United States v. Harvic Int'l, Ltd.

427 F.Supp.3d 1349

UNITED STATES, Plaintiff,

v.HARVIC INTERNATIONAL, LTD., Defendant.

Slip Op. 20-3

Court No. 16-00273

United States Court of International Trade.

Dated: January 3, 2020

Mikki Cottet, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice of Washington, D.C. for Plaintiff United States. On the brief with her were Joseph H. Hunt, Assistant Attorney General, Franklin E. White, Jr., Assistant Director. Of counsel on the brief was Jennifer W. Stilwell, Attorney, Office of the Associate Chief Counsel for U.S. Customs and Border Protection of Seattle, WA.

Michael T. Cone and Richard B. Cohen, FisherBroyles, LLP of New York, NY for Defendant Harvic International, Ltd.

OPINION and ORDER

Gordon, Judge:

In this action, Plaintiff United States ("the Government") seeks to recover the maximum allowable civil penalty for a non-revenue-loss violation of Section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592 (2012),¹ stemming from entries of wearing apparel (the "subject merchandise"), allegedly transshipped from the People's Republic of China ("China") through Bangladesh, the Philippines, or Korea, which Defendant Harvic International, Ltd. ("Harvic") entered into the commerce of the United States in 2006 and 2007. See Compl. ¶¶ 5–9, ECF No. 2. Before the court are the parties' cross-motions for summary judgment. See Harvic's Mot. for Summ. J., ECF No. 57 ("Def.'s MSJ"); Pl.'s Resp. in Opp'n to Harvic's Mot. for Summ. J. and Cross-Mot. for Summ. J., ECF No. 64 ("Pl.'s XMSJ"); see also Harvic's Combined Reply in Supp. of its Mot. for Summ. J. and Resp. in Opp'n to Pl.'s Cross-Mot. for Summ. J., ECF No. 75 ("Def.'s Reply"); Pl.'s Reply in Supp. of its Mot. for Summ. J., ECF No. 85 ("Pl.'s Reply"). The court has jurisdiction pursuant to 28 U.S.C. § 1582(1). For the reasons set forth below, the court denies the parties' cross-motions for summary judgment.

I. Undisputed Facts

The parties submitted separate statements of undisputed material facts pursuant to USCIT Rules 56(c)(1)(A) and 56.3(a). See Def. Harvic's Statement of Mat. Facts not in Dispute Pursuant to USCIT Rule 56.3 ("DSOF"), ECF No. 57-8; Pl.'s Resp. to Def.'s Rule 56.3 Statement ("Pl.'s Resp. to DSOF"), ECF No. 72; Pl.'s Statement of Mat. Facts not in Dispute Pursuant to USCIT Rule 56.3 ("PSOF"), ECF No. 65; Def. Harvic's Resp. to Pl.'s Rule 56.3 Statement ("Def.'s Resp. to PSOF"), ECF No. 76. Pursuant to USCIT Rule 56(e)(2) "[i]f a party fails to properly ... address another party's assertion of fact as required by Rule 56(c), the court may ... consider the fact undisputed for purposes of the motion." The following material facts are not genuinely in dispute.

In November 2005, the United States and China executed a Memorandum of Understanding ("MOU") regarding trade in textile and apparel products. PSOF ¶ 36; Def.'s Resp. to PSOF ¶ 36. That MOU established quotas for certain cotton, wool, man-made fiber, silk blend, and other vegetable fiber textiles and textile products produced or manufactured in China and exported to the United States from January 1, 2006 through December 31, 2008. PSOF ¶ 36; Def.'s Resp. to PSOF ¶ 36. As to imports during that period, U.S. Customs and Border Protection ("Customs" or "CBP") knew that there were illegal transshipments of Chinese textiles and textile apparel into the United States and developed a methodology to identify and "back-track" those illegal shipments. PSOF ¶¶ 37, 43; Def.'s Resp. to PSOF ¶¶ 37, 43. Because of concerns over violations of the MOU, CBP investigated these illegal transshipments. PSOF ¶ 38; Def.'s Resp. to PSOF ¶ 38.

Between January 2006 and September 2007, Harvic made 57 entries of the subject merchandise valued at $4,050,429.00 (the "subject entries"). PSOF ¶¶ 23–24, 35; Def.'s Resp. to PSOF ¶¶ 23–24, 35. The subject entries were transported to the United States by shipping companies Hanjin Shipping Company ("Hanjin") and Hyundai Merchant Marine Co. Ltd. ("Hyundai"). PSOF ¶ 61; Def.'s Resp. to PSOF ¶ 61. Harvic filed entry documentation indicating that the subject merchandise originated in Bangladesh, the Philippines, or Korea. DSOF ¶¶ 3–4; Pl.'s Resp. to DSOF ¶¶ 3–4. Specifically, Harvic declared the Philippines as the country of origin for 38 of the 57 subject entries, Bangladesh for 18 entries, and Korea for one entry. PSOF ¶ 24; Def.'s Resp. to PSOF ¶ 24.

