U.S. v. New-Form Mfg. Co., Ltd.

Decision Date30 June 2003
Docket NumberSLIP OP. 03-77.,Court No. 01-00034.
Citation277 F.Supp.2d 1313
PartiesUNITED STATES, Plaintiff, v. NEW-FORM MANUFACTURING COMPANY, LTD., Defendant.
CourtU.S. Court of International Trade

Robert D. McCallum, Jr., Assistant Attorney General; David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (A. David Lafer and Timothy P. McIlmail), for Plaintiff, Kevin B. Marsh, Office of the Associate Chief Counsel, Bureau of Customs and Border Protection, United States Department of Homeland Security, of counsel.

OPINION

RIDGWAY, Judge.

In this customs penalty action, plaintiff, the United States, seeks a civil penalty against defendant, New-Form Manufacturing Company, Limited, Canada ("New-Form"), for conduct in connection with its importation of steel jack parts from Canada into the United States. Jurisdiction lies under 28 U.S.C. § 1582 (1994).1

Pending before the Court is Plaintiff's Application for Default Judgment ("Plaintiff's Application"). For the reasons set forth below, that application is granted. New-Form "has failed to plead or otherwise defend" this action, and default has been entered against it. The record further establishes that, although New-Form knew that its jack parts were subject to antidumping duties, the company failed to accurately classify and describe its merchandise on its invoices, and — when questioned by its broker — denied that the merchandise was jack parts. New-Form's conduct thus violated 19 U.S.C. § 1592, and warrants imposition of the maximum penalty for gross negligence, plus interest and costs.

I. Background
A. The Facts of The Case

New-Form, a Canadian corporation located in Canada, manufactured and exported steel jacks and jack parts to the United States. A81 ¶ 3, A101 ¶ 3, A113 ¶ 5(d)-(e).2 Initially, the company exported completed jacks. But, eventually, it turned to exporting jack parts — including steel beams, handles, large and small runners, lifting pins, reversing levers, pitmans, reversing switches, bases, lever guards, and dowel lift pins — which were then assembled into completed jacks in this country. A66 ¶ 54, A191-92 ¶ 4.

Under cover of more than 30 entries, between February 5, 1996 and October 22, 1997, New-Form caused more than 111,000 jack parts to be entered or introduced into the United States. A84 ¶ 13, A86-87, A102 ¶ 13, A191-92 ¶ 4. Throughout that period, steel jack parts from Canada were subject to antidumping duties. See 61 Fed.Reg. 6,627, 6,627-28 (Feb. 21, 1996).

New-Form was aware of the antidumping duty order. Indeed, in 1993, the company sought to have the antidumping duty finding revoked. A1; 60 Fed.Reg. 53,584 (Oct. 16, 1995). However, in its notice of the final results of the 1993-94 administrative review of the finding, the U.S. Department of Commerce explained that New-Form was covered, and described the merchandise covered as "multi-purpose hand-operated heavy-duty steel jacks, ... measuring from 36 inches to 64 inches high, assembled, semi-assembled and unassembled, including jack parts, from Canada." 61 Fed.Reg. 6,627, 6,627-28 (Feb. 21, 1996) (emphasis added).

Moreover, in a September 1997 affidavit (presented in the course of litigation in Canada that is unrelated to this case), New-Form's President — David M. Boulanger — explained that New-Form decided to export jack parts to U.S. to minimize applicable duties. In his words:

[S]elling the components of a given product attracts less duty than would a product in a finished or assembled state; the duty payable is directly proportional to the value of the goods being shipped into the United States.

A65-66 ¶ 54 (emphasis added). See also A67 ¶ 59, A72, A171. Included with the affidavit was a chart, submitted by Mr. Boulanger, which indicated that New-Form's "Canadian supplied components" were "subject to U.S. Antidumping duty." A67 ¶ 58, A69 (emphasis added).

Although New-Form knew that the components at issue were jack parts and were to be used for jacks, it failed to reflect that fact on its invoices, which were among the documents used to introduce its merchandise into the U.S. A2-63, A108 ¶ 18(b), A115 ¶ 18(b), A123-26 ¶¶ 56-59, A127 ¶ 64, A132 ¶ 64, A133 ¶¶ 56-59. New-Form's invoices also classified the jack parts by Harmonized Tariff Schedule ("HTS") numbers that do not apply to jack parts. Some parts were identified by reference to HTS 8431.10, rather than the more accurate 8431.10.0090. But other parts were identified by reference to 8201.90.60 and 7326.90. A2-63, A182-85.

Moreover, in mid-June 1996, New-Form was asked point-blank by its broker, Tower Group International ("Tower"), whether the merchandise at issue was — tracking the language of the antidumping duty finding — "heavy duty jack parts with a height of 36'-64.'" New-Form responded with an unequivocal "No." A64.

