[00:00:00] Speaker 02: The final case for argument this morning is 22-1832, US versus Katana racing. [00:00:10] Speaker 00: Good morning, and may it please the court. [00:00:12] Speaker 00: Katana submitted prior disclosures to CBP, revealing an undervaluation scheme that resulted in millions of dollars of unpaid duties. [00:00:21] Speaker 02: Before you get into the merits of this, can I ask you kind of a background, just clarification, because we don't get many of these trade cases. [00:00:29] Speaker 02: And it seems like each one of them involves a different statutory provision. [00:00:33] Speaker 02: The bottom line argument seems to be that they're arguing they had the right to revoke [00:00:40] Speaker 02: because you instituted this, what's the number, 1592 D action? [00:00:46] Speaker 00: That's right, Your Honor. [00:00:47] Speaker 02: And they're saying, no, you were compelled to do some sort of administrative action. [00:00:52] Speaker 02: What's the difference? [00:00:54] Speaker 00: sure your honor so i'll i'll open up fifteen ninety-two which has different procedures and this case is proceeding under fifteen ninety-two d which is an independent cause of action just for the unpaid duties other provisions in the statute such as fifteen ninety-two [00:01:13] Speaker 00: provides for pre-penalty proceedings when a penalty is imposed. [00:01:17] Speaker 00: So a penalty of a certain amount and the duties would be due. [00:01:22] Speaker 00: And then subsections C and E also handle procedures that are required relating to penalty proceedings. [00:01:32] Speaker 00: OK. [00:01:32] Speaker 00: So they are. [00:01:33] Speaker 02: Well, what's the difference? [00:01:34] Speaker 02: I mean, it seems like what they're fighting for is that they should have been allowed. [00:01:39] Speaker 02: I mean, that won't be the consequence of this case if they win, but they otherwise [00:01:43] Speaker 02: They wanted to go through the administrative procedure. [00:01:45] Speaker 02: That's not what they thought. [00:01:46] Speaker 02: What advantage would that have been to them? [00:01:50] Speaker 00: It is extremely unclear what advantage that could have been. [00:01:52] Speaker 00: They benefited by CBP not imposing a penalty. [00:01:57] Speaker 00: A penalty proceeding would enable them to challenge the amount of the penalty to attempt to show mitigation under 19 USC 1618. [00:02:05] Speaker 00: But it would not affect the underlying requirement [00:02:08] Speaker 00: that they pay the duty. [00:02:09] Speaker 00: That's very clear in 1592. [00:02:13] Speaker 00: So they would be worse off because they would also be defending a penalty proceeding on top of the duty. [00:02:18] Speaker 02: What is this administrative proceeding that was referenced in the waiver? [00:02:23] Speaker 00: So the waiver references administrative proceedings because there were, as the appendix in this case demonstrates, there were administrative proceedings happening at CBP initiated by Katana filing a prior disclosure. [00:02:38] Speaker 00: Now a prior disclosure is something else that's discussed in 1592 C-4. [00:02:43] Speaker 00: A prior disclosure is when an involved person [00:02:47] Speaker 00: discloses a violation pursuant to 1592A. [00:02:52] Speaker 00: So merchandise has been entered into the United States via fraud, gross negligence, or negligence. [00:02:57] Speaker 00: Now, you'll notice that the documents in this case at the CBP level were labeled with this prior disclosure number. [00:03:05] Speaker 00: And so there was back and forth. [00:03:07] Speaker 00: There was an audit. [00:03:08] Speaker 00: at CBP. [00:03:09] Speaker 00: There was an offsetting evaluation. [00:03:12] Speaker 00: There was an opportunity for Katana to attempt to settle and compromise its claims. [00:03:18] Speaker 00: There were administrative proceedings happening. [00:03:21] Speaker 00: You'll notice that the statute of limitations waiver does not state that they will benefit from 1592 [00:03:29] Speaker 00: be pre-penalty proceedings. [00:03:31] Speaker 00: It says a much broader, more generic term that appears not just in the October 25, 2016 statute of limitations waiver that's at issue here, but also in the two prior statute of limitations waivers when no be [00:03:47] Speaker 00: the pre-penalty proceeding was pending and also in the generic CBP waiver that is attached to the duty demand in the complaint. [00:03:56] Speaker 00: This generic language of an administrative proceeding is in the language of the [00:04:02] Speaker 00: generic CBP waiver. [00:04:04] Speaker 00: It doesn't have a specific term