records or copies thereof as may be requested by the Secretary incident

to the functions transferred by this subparagraph.

Reorganization Plan, 44 Fed. Reg. at 69,274-75. However, the court does not agree with

plaintiffs that the reference to bonds “as deemed appropriate by the Secretary” necessarily must

be construed to mean that Customs is without any authority to consider potential antidumping

duty liability when setting a limit of liability on a continuous bond pursuant to 19 U.S.C. § 1623,

a section that the Reorganization Plan does not mention. From the text of the Reorganization

Plan, the court concludes that the functions Congress did not transfer from the Department of the

Treasury to the Department of Commerce, although not directed specifically to the determination

of antidumping duties, nevertheless encompassed the collection of revenue generally, including

antidumping duties. The Reorganization Plan did not provide that only Commerce was to have

authority to require security for payment of all antidumping duties owed on an entry of

merchandise subject to an antidumping duty order.

Plaintiffs also refer to a memorandum of agreement between Commerce and the

Department of the Treasury to support their argument that the Reorganization Plan gave

Commerce exclusive authority over security requirements for antidumping duties. Public Mem.

of P. & A. 12-15 (quoting Treasury Decision (“T.D.”) 85-145, 19 Cust. B. & Dec. 331 (1985)).

Commerce and Customs concluded the memorandum of agreement set forth in T.D. 85-145

Court No. 05-00683 Page 39

pursuant to the authority, inter alia, of the Reorganization Plan. Id. at 332. In the memorandum

of agreement, Commerce stated that “[u]nless specifically instructed by [Commerce] . . . to

accept another form of security or a cash deposit for estimated duties, [Customs] may accept, at

its discretion, any of the following forms of security for payment of estimated antidumping or

countervailing duties.” Id. The memorandum of agreement then outlined four options by which

the two agencies agreed that Customs, unless instructed by Commerce to require “another form

of security or a cash deposit for estimated duties,” would accept bonds (single entry or term) in

amounts sufficient to cover the estimated antidumping or countervailing duty, or both,

determined by the Secretary of Commerce. Id. The memorandum of agreement revised a prior

memorandum of agreement between the two agencies that was entered into on October 2, 1980,

and both memoranda sought to implement the Reorganization Plan. Id.; T.D. 82-56, 16 Cust. B.

& Dec. 224 (1982).

The context of both memoranda of agreement is that Customs will accept bonds to secure

estimated antidumping or countervailing duty liability as determined by Commerce. Neither

memoranda appears to contemplate that Customs will have occasion to make its own

determination of estimated antidumping duty liability and secure it with appropriate bonding.

Nevertheless, because the discussion of bonding in both memoranda is entirely in the context of

guaranteeing payment of estimated antidumping duty liability as determined by Commerce, the

memoranda also can be read to address only the specific situations, such as provisional measures,

in which bonds, as opposed to statutorily-required cash deposits, are permissible to secure the

estimated antidumping duty that Commerce determines. As such, the language in the two

memoranda that pertains to bonding can be interpreted to be directed to matters other than the

Court No. 05-00683 Page 40

specific question of whether, and to what extent, Customs has authority under 19 U.S.C. § 1623

to secure antidumping duty liability above the statutorily-required cash deposit.

Nevertheless, the broad transfer of functions from the Treasury Department to Commerce

by means of the Reorganization Plan evinces an intent that Commerce, not the Treasury

Department or Customs, would exercise substantive responsibility as administering authority for

the antidumping duty laws. Customs, exercising only a ministerial role, does not possess the

general authority, or the necessary expertise, to make substantive determinations under those

laws. Estimating potential antidumping duty liability requires various findings and

determinations under those same laws and therefore must be considered to be a substantive

responsibility rather than a ministerial one. In addition, courts have noted specifically the

importance of cash deposits that are based on estimates of the antidumping duty liability that are

as accurate as reasonably possible. See Allegheny Ludlum, 346 F.3d at 1373; Badger-Powhatan,

10 CIT at 250, 633 F. Supp. at 1373. The substantive role of Commerce under the antidumping

laws, the ministerial role of Customs under those same laws, and the specific responsibility of

Commerce to determine potential antidumping duty liability as accurately as possible in the form

of the cash deposit cause the court to conclude that Customs acts unlawfully when its decisions

under 19 U.S.C. § 1623 encroach on the substantive responsibility of Commerce to estimate that

liability.

In deciding the issues in this case, the court need not, and does not, hold that the existence

of potential antidumping duty liability could never be relevant, under any circumstance, to a bond

sufficiency determination under § 1623. It could be envisioned, for example, that Customs might

face an individual bond determination in which an importer has such a poor record of paying past

Court No. 05-00683 Page 41

bills for duties that any bill in excess of the antidumping cash deposit, no matter how small, is

likely to be dishonored. Even in this example, Customs would have to consider the financial

circumstances of the particular importer in order for the Customs bond determination to be

sustained upon judicial review. But this theoretical example is far different from the

circumstances of this case, in which Customs took a broad regulatory action that it based on its

own unqualified predictions of future antidumping duty liability stemming from an entire

antidumping investigation and that affected all importers of the subject merchandise.

