Florida Importer Moves to Toss Fraud Case at CIT Citing Statute of Limitations

The Court of International Trade should dismiss a penalty case against defendant Zhe "John" Liu since the statute of limitations had run out by the time the case was filed, and because the government has not established how Liu was connected to the allegedly fraudulent scheme, Liu argued in a Feb 7 brief at the Court of International Trade (U.S. vs. Zhe "John" Liu, CIT # 22-00215).

In the case, the government said Liu was behind a multiyear fraud scheme involving several companies that he operated or was an agent of, including GL Paper, NC Supply Group, CEK Group, Garment Cover Supply and AB MA Distribution Corp. Liu allegedly created the succession of companies to engage in transshipment schemes that involved sending Chinese wire hangers subject to antidumping and countervailing duties through Malaysia, India and Thailand, in an attempt to disguise their origin.

In response to Liu's motion to dismiss (see 2212130060), the government said that Liu's pattern of behavior laid out his culpability in a plausible way. The government said that Liu shifted between arguing that the complaint failed to lay out specific allegations and that he cannot be both an agent and principal of GL Paper. The U.S. said that the "wordplay and generalizations" were an attempt to obscure the fact that the complaint made specific allegations about the defendant's involvement (see 2301190042).

The government's reasoning fails for several reasons, Liu argued. The government "fail[ed] to allege, let alone demonstrate, a relationship between Liu and G.L. Paper," and any attempt to raise a new theory seeking to establish a relationship between GL Paper and Liu is barred by the requirement of exhaustion of remedies. The government never alleged "some sort of conspiracy or scheme" before its January response brief, Liu said, but it "now alleges that Liu orchestrated a multi-year fraud scheme through GL Paper," despite neither the CBP Pre-Penalty nor Penalty notices including a mention of an alleged multiyear fraud scheme.

The government made an "impossible allegation" because it never stated Liu's relationship with GL Paper nor explained, until its response to the motion to dismiss, its "theory as to why Liu might be responsible for the acts of a company that he did not own, was not an officer, nor was an agent." Instead, the government had previously tried to demonstrate negligence, shifted the burden of proof onto Liu.

In addition, the purported act committed by Liu was not the filing of the entry, Liu argued. The act therefore "must have occurred prior to entry when Liu purportedly caused Defendant GL Paper to file an entry with a false statement," which must "necessarily [have] occurred at some unspecified period prior to the date of entry," Liu argued. "As the U.S. has admitted that all entries were submitted 5 years before the filing of this Court matter, and as the statute of limitation period is five years, such action was necessarily untimely filed."