of art meaning that it always has to mean pre-penalty proceedings. [00:04:09] Speaker 00: And if you look to 1592D specifically, it says that a duty may be imposed regardless of whether a penalty is imposed. [00:04:18] Speaker 04: Do we know from the record we have here, which is not much because you just have to complain and various things, whether Customs was pursuing an investigation that might have resulted in penalties? [00:04:30] Speaker 00: So we don't know all of that, but what appears to have happened, and of course our argument out of the gate is this is at the pleading stage, all of this is beyond where the trial court should have gone, but what appears to be the case is that Katana filed these prior disclosures. [00:04:47] Speaker 00: revealing that a 1592A violation happened. [00:04:51] Speaker 00: The CBP went through its audits. [00:04:55] Speaker 00: CBP actually found that Katana, it found against Katana's importer of record theory. [00:05:00] Speaker 00: The court could look to appendix pages 134 and 135. [00:05:04] Speaker 00: five, I believe, in one of the audits where the CBP finds against their theory as to importer of record. [00:05:10] Speaker 00: It finds that there's no actual support for their duty delivery paid theory. [00:05:14] Speaker 00: So there's these audits that happen. [00:05:16] Speaker 00: And then as the case continues, Katana starts arguing they don't have the ability to pay. [00:05:21] Speaker 00: So that could explain why CBP, and this is myself speculating why we got here, [00:05:28] Speaker 00: And of course, we're at the complaint stage. [00:05:29] Speaker 00: But that may be why CBP pursued the compromise negotiations and ultimately the duty, the duty alone to recover the unpaid, the loss of revenue to the United States. [00:05:42] Speaker 03: Thank you. [00:05:43] Speaker 03: At the end of your brief, you ask us to reverse the judgment of the Court of International Trade and remand for further proceedings. [00:05:52] Speaker 03: What do you envision would be the focus of those further proceedings? [00:05:56] Speaker 03: In other words, what would they be getting at? [00:05:59] Speaker 00: So certainly, I would assume that Katana would continue to present its identity theft arguments. [00:06:06] Speaker 00: And the government would refute those and demonstrate that Katana was the importer of record, not only on paper, but in fact. [00:06:13] Speaker 00: Discovery may be necessary. [00:06:16] Speaker 00: In fact, Katana argues in its response brief that, of course, and we agree summary judgment is entirely premature. [00:06:22] Speaker 00: There's been no discovery in this case. [00:06:24] Speaker 02: Didn't you ask for summary judgment? [00:06:26] Speaker 02: Didn't you have a cross-motion? [00:06:27] Speaker 00: We had a cross-motion because there were all these attachments. [00:06:32] Speaker 00: We were concerned that the court would convert the motion to dismiss to a motion for summary judgment in light of all the information. [00:06:41] Speaker 02: You're going to have to just follow up to Judge Schall's question. [00:06:44] Speaker 02: I'm not sure if we vacate or reverse. [00:06:49] Speaker 02: Do you think we should reverse? [00:06:51] Speaker 02: And they could still even do summary judgment. [00:06:54] Speaker 02: when it goes back. [00:06:55] Speaker 02: Our reversal here would not preclude anything, even maybe even another motion to dismiss. [00:07:03] Speaker 02: I don't know. [00:07:04] Speaker 00: Indeed. [00:07:04] Speaker 00: Indeed, Your Honor. [00:07:05] Speaker 00: There could be further summary judgment proceedings. [00:07:07] Speaker 04: The reversal is just on the waiver of statute of limitations and us deciding it's a valid waiver. [00:07:14] Speaker 04: and the case can't be dismissed for steps and limitations. [00:07:17] Speaker 00: Yes, the court has multiple different options because there are multiple reversible errors here. [00:07:21] Speaker 00: One option would be simply to reverse because the court clearly exceeded the scope of a 12b6 analysis. [00:07:28] Speaker 00: We also would ask the court to correct some errors on the substantive law that the Court of International Trade made with regard to [00:07:36] Speaker 00: revocation theory regarding the statute of limitations. [00:07:39] Speaker 00: That's completely inconsistent with this report. [00:07:40] Speaker 02: Yeah, but that's not that I'm disagreeing with my friend and colleague Judge Hughes, but we're not gonna, you're not asking us to decide definitively and for all time [00:07:50] Speaker 02: to whether this was a valid revocation or