Based on its review of the Amendment, the Clarification, the administrative record in this

case, and the individual determinations Customs made on the continuous bonds it required of the

twenty-seven plaintiffs, the court concludes that these individual bond determinations are

contrary to law when considered according to the arbitrary, capricious standard of review. The

court concludes, first, that these determinations were impermissible because they were made

according to the formula in Amendment and the Clarification, which requires generally that bond

amounts for importers of subject shrimp be set at 100% of the duty that would have been owed

on the value of subject imports made during the previous year, at the rate determined by

Commerce at the time of issuing the order. The formula essentially requires security for twice

the antidumping duty liability that is secured by the cash deposit. In applying this formula,

Customs acted despite the determination of estimated potential antidumping duty liability by

Commerce, the agency possessing the authority and expertise to make such an estimate. Second,

Customs arbitrarily and capriciously imposed its heightened bonding requirement solely on U.S.

importers of subject shrimp, even though Customs did not consider whether U.S. shrimp

Court No. 05-00683 Page 42

importers pose a greater risk of defaulting on antidumping duties than U.S. importers of other

agricultural or aquacultural merchandise subject to antidumping or countervailing duty orders.

3. The New Bond Formula, As Applied to Plaintiffs, Unreasonably Required

100% Bonding in Addition to the Cash Deposits

Under 19 U.S.C. § 1623, Customs may require continuous bonds in amounts it deems

“necessary for the protection of the revenue.” 19 U.S.C. § 1623(a). Customs must exercise this

discretion responsibly and in recognition of its ministerial role in the statutory antidumping

scheme. Under the standard of review applicable in this case, Customs cannot be sustained in

bond determinations that are unnecessarily burdensome and disproportionate to the risk posed to

the public revenue.

Customs acted beyond the limits of its ministerial role in imposing on U.S. importers of

shrimp subject to antidumping duty orders, absent any direction from Commerce, an onerous

requirement for new bonds with greatly expanded limits of liability. In setting individual bond

amounts for shrimp importers, including plaintiffs, Customs applied the formula in the

Amendment and Clarification, which called for bonds in amounts equivalent to 100% of the duty

owed on the value of each shrimp importer’s merchandise, calculated according to the value of

the imported merchandise for the preceding year and the current assessment rates. See

Amendment; Clarification 4-5. Because the cash deposit is set at 100% of the duty that

Commerce estimates will be owing on the entry at the time of liquidation, the formula appears to

be based on the presumption of a risk that the duties owed upon liquidation will be

approximately twice the amounts estimated by Commerce. See Amendment; Clarification 4-5.

Customs, in fact, stated in the Clarification that “[t]he amount of the continuous bond is intended

Court No. 05-00683 Page 43

to reflect a reasonable amount necessary to cover the additional revenue risk not covered by cash

deposits or other security.” Clarification 2. However, as discussed previously, Commerce is

required by law to estimate the future antidumping duty as reasonably as possible. See Allegheny

Ludlum, 346 F.3d at 1373; Badger-Powhatan, 10 CIT at 250, 633 F. Supp. at 1373. Customs,

despite its lack of substantive authority or expertise in the field of antidumping, nevertheless

decided to require security to address a routine risk that Commerce would underestimate

substantially the antidumping duties that would be owing upon liquidation. The court cannot

sustain such a decision as a permissible exercise of the authority granted by § 1623.

In the Amendment, Customs offered various reasons for deciding to impose substantial

increases in the bond requirements for importers of subject shrimp: (1) “increasing concern

regarding collection of antidumping and countervailing duties, the impact of these collections on

the amount of disbursements pursuant to the Continuing Dumping and Subsidy Offset Act

(CDSOA or Byrd Amendment), and continued vigilance by CBP to ensure collection of all

appropriate antidumping and countervailing duties”; (2) some importers subject to “a recent

antidumping case on garlic” who “incurred a final liquidation rate of 376 percent” had

insufficient bonds and were “unable to meet their financial obligations”; (3) recent antidumping

cases for agriculture/aquaculture merchandise have resulted in considerable rate increases, for

example “[i]n the case of crawfish, the deposit rate for most imports was 91.5 percent but was

increased to 201 percent at final liquidation”; (4) “the time between entry of merchandise subject

to antidumping cases and final liquidation can be 18 months or more,” which is “significantly

longer than importations of other types and therefore poses a greater risk to CBP for collection.”

Amendment. The Clarification essentially repeated these reasons in summary form.

Court No. 05-00683 Page 44

Clarification 2. The Clarification also stated that “[t]he amount of the continuous bond is

intended to reflect a reasonable amount necessary to cover the additional revenue risk not

covered by the cash deposits or other security.” Id.

In arguing that the court must uphold Customs’ determination of increased bond amounts

for shrimp importers, defendant contends that the agency “actions possess a rational basis with

respect to the protection of the revenue.” Def.’s Resp. 25-26 (stating that “rational basis” is “the

only yardstick against which to compare CBP’s actions”). Defendant maintains that requiring

more security “is clearly a rational choice [on the part of Customs], as failure to require more

security in the face of the facts would be error of judgment.” Id. at 26. Quoting the Customs

regulations at 19 C.F.R. § 113.13(b)(3), defendant argues that “all that CBP did was to set bond

amounts based upon ‘[t]he value and nature of the merchandise involved in the transaction(s) to

be secured.’” Id. at 28 (quoting 19 C.F.R. § 113.13(b)(3)). Characterizing as “clearly irrational”

the arguments plaintiffs direct against the application of the bond formula, defendant maintains

that “NFI members possess no protected right to import shrimp.” Id. at 27.