As part of its investigation, CBP requested bills of lading and other documents from numerous shipping companies, including Hanjin and Hyundai, for thousands of shipments of textile goods that entered the United States between 2006 and 2010. PSOF ¶¶ 46, 47; Def.'s Resp. to PSOF ¶¶ 46, 47. Among the many documents obtained, CBP received bills of lading from Hanjin and Hyundai (the "Hanjin/Hyundai bills of lading") that appear to correspond to the subject entries. PSOF ¶ 61; Def.'s Resp. to PSOF ¶ 61. The Hanjin/Hyundai bills of lading reflect the movement of sealed containers of subject merchandise that were loaded onto vessels in ports in China, shipped to ports in third countries, loaded onto other vessels in those third countries, and then shipped to the United States.² PSOF ¶ 58; Def.'s Resp. to PSOF ¶ 58; see also CBP Oct. 9, 2009 Transshipment Memorandum, ECF Nos. 66-2 & 66-3.

During its investigation, Customs also sought information from Harvic regarding the subject entries. PSOF ¶ 59; Def.'s Resp. to PSOF ¶ 59. In response, Harvic produced an entry summary, a bill of lading, and a multi-country declaration for each entry (the "Harvic entry documents"). PSOF ¶ 60; Def.'s Resp. to PSOF ¶ 60; see also Harvic International, Ltd. Jan. 26, 2010 Response to Requests for Information, ECF Nos. 66-7, 66-8 & 66-9. These documents identify the subject entries as being produced by various manufacturers in Bangladesh, the Philippines, or Korea. PSOF ¶ 25; Def.'s Resp. to PSOF ¶ 25.

CBP reviewed the Harvic entry documents and compared them to the Hanjin/Hyundai bills of lading. PSOF ¶ 61; Def.'s Resp. to PSOF ¶ 61. The comparison showed that Harvic's documentation did not substantiate its country of origin declarations. PSOF ¶ 62; Def.'s Resp. to PSOF ¶ 62. Consequently, Customs issued a pre-penalty notice advising Harvic that CBP was contemplating a penalty in the amount of $1,620,171.60, an amount that represented 40 percent of the dutiable value of the subject merchandise, based upon a culpability level of gross negligence. PSOF ¶ 68; Def.'s Resp. to PSOF ¶ 68. Harvic responded to the pre-penalty notice. PSOF ¶ 69; Def.'s Resp. to PSOF ¶ 69. CBP then issued a notice of penalty to Harvic for violations of 19 U.S.C. § 1592, alleging a culpability level of negligence and assessing a penalty in the amount of $405,042.90, which represented 10 percent of the dutiable value of the subject merchandise. PSOF ¶ 70; Def.'s Resp. to PSOF ¶ 70.

Harvic submitted a petition in response to the penalty notice, but Customs declined to mitigate the penalty. PSOF ¶¶ 71, 72; Def.'s Resp. to PSOF ¶¶ 71, 72. Subsequently, CBP sent several demands to Harvic for payment of the $405,042.90 penalty. PSOF ¶¶ 73–74; Def.'s Resp. to PSOF ¶¶ 73–74. To date, Harvic has not paid any of the penalty demanded by CBP. PSOF ¶ 75; Def.'s Resp. to PSOF ¶ 75. In December 2016, the Government commenced this enforcement action, seeking a civil penalty of $405,042.90, plus interest and costs. Compl. ¶¶ 28–29.

II. Standard of Review

The U.S. Court of International Trade reviews all issues in actions brought for the recovery of a monetary penalty under 19 U.S.C. § 1592 de novo, including the amount of any penalty. 19 U.S.C. § 1592(e)(1) ; see also United States v. ITT Indus., Inc., 28 C.I.T. 1028, 1034–35, 343 F. Supp. 2d 1322, 1329 (2004), aff'd, 168 F. App'x 942 (Fed. Cir. 2006). USCIT Rule 56 permits summary judgment when "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." USCIT R. 56(c) ; see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In considering whether material facts are in dispute, the evidence must be considered in the light most favorable to the non-moving party, drawing all reasonable inferences in its favor. See Anderson, 477 U.S. at 261 n.2, 106 S.Ct. 2505 ; Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). On materiality, "the substantive law will identify which facts are material." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. "Where, as here, parties cross-move for summary judgment, each party carries the burden on its own motion to show entitlement to judgment as a matter of law after demonstrating the absence of any genuine disputes over material facts." Suntec Indus. Co. v. United States, 40 CIT ––––, 2016 WL 1621088, at *2 (Apr. 21, 2016) (internal quotation marks and citations omitted), aff'd, 857 F.3d 1363 (Fed. Cir. 2017).

III. Discussion

A. Harvic's Motion for Summary Judgment

Under 19 U.S.C. § 1592(a), "no person, by ... negligence[,] ... may enter, introduce, or attempt to enter or introduce any merchandise into the commerce of the United States by means of ... any document or electronically transmitted data or information, written or oral statement, or act which is material and false." 19 U.S.C. § 1592(a)(1). A document, statement, or act is material if it has the potential to interfere with the administration of a quantitative limitation, i.e., a quota. United States v. Inner Beauty Int'l (USA) Ltd., 35 C.I.T. 1693, 1697, 2011 WL 6009239 (2011) (citing United States v. Rockwell Int'l Corp., 10 C.I.T. 38, 42, 628 F. Supp. 206, 210 (1986) (holding false statement of country of origin to be material); 19 C.F.R. Part 171, App. B § (B) ("A document, statement, act, or omission is material if it has the natural tendency to influence or is capable of influencing agency action including ... [d]etermination of the classification, appraisement, or admissibility of merchandise...."...