not, right? [00:07:53] Speaker 00: Indeed not, Your Honor. [00:07:53] Speaker 00: No. [00:07:54] Speaker 00: But the court did make an error of law separate and apart from the facts by stating things like, I believe at page 28 and 44 of the court's decision, it stated that a revocation, this statute of limitations waiver can be revoked because it is not unreasonable or because it is reasonably justified. [00:08:11] Speaker 00: These are conclusions of law that are completely unfounded. [00:08:15] Speaker 03: But still, to the moment we determined that the judge aired, [00:08:18] Speaker 03: in dismissing this case for lack of jurisdiction, which is what he did. [00:08:24] Speaker 03: And it would go back. [00:08:25] Speaker 03: Presumably, because it's an affirmative defense, the statute of limitations, it's not jurisdiction. [00:08:33] Speaker 03: Presumably, in the Court of International Trade on Remand, [00:08:38] Speaker 03: Katana would be able to assert this argument that it makes that it was promised something and hence for that reason, which it didn't get, it was entitled to revoke the waiver. [00:08:53] Speaker 03: Do you agree that that argument is something that could be heard if we remand it to the Court of the National Trade? [00:08:59] Speaker 00: they could make the argument. [00:09:03] Speaker 00: We would argue it's legally wrong and also factually wrong. [00:09:05] Speaker 00: But they could make the argument. [00:09:07] Speaker 03: I'm not getting into that. [00:09:08] Speaker 03: I'm just saying, on remand, if we reversed on the jurisdictional issue and sent it back for further proceedings, conceivably, if Katana chose to pursue it, one of those proceedings could be its challenge to the statute of limitations, its argument being we were entitled to revoke our waiver. [00:09:30] Speaker 00: Yes, they would be free to make any merits arguments, including the affirmative defense of timeliness and the affirmative defense of exhaustion. [00:09:38] Speaker 00: They could make those arguments. [00:09:40] Speaker 00: But we do think it would clarify any further remand proceedings for the court to correct the clear errors of law that the Court of International Trade made in declaring this open-ended revocation theory for statute of limitations waivers and in requiring pre-penalty proceedings when no penalty was imposed. [00:10:01] Speaker 03: You're saying we should give. [00:10:03] Speaker 03: I think there are certain opinions in our court which stand for the proposition where we say, for the benefit of the court and the parties on remand, we make certain statements as to the applicable law. [00:10:17] Speaker 03: And you're saying you would urge us to do that in this case. [00:10:19] Speaker 00: Yes, because there are certain errors purely of law that appear in the Court of International Trade's decision that it would be helpful to correct. [00:10:26] Speaker 00: Otherwise, they could shape the course of merits proceedings. [00:10:30] Speaker 02: But your first line of argument is simply that he was wrong on jurisdiction as a matter of law, and that to reach pretty much everything else he did was way beyond the record in what he should confine himself to on the 12th and 6th, right? [00:10:45] Speaker 00: Yes. [00:10:46] Speaker 00: And that is sufficient to resolve the case and require a reversal and a remand. [00:10:50] Speaker 00: uh... before i was there uh... the reminder of my time for a bottle i did have one housekeeping matter which is yesterday we learned is a possibility that there are three documents in the appendix that may not have been in the court international trade record we've reached out to uh... katanas council and we're getting to the bottom of it so we're not sure yet but it's given that we're here today i want to highlight that for the court uh... but but we are continuing count what what pages of those documents [00:11:18] Speaker 03: You're saying, what are the present page numbers in the appendix of those disputed documents? [00:11:23] Speaker 00: Yep, it's appendix pages 165 to 169. [00:11:27] Speaker 00: and appendix pages 177 to 199. [00:11:32] Speaker 00: And those were not cited at all by Katana and cited only in footnotes by the government. [00:11:37] Speaker 00: It's not relevant to the legal arguments here that the court erred in treating this as jurisdictional, and that the court erred in finding facts at the 12th to 6th stage, or any of the remaining legal arguments we make. [00:11:47] Speaker 00: But I did want to highlight that, because I thought it might be of interest to the court. [00:11:52] Speaker 02: Well, I may ask a friend