Peerless Clothing Intern., Inc. v. U.S.

• Decision Date: 13 August 2009
• Docket Number: Slip Op. 09-86. Court No. 03-00537.
• Parties: PEERLESS CLOTHING INTERNATIONAL, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

637 F.Supp.2d 1253

PEERLESS CLOTHING INTERNATIONAL, INC., Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 09-86. Court No. 03-00537.

United States Court of International Trade.

August 13, 2009.

Sandler, Travis & Rosenberg, P.A., Miami, FL (Arthur K. Purcell) for Plaintiff Peerless Clothing International, Inc.

Tony West, Assistant Attorney General; Barbara S. Williams, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Edward F. Kenny); and Chi S. Choy, Office of the Assistant Chief Counsel, U.S. Customs and Border Protection, Of Counsel, for Defendant United States.

OPINION AND ORDER

WALLACH, Judge.

I INTRODUCTION

Plaintiff Peerless Clothing International, Inc. ("Peerless USA") commenced this action contesting the appraisement and assessment of certain duties by the United States Customs and Border Protection ("Customs") on garments imported into the United States. This court granted in part and denied in part both Peerless USA's Motion for Summary Judgment and Defendant United States' ("Defendant") Cross-Motion for Summary Judgment. Peerless Clothing Int'l, Inc. v. United States, 602 F.Supp.2d 1309 (CIT 2009) ("Peerless I"). Accordingly, this court remanded to Customs with instructions to reallocate specific expense categories that Customs had found dutiable. Defendant subsequently filed a Motion For Rehearing or Reconsideration ("Defendant's Reconsideration Motion") requesting reconsideration of Peerless I such that the underlying appraisement and assessment of Customs be affirmed in its entirety. Oral argument on Defendant's Reconsideration Motion took place on May 28, 2009. While the court has carefully considered Defendant's Reconsideration Motion and this Opinion represents a reconsideration of Peerless I, to the extent it seeks to change the result of Peerless I, the Motion is denied because the requisite standard is not satisfied.

II BACKGROUND

Peerless Clothing, Inc. ("Peerless Canada") is the largest manufacturer of men's wool suits in North America. Peerless I, 602 F.Supp.2d at 1313 (citation omitted). In the 1980s, Peerless Canada created Peerless USA, a separate legal entity sharing common senior management and corporate officers, to import merchandise into the United States (Peerless Canada and Peerless USA are collectively referred to as "Peerless"). Id. (citations omitted). The subject garments were purchased by Peerless USA from Peerless Canada through related party transactions. Id. (citations omitted). For appraisement by Customs, Peerless calculated intercompany price using two types of invoices that Peerless Canada issued to Peerless USA: the cost of manufacturing known as "cut, make & trim" ("CMT"); and the cost of fabric known as material purchase recovery ("MPR"). Id. (citations omitted). During an audit initiated in 1997, Customs examined CMT, MPR and a third type of invoice that Peerless Canada issued to Peerless USA but was not declared to Customs consisting of eleven categories of warehousing, general and administrative expenses known as Warehousing and Expense Allocation ("WEA"). Id. (citations omitted). Peerless USA claimed that these expenses were either not dutiable or had already been allocated and captured in CMT. Id. at 1314 (citations omitted).

Customs in March 2000 determined that Peerless USA owed additional dutiable value on certain WEA categories. Customs Headquarters Ruling Letter Number 547108 (March 28, 2000) ("HQ 547108"). Customs agreed with Peerless that the following three WEA categories were "not included in the price" and therefore not dutiable: "expenses for shipping truck rental, selling expenses, and travelling and selling expenses." HQ 547108 at 3. Customs further accepted Peerless' 50 percent allocation of the WEA category for shipping salaries. Id. at 6. In contrast to Peerless, Customs found that the entire WEA category for warehousing was dutiable. Id. at 6. For the six remaining WEA categories, Customs found that "92.2 percent of the management salaries, data entry salaries, office salaries and supplies, computer supplies, telephone and buying salaries were to be included in the price of the imported clothing." Id. at 9. Customs in September 2002 denied the protest of HQ 547108. Customs Headquarters Ruling Letter Number 548065 (September 6, 2002) ("HQ 548065").

Peerless USA commenced this action in August 2003 contesting the imposition of duties on the WEA categories by Customs. Specifically, Peerless USA argued that Customs violated: (1) 19 U.S.C. § 1625(c) by modifying "treatment" of the imported garments without the statutorily required review and comment period, and (2) 19 U.S.C. § 1401 a by replacing Peerless' expense methodology that complied with generally accepted accounting principles ("GAAP"). Peerless I, 602 F.Supp.2d at 1312. This court in January 2009 held that Customs had not violated 19 U.S.C. § 1625(c). Id. at 1318-24. This court further held that Customs properly found the WEA warehousing category fully dutiable but improperly replaced Peerless' allocation of six WEA categories. Id. at 1327-30. Peerless I determined that Peerless' intercompany expense allocation complied with both GAAP and the computed value method pursuant to 19 U.S.C. § 1401a(e). Id. at 1326-27.

