CIT Grants Over $234K in Default Judgment Against Korean Soju Importer
The Court of International Trade on Oct. 21 granted the government's motion for default judgment against importer E-Dong, U.S.A. for negligently failing to pay a federal excise tax on 20 entries of its "Korean distilled beverage soju." Judge Timothy Reif ordered E-Dong to pay $234,748.30 in unpaid federal excise tax along with pre- and post-judgment interest, which shall be calculated according to the relevant statutes.
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From 2017 to 2021, E-Dong made 38 entries of goods it described as "Korean Rice Wine" under Harmonized Tariff Schedule subheading 2206.00.4500, which covers rice wine free of duty. However, CBP said the goods should have been classified as a distilled spirit under subheading 2208.90.7500.
While both subheadings are free of duty, they are subject to different levels of federal excise tax. The excise tax rate for distilled spirits is $13.50 per proof gallon, while the tax rate for rice wine is $18 per barrel. Due to this misclassification, the U.S. said it was owed $361,479.92, $100,000 of which was paid by E-Dong's surety. After accounting for the $100,000 and the fact that the statute of limitations had lapsed for 18 of the entries, CBP issued a bill for $234,748.30 for the remaining entries.
The agency then took to the trade court after the importer didn't pay the missing federal excise tax. E-Dong then failed to appear in court, prompting the U.S. to file a motion for default judgment (see 2508080012).
Reif granted the motion for default judgment after admitting the government's allegations are true. The judge said E-Dong misclassified its entries as rice wine under subheading 2206.00.4500 instead of classifying them as distilled spirits under subheading 2208.90.7500. "Misclassifications under the HTSUS are material misstatements under § 1592(a) because they have the tendency to influence Customs’ decisions regarding classification and duty assessment," the court said.
Here, E-Dong's false classification was material, since CBP's calculation of the tax rate "depended on whether the merchandise was treated as rice wine, taxed at $18 per 31-gallon barrel, or as distilled spirits, taxed at $13.50 per proof gallon." In addition to granting the U.S. the amount of the unpaid taxes, Reif said E-Dong shall pay pre- and post-judgment interest. The court has discretion in awarding interest of this nature based on equitable factors.
Reif held that "the government has prosecuted its claim without delay and repeatedly made formal demands on E-Dong for payment," meaning equity "favors awarding pre-judgment interest." The pre-judgment interest runs from the government's last formal demand for payment to the date of judgment. The judge also granted post-judgment interest, which "is calculated from the date of the entry of this judgment, at a rate calculated in accordance with the statute."
(United States v. E-Dong, U.S.A., Slip Op. 25-139, CIT # 24-00066, dated 10/21/25; Judge: Timothy Reif; Attorneys: Collin Mathias for plaintiff U.S. government)