about it, just so you can align all of this [00:11:56] Speaker 02: And if I may reserve the remainder of my time for a minute. [00:12:04] Speaker 01: Good morning. [00:12:05] Speaker 01: May it please the court with Iksha for defendant appellee Katana Racing. [00:12:09] Speaker 01: I know the bulk of the discussion has been about the statute of limitations waiver issue. [00:12:14] Speaker 01: I think the most straightforward way to resolve this case, however, is [00:12:22] Speaker 02: Do you, are you familiar with what Ms. [00:12:24] Speaker 02: Bond referred to in terms of these pages? [00:12:26] Speaker 01: Yeah, we don't rely on those pages. [00:12:29] Speaker 01: So we don't have any problem with removing them. [00:12:31] Speaker 01: OK, so the court can? [00:12:35] Speaker 01: Disregard them. [00:12:36] Speaker 01: We don't rely on those pages at all. [00:12:39] Speaker 02: OK, I'm just trying to save people a lot of work if we all are in agreement about this. [00:12:43] Speaker 02: And it's 165 to 169 and 177 to 199. [00:12:49] Speaker 02: Is that your? [00:12:50] Speaker 01: Right. [00:12:50] Speaker 01: That's for the page. [00:12:51] Speaker 01: All right. [00:12:52] Speaker 01: Thank you. [00:12:52] Speaker 01: I'm sorry to interrupt. [00:12:53] Speaker 02: I didn't want to forget about that. [00:12:55] Speaker 01: No problem, Your Honor. [00:12:56] Speaker 01: So I think, statute of limitations aside, if we just put that to aside for a second, the government's third question presented is what I want to focus on. [00:13:05] Speaker 01: That is, that question is whether the complaint states a claim against Katana for violation of Section 1592 sufficient to survive a 12b6 motion to dismiss on the merits. [00:13:16] Speaker 03: But the judge didn't decide that. [00:13:18] Speaker 03: Well, the judge dismissed for lack of jurisdiction. [00:13:21] Speaker 03: And then in the briefing that we have, the briefing by Katana says we should simply focus on the dismissal for lack of jurisdiction. [00:13:32] Speaker 03: And it says the judge made fulsome statements about various deficiencies in the governmental process here. [00:13:40] Speaker 03: So we don't have [00:13:41] Speaker 03: a 12b6 dismissal before us. [00:13:44] Speaker 03: We just have a 12b1 for lack of jurisdiction. [00:13:47] Speaker 01: Well, Your Honor, I realize that's what Katana's appeal brief to you said. [00:13:50] Speaker 01: I think the government actually has the better view of that. [00:13:54] Speaker 01: And the third question presented, the government pointed to three grounds for the decision below and three errors. [00:13:59] Speaker 01: And if you look at the judgment of the opinion, it doesn't distinguish between 12b6 and 12b1. [00:14:06] Speaker 01: And in fact, the judge says timeliness on page four of his opinion [00:14:11] Speaker 01: a dismissal pursuant to 12b1 and or 12b6. [00:14:14] Speaker 03: The 12b6 is for failure to state a claim in the complaint. [00:14:20] Speaker 03: Yes. [00:14:20] Speaker 03: So let me ask you this. [00:14:22] Speaker 03: There's this issue of Katana says they were entitled to the 12b 1592b2 process, correct? [00:14:31] Speaker 01: And I am not pressing that argument either. [00:14:33] Speaker 01: I'm going to try to streamline this case. [00:14:35] Speaker 03: Oh, I understand. [00:14:36] Speaker 03: But if we disagree with Katana on that, do they lose? [00:14:40] Speaker 01: only on that exhaustion argument. [00:14:42] Speaker 01: That's the second question presented. [00:14:44] Speaker 01: I'm not going to argue that today. [00:14:46] Speaker 01: I want to focus on the third question presented. [00:14:48] Speaker 01: And this is addressed in the CIT opinion at 42 and 43. [00:14:52] Speaker 01: It cites Iqbal and Twomblay. [00:14:55] Speaker 01: And it says the government's complaint is just too bare bones. [00:14:58] Speaker 01: And this is the argument. [00:14:59] Speaker 01: I think it's an important argument. [00:15:01] Speaker 01: It's a straightforward argument on the law that is, [00:15:04] Speaker 01: Does their complaints, the four corners of the complaint, put aside all the intrinsic evidence, anything like that, the four corners of the complaint, does it state a claim against Katana for violation of section 1592 sufficient to survive a 12b6 motion dismissed? [00:15:20] Speaker 01: Specifically, the four corners of this complaint fails to state a claim on the merits because it lacks any factual allegations supporting Katana's culpability. [00:15:30] Speaker 01: That's easy to discern here, because the bare bones complaint is all of five