Defendant’s arguments are unpersuasive. The mere citation to the § 113.13(b)(3) factor

of the value and nature of the merchandise involved in the transactions to be secured, which is

general in nature, does not suffice as a rational basis for the specific decision by Customs to

incorporate a 100% bonding requirement in its bond formula. Nor is it accurate for defendant to

characterize plaintiffs’ cause of action in this case as involving a “protected right to import

shrimp.” See id. Plaintiffs make no such argument. Plaintiffs had the right under 28 U.S.C.

§ 1581(i) and the APA to contest the Agency’s bonding decisions that adversely affected them

and, in so doing, to obtain judicial review according to the arbitrary, capricious standard.

Court No. 05-00683 Page 45

Defendant’s argument that it was rational and responsible for Customs to require more security

appears to presume that the issue in this case is whether Customs is justified in imposing some

increase in bonding requirements when an importer’s particular situation makes it appropriate to

do so. Defendant’s argument overlooks the court’s obligation to conduct a judicial review under

the APA of the particular actions Customs took, which included imposing, through the formula, a

100% bonding requirement on plaintiffs through actions directed at the entire U.S. shrimp

importing industry.

With respect to the risk that the cash deposits would not suffice, the record shows that

Customs found that a large fluctuation in the dumping margin occurred in the crawfish case, with

a rate increasing from 91.5% to 201.63%. Periodic Risk Assessment of Material Risks in the

Revenue Process 1 (undated) (Admin R. Doc. No. 1) (“Periodic Risk Assessment”). Customs

also concluded that the defaulting Chinese crawfish importers were “not heavily capitalized,

allowing them to quickly enter and exit the business.” Id. Customs concluded that importers’

low capitalization posed two problems: importers could “easily close up shop and move on” to

avoid unpaid duties, and importers had “little to no assets” for Customs to move against if the

importer defaulted. Proactive Approach to Revenue Prot. for Antidumping Duty, Comm’r

Briefing 2 (June 23, 2004) (Admin R. Doc. No. 9). The administrative record, however, provides

no rational basis on which the agency could have concluded that these factors from the crawfish

case apply broadly to other classes of importers or that these other importers (such as, in

particular, U.S. shrimp importers) are particularly susceptible to bankruptcy, are likely to go out

of business, or are operating as “sham” or “successor companies.” See Mem. from Comm’r to

Assistant Comm’r, Office of Field Operations, and to Assistant Comm’r, Office of Strategic

Court No. 05-00683 Page 46

Trade 1 (Mar. 31, 2004) (Admin R. Doc. No. 7) (urging action to stop “Chinese exporters of

agricultural products to evade anti-dumping duties”) (“Mem. from Comm’r”); Anti-Dumping

Duty Collection 7 (May 27, 2004) (Admin R. Doc. No. 8) (“Anti-Dumping Duty Collection”).7

Another finding Customs made in its analysis of under-collection of duties involved the

importing history of companies. See Periodic Risk Assessment 1. Examining the data in the

crawfish from China case, Customs observed that 75% of the under-collected duties originated

with companies that had been importing for a time period less than five years. See id. The

record does not reveal a rational basis on which to extend such a finding to products other than

crawfish and, in particular, to exporting countries other than China.8 Customs applied the new

bond formula to subject shrimp from all countries, not merely China, even though its own record

revealed that importers of subject crawfish from China accounted for 65% ($85 million) of the

total $130 million of uncollected antidumping duties. CSDOA-FY2003 Uncollected Duties 4

(undated) (Admin R. Doc. No. 3) (“FY2003 Uncollected Duties”).

In summary, based on the record in this case, the reasons Customs put forth for its

actions, and the limitations under which Customs performs its ministerial role under the

7

The administrative record establishes that 25 current shrimp importers were

participating in the Customs-Trade Partnership Against Terrorism (“C-TPAT”), which evidences

a cooperative relationship between those importers and Customs in the war against terror. Bond

Sufficiency Review, Update for the CBP Modernization Bd. 3 (Feb. 18, 2004) (Admin R. Doc.

No. 6). Although participation in C-TPAT does not lend support to a finding relating to these

importers’ financial stability, such participation would have been relevant to a finding that these

importers are not “fly-by-night” operations.

8

Several of the plaintiffs that obtained preliminary injunctive relief have long histories of

importing seafood and/or shrimp specifically, e.g., Oriental Foods has been importing seafood

since 1979 and Ore-Cal has been importing shrimp for the last 45 years. See Nat’l Fisheries

Inst., Inc. v. U.S. Bureau of Customs and Border Prot., 30 CIT 1838, 1852-54, 465 F. Supp.

2d 1300, 1312-13 (2006).

Court No. 05-00683 Page 47

antidumping laws, the court concludes that Customs acted unlawfully in applying to the entire

shrimp importing industry (including plaintiffs) its burdensome 100% enhanced bonding

requirement.

