Katana faces federal lawsuit for unpaid customs duties

NEW YORK — A La Mirada, Calif.-based tire importer is fighting a federal lawsuit claiming that it owes the government more than $5.7 million in unpaid duties because of allegedly inaccurate invoices.

The suit, filed July 15 in the U.S. Court of International Trade, on behalf of the U.S. Department of Homeland Security and Customs and Border Protection, accuses Katana Racing Inc. d/b/a Wheel & Tire Distributors, of underpaying safeguard duties, regular customs duties, harbor maintenance fees and merchandise processing fees on 386 invoices for imported passenger and light truck tires between November 2009 and August 2012.

According to the suit, Katana listed prices for the tires that were lower than what Katana paid its Chinese vendors.

"For example," the lawsuit said, "one commercial invoice supplied by a customs broker to CBP during the entry process valued the covered merchandise at $21,220.

"Another commercial invoice, supplied by Katana to CBP during a regulatory audit, valued the same merchandise at $136,500," it said. "Using the information reflected in the latter invoice, which is the amount actually paid by Katana to the Chinese vendor, the safeguard duties alone should have amounted to $34,087.50."

In its motion to dismiss, Katana argued there were two separate avenues to dismissal of the case.

First, Katana said CBP never initiated procedures to establish a violation involving withheld taxes, duties and fees, and therefore, failed to state a valid claim for relief.

Second, Katana argued that the statute of limitations had lapsed on the claims.

"It is not the province of this court to excuse CBP from following the procedures which Congress has specified as the predicate for setting aside the finality of liquidation," according to the memorandum in support of the motion to dismiss filed Aug. 30.

"Waiving exhaustion of remedies would be particularly grotesque in the instant case," Katana said. "CBP's utter failure to exhaust administrative remedies is compounded by the fact that the agency had plenty of time and resources to conduct the administrative proceedings required."

The government filed a brief in opposition to the motion. An attorney representing Katana said the company plans to file a reply soon supporting the motion. He said he expected the court to rule shortly after that filing.