pages. [00:15:35] Speaker 01: It starts at appendix page 89. [00:15:38] Speaker 01: Now, the underlying law is fairly clear. [00:15:41] Speaker 01: Section 15. [00:15:42] Speaker 02: You missed this argument in your brief. [00:15:44] Speaker 01: It's pages 33 to 42 of our brief. [00:15:48] Speaker 01: It's addressing the government's third question presented. [00:15:51] Speaker 01: And the law is fairly clear. [00:15:55] Speaker 01: And this is the argument the government makes under Blum. [00:15:58] Speaker 01: And the law is fairly clear. [00:16:00] Speaker 01: A Section 1592D claim must be predicated on the violation of Section 1592A. [00:16:07] Speaker 01: Everyone agrees with that. [00:16:09] Speaker 01: And a violation of Section 1592A requires at least negligence. [00:16:13] Speaker 01: Now, the government cites Blum in its brief. [00:16:16] Speaker 01: And that permits recovery against innocent importers. [00:16:19] Speaker 01: But Blum also makes clear [00:16:21] Speaker 01: that you still need a threshold violation of 1592A by someone. [00:16:26] Speaker 01: And in Blum, there was another party who had committed the fraud. [00:16:30] Speaker 01: And so they were able to recover against the innocent importer. [00:16:34] Speaker 01: By contrast, the only count in this complaint, it's all of one sentence, alleges that Katana itself violated 1592A. [00:16:44] Speaker 01: And that's at A93. [00:16:45] Speaker 01: It's a paragraph. [00:16:47] Speaker 02: OK. [00:16:47] Speaker 02: I'm a little surprised by your argument. [00:16:50] Speaker 02: Can I point you to page 30 of your brief? [00:16:52] Speaker 02: And maybe this is why I didn't see it. [00:16:57] Speaker 02: Because I thought you said on page 30, contrary to the government's assertions, the CIT did not make any appealable determination [00:17:07] Speaker 02: concerning 12b6 motion. [00:17:09] Speaker 02: Right. [00:17:09] Speaker 01: Your Honor, you're right. [00:17:11] Speaker 01: The brief does say that. [00:17:12] Speaker 01: I think the better view is the government's view. [00:17:15] Speaker 01: That is, what I read at page 42 and 43 of the CIT's opinion, it clearly cites Iqbal and Twombly. [00:17:21] Speaker 01: Those are classic 12b6 cases, and says the complaint isn't good enough. [00:17:26] Speaker 01: And if you look after that, we then argue, because the government argued it, the merits. [00:17:31] Speaker 01: And it starts on pages 33. [00:17:32] Speaker 03: If you're asking us, Mr. Chad, decide the case on a basis [00:17:36] Speaker 03: lower court didn't decide it on, number one, and number two, a basis that on appeal, the red brief says, no, no, don't go there. [00:17:46] Speaker 01: Well, Your Honor, I guess my first response would be- I realize you came in after the fact here. [00:17:51] Speaker 01: I did. [00:17:51] Speaker 01: But I do think the court did decide it. [00:17:54] Speaker 04: And I'm going to point you specifically to- Are you really sure you want us to address this? [00:17:59] Speaker 04: Because if we don't address it, you can renew this 12b6 motion below. [00:18:04] Speaker 04: But if we address it and we determine [00:18:07] Speaker 04: that the complaint is sufficient, then you're out below. [00:18:10] Speaker 04: You've got to go through with the rest of this case. [00:18:11] Speaker 01: Right. [00:18:12] Speaker 01: Then we'd have to go to summary judgment. [00:18:13] Speaker 01: But I do think, Your Honor, I'm confident that you won't, that you will affirm it on the Iqbal Twombly ground because of this complaint. [00:18:21] Speaker 01: It's a bare bones complaint. [00:18:23] Speaker 01: If you look at it, page A89, it's a one sentence count. [00:18:28] Speaker 01: That one sentence count at 29 [00:18:31] Speaker 01: 829 says that Katana violated, based on its violation of 1592A, Katana is liable for the duties. [00:18:41] Speaker 01: Now, a violation of 1592A requires culpability at a minimum negligence. [00:18:48] Speaker 01: So you can scour this five-page complaint to see what are the allegations of culpability against Katana underlying a violation of 1592A. [00:19:00] Speaker 01: All you will find is one sentence, paragraph 14. [00:19:04] Speaker 02: That's at 892. [00:19:06] Speaker 01: OK, so the complaint starts at page 89 of the appendix. [00:19:12] Speaker 01: The one count which says that Katana violated 1592A is paragraph 29 on 93. [00:19:19] Speaker 01: You can scour the complaint. [00:19:20] Speaker 01: It's only five pages. [00:19:21] Speaker 01: It won't take you long. [00:19:22] Speaker 01: The only mention of any culpability, which is a prerequisite to a 1592A