4. The Decision to Apply the Enhanced Bonding Requirement Only to U.S. Importers of Shrimp

Subject to Antidumping Duty Orders Was Arbitrary and Capricious

The record shows that Customs concluded that targeting shrimp importers is “necessary

to insure sufficient ‘safety net’ bond coverage,” noting that “75% of the current importers have

the minimum continuous bond of $50,000,” that such bonds were sufficient previously, before

antidumping duties applied, and that this scenario “highlights how quickly the duty liability can

change.” Anti-Dumping Duty Collection 6. However, Customs did not base its regulatory action

on a finding that U.S. shrimp importers are less likely to pay their antidumping duties than are

importers of other agriculture/aquaculture products or importers of other products subject to

antidumping duties. The court concludes that the decision by Customs to apply the 100%

enhanced bonding requirement only to U.S. importers of shrimp subject to antidumping duty

orders was arbitrary and capricious.

The decision to single out shrimp importers appeared to stem in part from the revenue

collection data for fiscal year 2003 showing that a single antidumping case, crawfish from China,

accounted for 65% of uncollected duties ($85 million of the $130 million in total uncollected

antidumping and countervailing duty bills). FY2003 Uncollected Duties 4. Customs also

appeared to rely on the record information that the rate applied to subject crawfish from China

increased from 91.5% to 201.63% and that three-quarters of crawfish importers who did not pay

the additional duties owed on liquidation were importers with less than five years of import

Court No. 05-00683 Page 48

history. Periodic Risk Assessment 1. The record data indicates that imports from a single

country, China, accounted for 80% ($104 million) of the total $130 million of uncollected duties.

FY2003 Uncollected Duties 4. The record further indicates that it was “the ability of Chinese

exporters of agricultural products to evade anti-dumping duties” through “sham or alter ago

successor companies” that was particularly troubling to Customs. Mem. from Comm’r 1

(suggesting that Customs “vigorously engage[] the Commerce Department” on the issue).

Finding that crawfish imports from China posed an inordinate risk to the revenue, Customs

apparently inferred that importers of all agricultural and aquacultural products share certain

characteristics that make them less likely to pay duties assessed above the cash deposit. See

Periodic Risk Assessment 2 (in which Customs concluded that risks identified in the crawfish

from China case – “large fluctuations in the dumping margins, and importers who enter and exit

the importing business quickly” – apply to importers of agriculture and aquaculture products).

Thus, Customs apparently believed that importers of all agriculture and aquaculture products

subject to antidumping or countervailing duties, from all countries, pose a high risk to the

revenue. Customs then made the choice to increase substantially the bonding requirements for

only one group of U.S. importers–those who import shrimp subject to antidumping duties.

In defending Customs’ actions, defendant identifies several of what it refers to as

“relevant factors”:

(1) the final assessment of antidumping duties for agricultural and aquacultural

merchandise had often greatly exceeded the estimated duties paid at time of entry;

(2) importers of such merchandise were highly leveraged, preventing CBP from

collecting the increased duties; (3) bonds that secured the importations were often

the only recourse left to CBP; and (4) bonds calculated pursuant to the “ten

percent rule” were insufficient to cover the increased duties.

Court No. 05-00683 Page 49

Def.’s Resp. 26. None of the cited factors is specific to the U.S. shrimp importing industry or to

any of the individual plaintiffs in this case. In that regard, defendant admits that “CBP never

made a determination that shrimp imports posed more or less of a risk to the revenue than other

agricultural/aquacultural products.” Id. at 21. Defendant’s admission highlights the arbitrariness

of the decision to single out the U.S. shrimp importing industry as the target for greatly expanded

bonding requirements. Defendant attempts to qualify or explain its admission, adding that “CBP

elected to first target its enforcement efforts upon a single product.” Id. Defendant’s attempt to

cast that decision as an exercise of enforcement discretion is unavailing. The action Customs

took is not in the nature of a decision to direct or allocate agency resources in endeavoring to

enforce an existing regulatory requirement. Instead, Customs put in place a new, and far more

burdensome, regulatory requirement and ordered its port directors to effectuate it upon the review

of all bond determinations of U.S. importers of subject shrimp.

Even where, as here, an agency’s regulatory discretion is relatively broad, “‘reasonable-

ness’ cannot cover for arbitrary or capricious action.” See Beardmore v. Dep’t of Agric., 761

F.2d 677, 679 (Fed. Cir. 1985). Absent from the decision-making was a rational connection

between the choice to single out the U.S. shrimp importing industry for imposition of a strenuous

new bonding requirement and any risk to the revenue that was unique to that industry. Customs

thus failed to address what was, in the words of Bowman and Overton Park, one of the “relevant

factors.” See Bowman, 419 U.S. at 285; Overton Park, 401 U.S. at 416. Unquestionably, the

risk to the revenue arising uniquely from the shrimp importing industry stood as an important

factor for Customs to consider; it related to the scope of, and the justification for, the entire

Court No. 05-00683 Page 50

action. Yet, as defendant admits, that factor played no part in the decision by Customs to

proceed as it did.

