St. Paul Fire & Marine Ins. Co. v. US

• Decision Date: 03 August 1992
• Docket Number: Court No. 88-02-00094.
• Citation: 799 F. Supp. 120
• Parties: ST. PAUL FIRE & MARINE INSURANCE COMPANY (SURETY FOR CARREON, INC.), Plaintiff, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

799 F. Supp. 120

ST. PAUL FIRE & MARINE INSURANCE COMPANY (SURETY FOR CARREON, INC.), Plaintiff, v. The UNITED STATES, Defendant.

Court No. 88-02-00094.

United States Court of International Trade.

August 3, 1992.

Glad & Ferguson, T. Randolph Ferguson and John M. Daley, San Francisco, Cal., for plaintiff.

Stuart M. Gerson, Asst. Atty. Gen., Joseph I. Liebman, Attorney in Charge, Intern. Trade Field Office, Commercial Litigation Branch, Washington, D.C., Pamela G. Larrabee, Governors Island, N.Y., for defendant.

MEMORANDUM OPINION AND ORDER

GOLDBERG, Judge:

Plaintiff St. Paul Fire & Marine Insurance Company ("St. Paul") brought this action pursuant to 28 U.S.C. § 1581(a) (1988) challenging the denial by the United States Customs Service ("Customs") of its protest regarding the liquidation of forty-one entries of merchandise. St. Paul contends that the merchandise was liquidated by operation of law at the rate of duty claimed by the importer at the time of entry because Customs improperly extended the time for liquidation of the entries. Defendant asserts that it properly extended the time for liquidation of the forty-one entries, and that duties were appropriately assessed. The case is before the court on cross motions for summary judgment.

Background

Plaintiff is the surety for Carreon Management Services, Inc. ("Carreon"), which made forty-one entries of merchandise at El Paso, Texas between July 14, 1981 and August 24, 1982. Carreon claimed duty-free treatment for the merchandise under Item 807.00, of the Tariff Schedules of the United States ("TSUS").

Item 807.00 provides duty-free treatment for imports of articles assembled abroad with components produced in the United States. Classification of merchandise under Item 807.00 is conditioned upon the importer's submission to Customs of detailed documentation including invoices, certificates of origin, foreign assemblers' declarations, and actual cost data.

Carreon failed to file, at the time of entry, or at any time thereafter, actual cost data and certificates of origin required by Customs to support its claim for duty-free treatment under Item 807.00, TSUS.

Customs extended the time for liquidation under 19 U.S.C. § 1504(b)(1) (1988) for the forty-one entries¹ because it was awaiting receipt of the required information from Carreon. Customs issued three one-year extensions for merchandise entered before February 1983, and two one-year extensions for merchandise entered thereafter.²

On April 5, 1984, and again on October 10, 1984, Customs issued a Request for Information (Form CF 28) to Carreon seeking the required missing data. Carreon failed to respond to both requests.

On January 4, 1985, Customs liquidated the forty-one entries. Customs denied Carreon's claim for duty-free treatment under Item 807.00, TSUS, and assessed duties. On March 3, 1985, Customs issued a demand for payment to St. Paul for the duties. At that time, St. Paul discovered that Carreon had discontinued business and would not pay the duties due Customs. St. Paul filed a protest on May 8, 1985 contesting the validity of the liquidations and the extensions for the time to liquidate. On August 20, 1987, Customs denied the protest, and St. Paul paid Customs $273,994.44, the duties due on Carreon's entries. St. Paul filed a summons with the court on February 10, 1988, and a complaint on March 28, 1988. Both St. Paul and the government move for summary judgment.