violation, which is a prerequisite to a 1592D action, is paragraph 14. [00:19:33] Speaker 01: one conclusory sentence. [00:19:35] Speaker 01: It says, Katana did not exercise reasonable care to ensure that these entries for which Katana is the import of record reflected accurate values of the merchandise. [00:19:46] Speaker 01: That is the sum total. [00:19:48] Speaker 01: Iqbal Qamili tells us anything. [00:19:50] Speaker 01: I mean, based upon all the factual allegations in the five or six paragraphs preceding that. [00:19:55] Speaker 01: Well, but none of those say that Katana was culpable at all. [00:19:59] Speaker 01: If you look at the factual allegations in the five to six paragraphs before that, all they established is that there were underpaid duties. [00:20:08] Speaker 01: That's true. [00:20:08] Speaker 04: There were underpaid duties. [00:20:10] Speaker 04: The government series Katana is the importer of record and had the responsibility to ensure these duties weren't underpaid. [00:20:16] Speaker 04: And so when these entries were entered at less than the proper amount, Katana did not exercise [00:20:22] Speaker 04: Reasonable care that at least is an allegation of negligence. [00:20:26] Speaker 01: Well, what if it's a conclusion? [00:20:27] Speaker 01: It doesn't say what more katana could have done to do it It doesn't like any factual basis. [00:20:32] Speaker 04: Remember the only factual basis in this let me just tell you I think it is very unwise of you to ask me to decide whether government complaint states a Claim under 12. [00:20:45] Speaker 04: Okay six if you don't want that for close. [00:20:48] Speaker 04: Okay below [00:20:48] Speaker 01: Fair point, Your Honor. [00:20:50] Speaker 01: Then let me argue instead the statute of limitations waiver issue. [00:20:54] Speaker 01: We don't dispute that that is in fact not jurisdictional, so I think we're on the same page with the government there. [00:21:01] Speaker 03: So you agree the judge erred in dismissing for lack of jurisdiction? [00:21:04] Speaker 01: I think if it was a 12b1 dismissal, and I don't think that opinion is clear, that would be error. [00:21:10] Speaker 03: Well, he says I'm dismissing for lack of jurisdiction. [00:21:12] Speaker 01: Yes. [00:21:12] Speaker 01: But here's the reason why I think that that error is harmless. [00:21:17] Speaker 01: Ordinarily, you're absolutely right. [00:21:18] Speaker 01: You can't rely, obviously, on extrinsic evidence on a 12b6 motion, which this properly should have been on the statute of limitation ground. [00:21:27] Speaker 01: The problem is that the government didn't object to reliance on that evidence at the CIT. [00:21:33] Speaker 01: It didn't object to it in its opening appeal brief. [00:21:35] Speaker 01: It's not until its appeal reply brief that it says the court improperly relied on extrinsic evidence. [00:21:42] Speaker 01: But it's not just waiver that I'm relying on. [00:21:45] Speaker 01: In their motion to dismiss response, this is at appendix page 689, footnote one. [00:21:52] Speaker 01: Here's what the government, and this is why I think the government didn't raise it in its opening appeal brief. [00:21:56] Speaker 01: It says, quote, for purposes of considering Katana's motion to dismiss in our response, we do not object to consideration of these exhibits. [00:22:06] Speaker 01: So the exhibits that were attached were the ones that had the correspondence back and forth with the government about how they had reached an agreement. [00:22:13] Speaker 01: They would get some sort of administrative process, some opportunity, contest that. [00:22:17] Speaker 01: The government says in its motion to dismiss response brief, in footnote one, we do not object to the district court's consideration of these exhibits. [00:22:29] Speaker 01: not object, agree to the consideration, and then come here on appeal and say, the court, hey, look, it junked the gun and improperly considered this extrinsic evidence. [00:22:39] Speaker 01: The extrinsic evidence. [00:22:40] Speaker 04: Is that really true? [00:22:40] Speaker 04: I mean, you can't consider it. [00:22:42] Speaker 04: I don't understand how that's. [00:22:43] Speaker 04: It sounds like the government made a legal error. [00:22:45] Speaker 04: They were saying, we don't object to considering these for purposes of 12b6, which it can't do. [00:22:51] Speaker 04: If these documents are considered, the trial court had to convert it to a summary judgment motion. [00:22:55] Speaker 04: It did not. [00:22:56] Speaker 01: Well, Your Honor, if that's the only error, what we were left with then is