Instead, it appears from the record that the decision to single out shrimp importers was

motivated entirely by considerations other than any unique risk to the revenue that such

importers actually posed. The administrative record includes an internal Agency presentation

from May 2004, in which the prospect of new bonding requirements for shrimp importers (which

actually were imposed, beginning in July 2004) was described as “a proactive and prospective

approach for the purpose of reducing the potential revenue write-off exposure.” Anti-Dumping

Duty Collection 8. The presentation stated that it experienced revenue write-off exposure in

cases other than shrimp but explained that the proposal called for “shrimp as a first shot at this”

because Customs had “built a strong risk based case that provides a strong, defensible position

for why [Customs is] taking these actions.” Id. The presentation recognized that shrimp

importers would complain but expressed the belief that Customs would have the support of the

domestic industry and the members of Congress who had been urging action on uncollected

duties. Id. The agency noted that the Ad Hoc Shrimp Action Committee, which is the petitioner

in the shrimp antidumping investigations and represents the interests of the domestic industry, is

comprised of shrimp producers located mainly in Alabama, Florida, Louisiana, Mississippi,

North Carolina, South Carolina, and Texas and that members of Congress from these states sit on

several committees that have an interest in Customs. Id.

In another record document, Customs addressed the potential political repercussions of its

taking action on shrimp importers’ bonds. Customs explained that in applying the new bond

requirements to shrimp importers, Customs would demonstrate to Congress that Customs was

Court No. 05-00683 Page 51

proactive in addressing congressional concerns about the under-collection of antidumping duties,

particularly from Southeast Asia. Mem. from Deputy Comm’r to Comm’r 3 (undated) (Admin R.

Doc. No. 14) (explaining that the intensity of scrutiny regarding Customs’ under-collection of

duties results from the Continued Dumping and Subsidy Offset Act of 2000, Pub. L.

No. 106-387, §§ 1001-1003, 114 Stat. 1549A-72-1549A-75 (2000), which gave the domestic

industry a stake in the duties collected upon liquidation). Customs also anticipated the support of

the domestic industry, explaining that “domestic petitioners in this case are from south and

southeastern states that have congressional representation on committees that include the

Subcommittee on Homeland Security, International Trade, House Ways & Means,

Appropriations, Small Business Affairs, and the Senate Finance Committee.” Id. Customs then

noted that the “ [t]he impact on importers may also generate inquiries and interest from their

congressional representatives” but that “[t]he importers are not as geographically concentrated”

even though importers’ congressional representatives sit on all of the same committees as those

of the domestic industry. Id. at 4 (observing that “three states that account for over 50 percent of

the imports of shrimp are also the home to domestic petitioners for the case”).

In summary, Customs chose to impose greatly expanded bonding requirements on the

U.S. shrimp importing industry even though, as defendant admits, Customs had no reason to

believe that shrimp importers posed any greater risk to the revenue than importers of other

agricultural or aquacultural products. Despite defendant’s attempt to cast such a choice as a

permissible exercise of enforcement discretion, the court concludes that the Agency’s decision to

confine its broad regulatory action to the U.S. shrimp importing industry was arbitrary and

capricious.

Court No. 05-00683 Page 52

C. The Court Orders a Remand for Redetermination of the Bond Sufficiency

Determinations Contested in this Case

With respect to existing bonds, plaintiffs seek an affirmative injunction directing

Customs to permit each of the plaintiffs to “replace any existing continuous entry bond(s) with

bond(s) calculated without regard to any potential antidumping duty liability.” Pls.’ Proposed

Order 1-2; Public Mem. of P. & A. 28-30. With respect to existing and future bonds, plaintiffs

seek an injunction prohibiting Customs from applying the amended Bond Directive “in

determining the sufficiency of or in calculating any NFI Importer’s continuous entry bond.” Pls.’

Proposed Order 2-3; Public Mem. of P. & A. 30-31. Plaintiffs further urge that, should the court

conclude that Customs has authority to consider antidumping duty liability in determining bond

limits of liability, the court must prevent Customs from doing so in an arbitrary, capricious, or

unlawful manner. Public Mem. of P. & A. 30. Specifically, plaintiffs request that the court

enjoin Customs from considering antidumping duty liability in determining bond amounts “until

CBP can demonstrate that the NFI Importers, either alone, or in conjunction with other importers,

present a heightened risk of default.” Id. at 31.

A remedy in the form of a remand is among the remedies that may be appropriate when a

plaintiff succeeds in a cause of action that contests agency action. As the Court of Appeals has

noted, “the Court of International Trade has been granted broad remedial powers.” Shinyei Corp.

of Amer. v. United States, 355 F.3d 1297, 1312 (Fed. Cir. 2004) (citing 28 U.S.C. § 2643

(2000)). In 28 U.S.C. § 2643(c)(1), Congress provided, with exceptions not here applicable, that

“the Court of International Trade may, in addition to the orders specified in subsections (a) and

(b) of this section [referring to money judgments and certain forms of further administrative or

Court No. 05-00683 Page 53

adjudicative procedures, respectively], order any other form of relief that is appropriate in a civil

action, including . . . orders of remand.” 28 U.S.C. § 2643(c)(1).

