The United States Court of International Trade has sided with the government in a case against E-Dong, U.S.A., Inc., a California-based import company. The court granted a default judgment, meaning E-Dong failed to respond to the lawsuit, and now owes the government over $234,000 in unpaid federal excise taxes (FETs), along with interest.
The case, decided on October 21, 2025, centers around E-Dong’s import of Korean distilled beverage soju. The government alleged that E-Dong misclassified the product, leading to significantly lower tax payments.
The Allegations: Misclassification and Unpaid Taxes
The core of the dispute lies in how E-Dong classified the imported soju. According to court documents, E-Dong filed 20 entries of the alcoholic beverage between April 2017 and July 2020. They classified the soju as “rice wine” under the Harmonized Tariff Schedule of the United States (HTSUS) subheading 2206.00.4500.
However, U.S. Customs and Border Protection (Customs) later determined that the product was, in fact, distilled soju, which is properly classified under HTSUS subheading 2208.90.7500. While both classifications are duty-free, the difference lies in the FETs. Rice wine is subject to an FET of $18 per barrel, whereas distilled spirits are taxed at $13.50 per proof gallon. A barrel contains approximately 31 proof gallons.
By classifying the soju as rice wine, E-Dong would have paid substantially less in FETs than if the product had been correctly classified as distilled spirits. The government argued that this misclassification deprived the United States of lawful revenue.
The Government’s Calculations
The government’s initial calculation showed that E-Dong’s misclassification and failure to declare excise taxes resulted in a loss of $361,479.92 in revenue. After considering a $100,000 payment made by E-Dong’s surety (a company that guarantees payment on behalf of the importer) and excluding entries that fell outside the statute of limitations, the government calculated the total amount owed as $234,748.30.
The Court’s Decision: Default Judgment Granted
Because E-Dong failed to respond to the complaint, the government filed a motion for a default judgment. The court granted this motion, meaning the court found in favor of the government because E-Dong did not defend itself.
The court found that the government’s factual allegations established that E-Dong violated 19 U.S.C. § 1592(a)(1)(A)(i). This law prohibits the entry of merchandise into the U.S. commerce by means of a “material and false” document or statement. The court determined that E-Dong’s misclassification of the soju was a material misstatement because it influenced Customs’ decisions regarding classification and duty assessment.
Interest on the Debt
In addition to the unpaid FETs, the court also awarded the government both pre-judgment and post-judgment interest.
The court has discretion to award pre-judgment interest, which is calculated from the date of the government’s last formal demand for payment. In this case, that date was August 11, 2023. The interest rate for pre-judgment interest is calculated in accordance with 26 U.S.C. § 6621.
The court also awarded post-judgment interest, which will accrue from the date of the court’s judgment. The rate for post-judgment interest is calculated according to 28 U.S.C. § 1961.
Legal Framework: Key Statutes Involved
The case hinges on several key sections of U.S. law:
* 19 U.S.C. § 1592(a)(1)(A)(i): This section prohibits the entry of merchandise into U.S. commerce through “any document or electronically transmitted data or information, written or oral statement, or act which is material and false.”
* 19 U.S.C. § 1592(d): This section states that if the government is deprived of lawful taxes due to a violation of § 1592(a), the government shall require that those taxes be restored.
* 28 U.S.C. § 1582: This section grants the Court of International Trade exclusive jurisdiction over civil actions brought by the United States to recover civil penalties or customs duties.
* 26 U.S.C. § 6621: This section outlines the interest rates used for underpayment of taxes.
* 28 U.S.C. § 1961: This section covers interest on money judgments in civil cases.
The court’s decision underscores the importance of accurate classification of imported goods and the potential financial consequences of misclassifications, particularly when they involve excise taxes on alcoholic beverages. The government’s successful pursuit of this default judgment highlights its ability to enforce import regulations and collect owed taxes, even when faced with an uncooperative defendant.