uncontroverted evidence, right? [00:23:02] Speaker 01: The government says, we don't object to consideration of these exhibits. [00:23:07] Speaker 01: The court considers these exhibits, which the court reads and finds. [00:23:10] Speaker 01: Hey, look, there was a promise made that if they're going to do this third waiver, they're going to at least get some opportunity to bring the evidence of fraud to you. [00:23:20] Speaker 01: And maybe you'll reconsider bringing [00:23:22] Speaker 01: 592D action or whatever, if they truly were the victim of fraud. [00:23:27] Speaker 04: Well, if they were the, I mean, if there was fraud, if the government was going to pledge fraud, they would have had to bring all this pre-penalty stuff to you. [00:23:34] Speaker 01: Right, not fraud by Katana. [00:23:36] Speaker 01: If Katana was the victim of the fraud, right? [00:23:37] Speaker 01: Katana's whole theory, the reason why they wanted this administrative process. [00:23:42] Speaker 01: But let me ask you this. [00:23:43] Speaker 04: You still have the opportunity, because this is a 1582 case, right? [00:23:47] Speaker 04: And I'm pretty sure, I didn't get a chance out of the government, but I'm pretty sure in a 1582 case, [00:23:52] Speaker 04: The government bears the burden of proof. [00:23:55] Speaker 04: So you can present all this evidence that you're the victimless importer. [00:24:01] Speaker 04: you know, all this kind of stuff, or you're the victim of fraudulent, you know, whatever, as a defense at trial, either on summary judgment or if it goes to trial. [00:24:10] Speaker 04: You're not precluded from any of this. [00:24:12] Speaker 04: And you're not entitled to that during the administrative process if it's purely a 1592D case, are you? [00:24:20] Speaker 04: So the fact that the government suggested that they're going to allow this doesn't show that there's no legal entitlement to this anywhere, is there? [00:24:29] Speaker 01: Well, I guess my position would be true. [00:24:32] Speaker 01: If this court were to remand, then we would bring our motion to dismiss on the complaint. [00:24:37] Speaker 01: We would then, on the statute of limitations waiver, it would probably be a summary judgment motion. [00:24:42] Speaker 01: And we would litigate all of those things. [00:24:44] Speaker 01: And if you vacate and remand, obviously, that's how we'll go. [00:24:49] Speaker 01: I just wanted to take a shot at arguing to you that, look, what the Court of International Trade did is what the government invited. [00:24:55] Speaker 01: It said, we don't object. [00:24:58] Speaker 01: to consideration of these exhibits. [00:25:00] Speaker 01: So what was the Court of International Trade left with? [00:25:03] Speaker 01: It was left with no countervailing evidence, but evidence that showed in the Court of International Trade's opinion after reviewing the documentary evidence that, hey, look, yeah, the government said [00:25:15] Speaker 01: before it brings the suit, it's going to give you a chance to say you were a victim of fraud, make your case, convince them otherwise. [00:25:22] Speaker 01: Instead what happened is they got hit with the action in there and they said you can't procure a waiver on those grounds, have them switch positions and be stuck with it and that's a grounds for voiding the waiver. [00:25:33] Speaker 01: My position is [00:25:35] Speaker 01: There is no error there because the court, the government invited it. [00:25:38] Speaker 01: That's a principle of practice. [00:25:40] Speaker 01: You can't invite an error and then run to the appeals court and say, hey, look, the Court of International Trade jumped the gun in considering this extrinsic evidence. [00:25:49] Speaker 01: That should have been for summary judgment. [00:25:51] Speaker 01: In the government's view, [00:25:52] Speaker 01: I read you the passage. [00:25:54] Speaker 01: We don't object. [00:25:55] Speaker 01: Go ahead and consider this evidence. [00:25:57] Speaker 01: So that would be my plea to you, Your Honor. [00:25:59] Speaker 01: If it's not persuasive, obviously, we'll take the remand and have the opportunity both to bring our motion to dismiss on this bare bones complaint and to bring any further proceedings on the statute of limitations. [00:26:11] Speaker 03: Mr. Shah, just one question. [00:26:12] Speaker ?: Yeah. [00:26:13] Speaker 03: The promise, it's Katana's position that a promise was made to him, okay? [00:26:19] Speaker 03: Yes. [00:26:19] Speaker 03: Is Katana's position that it was promised rule, that it was promised 1592B procedures or that it was promised [00:26:30] Speaker 03: some