Based on its review of the entire record in this case, including the various status reports

that provide information on, inter alia, actions Customs already has taken with respect to

plaintiffs’ continuous entry bonds, the court concludes that a remand proceeding, rather than

entry of a permanent injunction, is appropriate at this time. In determining that a remand

proceeding is now appropriate, the court does not reach any conclusion on the ultimate necessity

for permanent injunctive relief and holds in abeyance any ruling on plaintiffs’ motion for such

relief. Nevertheless, a remand proceeding may obviate the need for a permanent injunction in the

future by resolving expeditiously the remaining issues in this case. The court’s review of the

information in the various status reports on the administrative record of this case, which includes

information on changes to the bonding status of the plaintiffs and the effect of administrative

actions Customs has taken, indicates to the court that some of the issues giving rise to this

litigation already have been resolved. Also, the court concludes from the record information, and

from its taking judicial notice of the actions announced in the January 2009 Notice and the April

2009 Notice, that the most significant issue remaining to be resolved concerns the continuous

entry bonds covering previous time periods on which a plaintiff is the principal but which have

not been canceled because potential liabilities remain on entries that are unliquidated. A remand

proceeding should allow this issue to be addressed by Customs, with the participation of

plaintiffs, in an expeditious manner. The problem posed by these “previous” bonds is addressed

below.

Court No. 05-00683 Page 54

1. The Actions Announced in the April 2009 Notice Do Not Correct the Unlawful Sufficiency

Determinations for Previous Bonds

Future bond determinations and bonds on which plaintiffs currently are importing

merchandise are affected by the regulatory actions that Customs announced in the April 2009

Notice. However, the bonds on which the various plaintiffs remain the principals include not

only those bonds on which a plaintiff currently is importing merchandise but also those bonds

that covered previous time periods and in that sense might be described as “terminated” (but not

canceled), on which a plaintiff will remain liable as principal until all entries made during the

period covered by a particular bond have been liquidated and all duty obligations have been

satisfied. With respect to future bond determinations, Customs announced that it had “decided to

end the designation of shrimp subject to [antidumping and countervailing] duty orders as a

special category or covered case subject to the requirement of additional bond amounts for all

countries.” April 2009 Notice, 74 Fed. Reg. at 14,812. With respect to current bonds, Customs

announced in the April 2009 Notice that “on or after the publication of this notice, an importer

with a current bond that was calculated using the [enhanced bonding requirement] may request

termination pursuant to [19 C.F.R. § 113.27(a)] such that no further obligations would be

charged against that bond.” Id. Customs also stated that “[s]hrimp importers may request

termination of existing continuous bonds pursuant to [19 C.F.R. § 113.27(a)] and submit a new

continuous bond application pursuant to [19 C.F.R. § 113.12(b)].” Id. For existing bonds, CBP

will enforce the bonds up to the date of termination, which will be no earlier than the effective

date of this notice [April 1, 2009].” Id.

Court No. 05-00683 Page 55

As did the January 2009 Notice, the April 2009 Notice announced that Customs would

grant no relief with respect to previous bonds for which liability limits were determined

according to the enhanced bonding requirement. Id. at 14,811-12; January 2009 Notice, 74 Fed.

Reg. at 1225. It gave as reasons its obligation to collect the revenue and ensure compliance with

law, its reluctance to interfere with the contractual relationship between principals and sureties,

legal confusion and possible court action between competing sureties resulting in serious risk to

the Agency’s ability to collect duties lawfully owed, and the fact that the court, in National

Fisheries I, did not order Customs to take any action on the previous bonds. April 2009 Notice,

74 Fed. Reg. at 14,811-12. The April 2009 Notice alluded to an Agency policy, stating that

“CBP does not retroactively raise or lower bond security amounts that cover past customs

transactions.” Id. at 14,812.

2. On Remand, Customs Must Cancel the Bonds at Issue in this Litigation that Have Limits of

Liability Determined According to the Enhanced Bonding Requirement

The court has the authority to order, as part of a remand, the cancellation of the bonds at

issue in this litigation. The decision of the Court of Appeals in Shinyei illustrates the principle

that the Court of International Trade has the authority to order a remand that not only sets aside

the agency decision directly challenged by the plaintiff but that also affects related agency

actions, where declining to do so would render the relief meaningless. See Shinyei Corp. of

Amer. v. United States, 355 F.3d 1297. The plaintiff in Shinyei sought to have the Court of

International Trade declare unlawful certain liquidation instructions issued by Commerce that

affected the plaintiff’s entries. See Shinyei Corp. of Amer. v. United States, 27 CIT 305, 306, 248

F. Supp. 2d 1350, 1351 (2003), rev’d 355 F.3d 1297. As a remedy, the plaintiff in Shinyei sought

Court No. 05-00683 Page 56

a remand of the matter to Commerce so that it could obtain corrected liquidation instructions and

also obtain reliquidation of the already-liquidated entries according to those corrected

instructions. Id. at 306, 308, 312, 248 F. Supp. 2d at 1351, 1353, 1357. The Court of

International Trade, concluding that the relief sought was unavailable because the entries had

liquidated, dismissed for lack of subject matter jurisdiction. Id. at 314-17, 248 F. Supp. 2d

at 1358-61. On appeal, the Court of Appeals reversed, holding that the relief sought is “easily

construed as ‘any other form of relief that is appropriate in a civil action’” and therefore available

under 28 U.S.C. § 2643(c)(1). Shinyei, 355 F.3d at 1312 (quoting 28 U.S.C. § 2643(c)(1)). The

Court of Appeals considered that available relief to include reliquidation of the entries in

question. See id. at 1311-12 (refusing to hold that the Court of International Trade may not order

reliquidation because to read such a prohibition into the statute “would preclude enforcement of

court orders as to duty determinations as soon as entries subject to those orders are liquidated,

even where liquidation was under erroneous instructions that fail to reflect the amended

administrative review results implementing the courts’ determinations”).