Although New-Form knew that its merchandise was jack parts to be used for jacks, and although New-Form knew that jack parts were subject to antidumping duties, neither New-Form nor Tower paid those duties until years later — when Tower finally paid them, long after the merchandise had been entered, and after this action had been filed.3 A170. The jack parts at issue were valued at $81,537.31; and the revenue lost to the United States (i.e., the unpaid duties) was, until Tower's payment, $18,466.84. A192 ¶ 5.

As recently as March 2002, New-Form intended to continue doing business in the U.S., and had transferred certain of its functions and personnel to a related company called "Supplierpipeline." A172, A176-77. Mr. Boulanger is not only the President of New-Form and, through Northman Holdings, Inc., its sole shareholder (A65, A171); he is also the President and Chief Executive Officer of Supplierpipeline, which is a subsidiary of Northman Holdings. A171, A187; SA5-6. And Dan Evans, a former Vice President of New-Form, is now a Vice President of Supplierpipeline. A114 ¶ 12; SA5-6, SA10, SA12.

Although New-Form itself has not exported merchandise into this country since December 2002 (SA15-16), it appears that the company's business is being continued through Supplierpipeline. Supplierpipeline represents that it began with "[its] Milverton, Ontario operation of New-Form Manufacturing," and that it manufactures and distributes jacks. A186; SA9. New-Form's internet address — www.new-form. com — leads directly to the website of Supplierpipeline. SA2 ¶ 6. And, although Dun & Bradstreet reports that Supplierpipeline commenced business in 2000(SA6), Supplierpipeline claims to have been doing business for 11 years. SA11. See also A186 (Supplierpipeline boasts of growth rate "for the past 12 years"). Supplierpipeline even advertises, as one of its products, the "Jackall" jack — the same jack whose parts are the subject of this litigation. A172, A186; SA12, SA14. In fact, in March 2002, Mr. Boulanger, referring to a U.S. auto manufacturer, testified that "we're selling them Jackall jack product from Supplier Pipe Line." A172.

In its Spring 2002 newsletter, "In The Pipeline," Supplierpipeline reported that it was

combining two of its three manufacturing facilities to offer a better freight solution to its customers. Currently, there are two manufacturing facilities in Mississauga and one in Milverton, Ontario. The Milverton facility manufactures Erie Wheelbarrows, Jackall Jacks and many ... other seasonal lawn and garden products.

SA9 (emphasis added). The newsletter continued, "effective March 23rd, 2002 Supplierpipeline Inc. will combine its Mississauga MIC Metabuilt facility and its Milverton Newform Manufacturing facility." Id. (emphasis added). Further, on January 28, 2003, in an apparent reference to its "Milverton Newform Manufacturing facility," Supplierpipeline reported:

The most recent "Pipeline Partner" welcomed to the group is Sinclair-Erie Ltd, a Canadian manufacturer of Erie wheel-barrows and contractor tools located in Milverton, Ontario. Sinclair-Erie has acquired a strong manufacturing operation in Milverton, streamlined its product offering, and is committed to delivering improved service levels within the next 60 days.

SA11.

Supplierpipeline identifies Sinclair-Erie as one of "two manufacturing partners" that it "currently operates." SA13. And, although Supplierpipeline does not list the Jackall jack as one of the products that Sinclair-Erie manufactures, Sinclair-Erie is located at the same address (37 Pacific Avenue, Milverton, Ontario) and has the same telephone and fax numbers that New-Form used. A2-63; SA3, SA13.

Through May 2003, Supplierpipeline had exported more than $2.7 million worth of merchandise into the United States — including, since November 9, 2002, $482,323 worth of merchandise of which $10,000 consisted of jack parts classified under HTS number 8431.10.0090, and $12,158 consisted of jacks. SA2 ¶ 4, SA28-46.

B. The Procedural Posture of The Case

The early stages of this action were largely uneventful — discovery was completed, a pretrial conference was held, and counsel for both parties participated in a settlement conference before another judge of this Court. Following the settlement conference, the parties were to file reports on the prospects for settling the case, together with their recommendations as to further proceedings.

The Government's post-settlement conference report advised that settlement was unlikely, and proposed a schedule for the filing of dispositive motions. In contrast, the report filed by counsel for New-Form — barely one month after the pretrial conference — stated that the company had just declared bankruptcy, that a bankruptcy trustee had been appointed by the Canadian authorities, and that the trustee had indicated that no counsel would be engaged to represent New-Form (apparently in this or any other action). The report concluded that it was therefore impossible "to propose any further recommendations as to further proceedings in this action."...

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