other kind of an administrative process. [00:26:32] Speaker 01: I think really the latter. [00:26:33] Speaker 01: Can someone say? [00:26:34] Speaker 01: Yeah. [00:26:34] Speaker 01: It doesn't have to be a 1592B. [00:26:36] Speaker 01: What the letter says is an opportunity to make their case on the identity. [00:26:42] Speaker 03: Do you agree 1592B isn't required? [00:26:44] Speaker 01: I agree, Your Honor. [00:26:45] Speaker 01: And that's why I said I'm not going to argue that. [00:26:47] Speaker 01: But what clearly was promised at that meeting, based on the documentary evidence, based on the CIT's finding, again, [00:26:54] Speaker 01: the government didn't object to consideration is there was going to be some opportunity for them to get in front and on the identity theft not the all the procedure they have the audits that was about the numerical calculation of the underpaid entries it did not go to the theory that they were a victim of of identity theft fraud by these Chinese vendors and the custom brokers that's what they wanted to have an opportunity for that's why they agreed to that third statute of limitations waiver [00:27:21] Speaker 01: And that wasn't given to them. [00:27:23] Speaker 01: Thank you, Your Honor. [00:27:25] Speaker 00: So there were a few arguments there, so I'm going to try to summarize, I think, where we stand. [00:27:29] Speaker 00: It seems that Katana and the United States now agree this is not a jurisdictional issue, and at a 12b6 stage, allegations outside of the complaint are not appropriately considered. [00:27:40] Speaker 00: pre-penalty procedures were not required. [00:27:43] Speaker 00: And I did not hear Katana's counsel say that attempt to defend the CIT's erroneous legal statements regarding revocation of the statute of limitations waiver. [00:27:53] Speaker 00: So those are the bases that we ask the court to reverse, correct the CIT's erroneous analysis, and send it back for any further decision on the merits. [00:28:02] Speaker 04: And so to be clear, that means that below they can still [00:28:05] Speaker 04: either renew a 12B6 about you haven't stated a claim because you haven't sufficiently described an A violation here and either do it under 12B6 or summary judgment that [00:28:20] Speaker 04: they were entitled to the revocation because you broke some promise to them. [00:28:24] Speaker 04: I know you have arguments about why that's not factually or legally sufficient, but that's still open to the trial court to decide. [00:28:31] Speaker 00: Yes. [00:28:31] Speaker 00: If this court, I think, correctly looks at the CIT decision and says, if the court erroneously treated the timeliness as jurisdictional, that was wrong, send it back, then they would be free to, [00:28:43] Speaker 00: potentially try again on 12-26 or proceed to discovery, go to summary judgment proceedings, or potentially attempt to defend his positions at trial. [00:28:52] Speaker 00: I do have some arguments on the adequacy of the complaint. [00:28:58] Speaker 00: So briefly, [00:28:59] Speaker 00: First of all, it's not clear at all. [00:29:01] Speaker 00: It seems quite unlikely that the trial court actually engaged in an analysis that Katana's counsel is presenting now. [00:29:07] Speaker 00: Second, negligence is not a fraud analysis. [00:29:11] Speaker 00: There's no requirement to plead it with specificity. [00:29:13] Speaker 00: The complaint alleges that Katana was the importer of record. [00:29:16] Speaker 00: Importers of record under 1484 in the statute, 141.1B in the regulation have a obligation of due diligence. [00:29:25] Speaker 02: Well, maybe we should curtail this just because [00:29:28] Speaker 02: and we could shield your friend in making the Archimedes. [00:29:31] Speaker 02: At least try to strengthen your courage in doing that. [00:29:34] Speaker 00: You don't want us to decide that either. [00:29:36] Speaker 00: Agreed. [00:29:36] Speaker 00: Yes. [00:29:37] Speaker 00: It was not decided by the Court of International Trade. [00:29:40] Speaker 00: And as to the footnote at page 689, I was just looking at that for the first time a moment ago. [00:29:48] Speaker 00: I don't believe that it authorized the court to engage in fact-finding at a 12b6 posture to the extent that that footnote reflects the confusion regarding jurisdictional timeliness analysis. [00:30:01] Speaker 00: by the government. [00:30:02] Speaker 00: It could also be read to simply be referring to the prior disclosure itself that were attached to Katana's motion to dismiss. [00:30:11] Speaker 02: So I don't think it's appropriate to make too much of that, but no one.