Because of the enhanced bonding requirement, plaintiffs have been subjected to bond

sufficiency determinations that they have demonstrated in this litigation to be contrary to law.

These unlawful determinations cannot be allowed to stand. However, in exercising its duty to

provide a remedy appropriate in this case, the court also must address the bonds that were

obtained as a result of the unlawful bond sufficiency determinations. The setting aside of the

unlawful bond sufficiency determinations, standing alone, is a hollow act that provides plaintiffs

no remedy absent action taken on the underlying continuous entry bonds, including the previous

bonds, which secure liabilities on entries occurring in past time periods. Throughout this

Court No. 05-00683 Page 57

litigation, Customs steadfastly has refused to provide any relief as to these previous bonds, even

though it has had multiple opportunities to do so during the course of this litigation and even

though it now has discontinued the enhanced bonding requirement. The court, therefore, is

ordering a remand under which Customs either must redetermine the limit of liability of each

bond on which a plaintiff is the principal, for purposes of allowing a superseding bond, or, if

Customs chooses, instead may cancel liability outright on a previous bond without requiring a

superseding bond.

Defendant opposes plaintiffs’ request that the court order replacement of bonds (including

previous bonds), arguing that the court does not have authority to order replacement of a bond

because the sureties are not party to this case and that the court could not compel a surety to

underwrite the risk. Def.’s Resp. 29. Defendant also argues that replacing bonds is against

sound administrative practice. Id. Customs advanced similar reasoning in its April 2009 Notice,

stating that “[t]here are approximately 140,000 bonds currently on file with CBP. The possibility

that each and every one of these bonds may be reconsidered and liability reassessed anytime after

execution would cause administrative chaos.” April 2009 Notice, 74 Fed. Reg. at 14,812.

Although Customs advances reasons for adhering in general to an established policy of

refusing to “retroactively raise or lower bond security amounts that cover past customs

transactions,” id., the court cannot allow any such policy, or considerations of agency

convenience, to stand in the way of providing plaintiffs the relief to which they qualify, as a

remedy for the unlawful agency determinations to which they were subjected. Moreover, the

court is not convinced by the argument of defendant that the court lacks authority to order

Customs to replace previous bonds because the sureties are not parties to this case and because

Court No. 05-00683 Page 58

the court could not compel a surety to underwrite the risk. The remedy being ordered in this case

will not require the court, or Customs, to compel a surety to underwrite a risk. On remand,

Customs, if it chooses not to cancel a bond outright, must redetermine a limit of liability for a

bond on which a plaintiff is a principal and allow replacement with a superseding bond at the

new limit of liability, which must be determined lawfully according to the court’s decision in this

case. Thus, the plaintiff will be given the opportunity to obtain a superseding bond from a surety

and tender that bond with Customs, which then must cancel the existing bond.

The government’s argument that replacement of previous bonds is “contrary to sound

administrative practice” is vague and unconvincing. See Def.’s Resp. 29. The continued refusal

of Customs to address the problem of the previous bonds has resulted in inequitable treatment of

long-time importers, such as plaintiffs, relative to new importers who were never subject to the

unlawful enhanced bonding requirement. The agency’s tolerating such a situation as this does

not appear to the court to constitute “sound administrative practice.” If, by citing “administrative

practice,” defendant is alluding to the underlying purpose of the bonds, the argument lacks merit

because replacement of the previous bonds with superseding bonds need not adversely affect

protection of the revenue or compliance with law. Even if the previous bonds were canceled

absent any replacement (superseding) bonds, Customs would not be without a measure of

security, in the form of cash deposits, for collection of the antidumping duties that Commerce

estimated would be owing upon liquidation. With respect to ordinary customs duties, subject

shrimp have been free of duty during the entire time period in which the antidumping duty orders

have been in effect. Subheading 0306.13.00, Harmonized Tariff Schedule of the United States

(2005). Concerning the matter of compliance with other laws, it is not likely that redelivery of

Court No. 05-00683 Page 59

frozen shrimp would be ordered by the Food and Drug Administration for entries that occurred

long ago, and in any event redelivery of a perishable food product would no longer be possible

after such a period of time. See 19 C.F.R. § 141.113(c), (h) (2008) (setting forth a conditional

release period and the general rule that Customs may order redelivery at any time prior to the

time that liquidation of the entry becomes final). Concerning any possible interest of Customs in

imposing liquidated damages for a failure to redeliver, in order to deter future noncompliance,

the court is allowing Customs, under the remand order, to pursue that interest by requiring a

superseding bond prior to canceling any previous bond, if it so chooses to take this action instead

of canceling a previous bond without requiring a superseding bond.