Defendant now moves for reconsideration of Peerless I, requesting the affirmation of HQ 547108 and HQ 548065. Defendant's Reconsideration Motion at 1. Defendant claims that pursuant to the statutory scheme of 19 U.S.C. § 1401 a valuation methods are hierarchical and contends that the court misapplied 19 U.S.C. § 1401a by failing to either apply the transaction value method pursuant to 19 U.S.C. § 1401a(b) or find the transaction value method to be inapplicable. Id. at 8-11. Defendant further claims that Peerless I erroneously relied upon the KPMG Transfer Pricing Study Update 1997 Report ("KPMG Study") to support its computed value conclusion. Id. at 12-14. Peerless USA opposes Defendant's Reconsideration Motion. See Plaintiff's Brief in Opposition to Defendant's Motion for Rehearing or Reconsideration ("Plaintiff's Reconsideration Opposition").

III STANDARD OF REVIEW

USCIT Rule 59 provides that rehearing may be granted "on all or some of the issues—and to any party—. . . after a nonjury trial, for any reason for which a rehearing has heretofore been granted in a suit in equity in federal court." USCIT R.59(a)(1)(B). This court has articulated the grounds for granting motions pursuant to USCIT Rule 59 as follows:

A rehearing may be appropriate [for cases in which] there was: (1) an error or irregularity in the trial; (2) a serious evidentiary flaw; (3) a discovery of important new evidence which was not available even to the diligent party at the time of trial; or (4) an occurrence at trial in the nature of an accident or unpredictable surprise or unavoidable mistake which impaired a party's ability to adequately present its case. In any event, in ruling on a petition for rehearing, a court's previous decision will not be disturbed unless it is "manifestly erroneous."

United States v. Gold Mountain Coffee, Ltd., 8 CIT 336, 336-37, 601 F.Supp. 212 (1984) citing W.J. Byrnes & Co. v. United States, 68 Cust.Ct. 358 (1972), and Quigley & Manard, Inc. v. United States, 61 C.C.P.A. 65, 496 F.2d 1214 (1974). See also Ford Motor Co. v. United States, 30 CIT 1587, 1588 (2006) ("The major grounds justifying a grant of a motion to reconsider a judgment are an intervening change in the controlling law, the availability of new evidence, the need to correct a clear factual or legal error, or the need to prevent manifest injustice.").

Motions for reconsideration are granted to correct instances in which there was a "significant flaw" in the original proceedings, not to allow a losing party the chance to repeat arguments or to relitigate issues previously before the court. Ont. Forest Indus. Assoc. v. United States, 30 CIT 1624, 1625, 462 F.Supp.2d 1261 (2006); see also Starkey Lab. v. United States, 24 CIT 504, 510, 110 F.Supp.2d 945 (2000) ("rehearing is a means to correct a miscarriage of justice") (quoting Nat'l Corn Growers Ass'n v. Baker, 9 CIT 571, 585, 623 F.Supp. 1262 (1985) rev'd and remanded on other grounds, 840 F.2d 1547 (Fed. Cir.1988)); Gold Mountain, 601 F.Supp. 212, 8 CIT at 337. "[T]he purpose of a petition for rehearing under the [USCIT] Rules . . . is to direct the Court's attention to some material matter of law or fact which it has overlooked in deciding a case, and which, had it been given consideration, would probably have brought about a different result." Retamal v. United States, 29 CIT 132, 136 (2005) (citations omitted), vacated in part, rev'd in part, and remanded on other grounds, 439 F.3d 1372 (Fed.Cir.2006).

IV DISCUSSION

Defendant's Reconsideration Motion is denied because use of the transaction value method that Defendant advocates would not have brought about a different result from Peerless I. See Retamal, 29 CIT at 136. Defendant is certainly correct that 19 U.S.C. § 1401a creates a hierarchy of valuation methods for appraisement with transaction value being the primary method. See Defendant's Reconsideration Motion at 8-11 citing 19 U.S.C. § 1401a; VWP of Am., Inc. v. United States, 175 F.3d 1327, 1330-31 (Fed.Cir.1999); E.I. Dupont De Nemours & Co. v. United States, 24 CIT 1301, 1307, 123 F.Supp.2d 637 (2000); 19 C.F.R. § 152.101(b). See also H.R.Rep. No. 96-317, at 80 (1979), as reprinted in 3 Legislative History of the Trade Agreements Act of 1979. The statute permits use of transaction value between related parties but sets out a prerequisite before that value can be used between a related buyer and seller. 19 U.S.C. § 1401a(b)(2)(B).¹ Because the court is convinced that Defendant is correct about the hierarchical nature of the statute, it has used the transaction value method for appraisement between Peerless USA and Peerless Canada in deciding Defendan...