3. Bond Sufficiency Determinations Made Under the Enhanced Bonding Requirement After

Initiation of this Action Are at Issue in This Case and Must Be Set Aside as Contrary to Law

The record demonstrates that certain bond sufficiency determinations affecting plaintiffs

were made by Customs according to the enhanced bonding requirement after this case was

initiated. For reasons discussed previously in this Opinion and Order, the court concludes that all

bond sufficiency determinations that were made on plaintiffs’ continuous entry bonds according

to the enhanced bonding requirement are contrary to law and must be set aside. Plaintiffs stated

in a status conference that they intended to contest all determinations made according to the

enhanced bonding requirement, which determinations would include those that Customs made

after the complaint was filed in this case. Status Conference Tr. (Confidential) 31, Mar. 28, 2008

(in which plaintiffs stated that they “are challenging any bond determination for the 27 plaintiffs

in this case to the extent that those bond determinations were made based on Customs’ enhanced

bonding practice.”). Defendant did not object to plaintiffs’ statement that plaintiffs were

Court No. 05-00683 Page 60

contesting all such determinations and, in its communications with plaintiffs and the court, has

defended these bond determinations on the merits, expressly or impliedly regarding these

determinations as being at issue in this litigation. Id. at 35-36. The court rules that the issue of

the lawfulness of bond sufficiency determinations that Customs made after the initiation of this

action has been litigated by the express or implied consent of the parties. See USCIT

Rule 15(b)(2).

III. CONCLUSION

All of the individual bond sufficiency determinations at issue in this case were

determined according to the enhanced bonding requirement, which was unlawful in multiple

respects. All such determinations, therefore, must be set aside as contrary to law. With respect

to bonds on which plaintiffs are principals, and with particular respect to bonds applying to

previous time periods, the remedy of setting aside past bond sufficiency determinations is

meaningless absent the cancellation of the bond, either with or without replacement by a

superseding bond. The court has structured a remand proceeding to provide for the relief to

which plaintiffs are entitled, with respect to their current and their previous bonds.

ORDER

Based on the court’s consideration of the entire record in this case and all papers and

proceedings herein, and after due deliberation, it is hereby

ORDERED that the enhanced bonding requirement be, and hereby is, set aside as

arbitrary, capricious, and otherwise not in accordance with law; it is further

ORDERED that all of plaintiffs’ individual bond sufficiency determinations that were

made according to the enhanced bonding requirement be, and hereby are, set aside as arbitrary,

capricious, and otherwise not in accordance with law; it is further

Court No. 05-00683 Page 61

ORDERED that the individual bond sufficiency determinations at issue in this action are

remanded to Customs for redetermination during a period of sixty (60) days beginning with the

date of this Opinion and Order (the “remand period”), during which remand period Customs

shall effect, in accordance with this Opinion and Order, an individual redetermination of the limit

of liability on each individual continuous entry bond at issue in this action without application of

the enhanced bonding requirement unless it chooses to cancel all liability on a bond outright, as

provided in this Opinion and Order; it is further

ORDERED that Customs, in accordance with this Opinion and Order, shall accomplish

each individual bond redetermination under this Opinion and Order for the purpose of allowing a

plaintiff who is a principal on a bond to replace that bond with a superseding bond at a limit of

liability that was not determined according to the enhanced bonding requirement, regardless of

whether such bond is a current bond or a bond applying to a previous time period; it is further

ORDERED that pursuant to the preceding paragraph, Customs, during the remand period

or during a reasonable time thereafter, shall cancel each of plaintiffs’ bonds that have a liability

limit determined according to the unlawful enhanced bonding requirement, with or without

accepting a superseding bond as a replacement for the bond to be canceled, except as provided

specifically in this Opinion and Order; it is further

ORDERED that Customs, without prior approval of the court, shall allow upon remand

the replacement of any bond with a superseding bond with a limit of liability that is determined

during the remand period according to this Opinion and Order if such superseding bond is

obtained pursuant to a redetermination of sufficiency that is now acceptable to the plaintiff who

is a principal on the bond to be replaced; it is further

ORDERED that Customs, in its discretion and without the prior approval of the court,

may determine during the remand period that a bond at issue in this case may be canceled

without the need for replacement with a superseding bond and proceed to cancel such bond; it is

further

ORDERED that any plaintiff who contests an individual redetermination of sufficiency

for a bond on which such plaintiff is the principal that is effected by Customs during the remand

period may file with the court comments setting forth its objections to the bond sufficiency

redetermination; it is further

ORDERED that any bond sufficiency determination pertaining to a plaintiff that

Customs already has made pursuant to consultations conducted during litigation of this action or

pursuant to the Enhanced Bonding Requirement for Certain Shrimp Importers, 74 Fed.

Reg. 1224 (Jan. 12, 2009) or the Enhanced Bonding Requirement for Certain Shrimp Importers,

74 Fed. Reg. 14,809 (Apr. 1, 2009) shall suffice to satisfy the obligation imposed by this Opinion

and Order to redetermine a prior bond sufficiency determination, provided such redetermination

remains acceptable to such plaintiff; it is further

Court No. 05-00683 Page 62

ORDERED that a ruling by the court on plaintiffs’ motion for injunctive relief be, and

hereby is, held in abeyance pending the court’s ruling on the results of the remand proceeding

ordered by the court; it is further

ORDERED that the preliminary injunction entered by the court pursuant to the Order of

November 13, 2006 remains in effect, except that no provision in the Order of November 13,

2006 shall be construed to prevent Customs from complying in full with the requirements of the

remand specified in this Opinion and Order; and it is further

ORDERED that defendant shall file with the court, within sixty (60) days of the date of

this Opinion and Order, the results of its redeterminations upon remand and plaintiffs shall file

with the court, within thirty (30) days of the filing of defendant’s remand results, their comments

thereon.

/s/ Timothy C. Stanceu

Timothy C. Stanceu

Judge

Dated: August 25, 2009

New York, New York