Discussion

1. Standard of Review

Decisions by Customs to extend the period in which to liquidate entries are subject to judicial review. International Cargo & Surety Ins. Co. v. United States, 15 CIT ___, 779 F.Supp. 174, 176 (1991); Detroit Zoological Soc'y v. United States, 10 CIT 133, 137-138, 630 F.Supp. 1350, 1356 (1986); Pagoda Trading Co. v. United States, 9 CIT 407, 411, 617 F.Supp. 96, 99-100 (1985), aff'd, 5 Fed.Cir. (T) 10, 804 F.2d 665 (1986); and Bar Bea Truck Leasing Co. v. United States, 4 CIT 138, 140 (1982) (quoting People v. United States Dep't of Agric., 427 F.2d 561, 567 (D.C.Cir. 1970)). These decisions will be upheld if they are proper under the statute, and are not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. International Cargo, 15 CIT at ___, 779 F.Supp. at 176; Detroit Zoological, 10 CIT at 137-138, 630 F.Supp. at 1356.

Summary judgment is appropriate only where the pleadings and other documents on file demonstrate that there is "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." USCIT R. 56(d). The party opposing summary judgment may not rest on its pleadings, but must respond with specific facts showing the existence of a genuine issue for trial. See International Cargo, 15 CIT at ___, 779 F.Supp. at 176; Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986) (citing Fed.R.Civ.P. 56(e)); United States v. Pent-R-Books, Inc., 538 F.2d 519 (2nd Cir.1976), cert. den., 430 U.S. 906, 97 S.Ct. 1175, 51 L.Ed.2d 582 (1977); and Stevens v. Barnard, 512 F.2d 876 (10th Cir.1975). In ruling on cross-motions for summary judgment, if the court determines that no genuine issues of material fact exist, the court may properly grant summary judgment in favor of the movant who is "entitled to judgment as a matter of law." Texas Apparel Co. v. United States, 12 CIT 1002, 1004, 698 F.Supp. 932, 934 (1988), aff'd per curium, ___ Fed.Cir. (T) ___, 883 F.2d 66 (1989), cert. den., 493 U.S. 1024, 110 S.Ct. 728, 107 L.Ed.2d 747 (1990) (quoting USCIT R. 56(d)).

2. Statutory Limitations on Liquidation

Subsection (a) of 19 U.S.C. § 1504 provides that:

Except as provided in subsection (b) of this section, an entry of merchandise not liquidated within one year from:

(1) the date of entry of such merchandise;

. . . . .

shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted at the time of entry by the importer of record.

19 U.S.C. § 1504(a) (1988).

Subsection (b) of § 1504 permits Customs to extend the period in which to liquidate an entry if:

(1) information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer;

(2) liquidation is suspended as required by statute or court order; or

(3) the importer of record requests such extension and shows good cause therefor.

19 U.S.C. § 1504(b)(1) (1988).

Customs may only grant three extensions and no extension may exceed one year. 19 C.F.R. § 159.12(a) & (e) (1991).³ Therefore, the period for liquidation of merchandise cannot exceed four years from the date of entry.

Prior to 1978, "Customs could delay liquidation as long as it pleased, with or without giving notice." International Cargo, 15 CIT at ___, 779 F.Supp. at 177; see also S.Rep. No. 95-778, 95th Cong., 2d Sess. 32 (1978), reprinted in, 1978 U.S.C.C.A.N. 2211, 2242. Congress enacted Section 1504 in 1978 to "increase certainty in the customs process for importers, surety companies, and other third parties with a potential liability relating to a customs transaction." S.Rep. No. 95-778, 95th Cong., 2d Sess. 32 (1978), reprinted in, 1978 U.S.C.C.A.N. at 2243. Congress specifically noted that by the passage of Section 1504, "sureties would ... be better protected against losses resulting from the dissolution of their principals in instances where there has been undue delay in liquidating entries." S.Rep. No. 95-778, 95th Cong., 2d Sess. 32 (1978), reprinted in, 1978 U.S.C.C.A.N. at 2243.

3. Extension of Liquidation

Plaintiff claims that Customs' extensions of the time for liquidation were unjustified on two grounds. First, St. Paul argues that Customs had no valid basis to extend liquidation for insufficient information under § 1504(b)(1) beyond the second anniversary date of each entry. Specifically, plaintiff maintains that Customs had all the information it needed to properly classify the merchandise, i.e., to deny the claimed Item 807.00 classification, by the second anniversary date of each entry. Second, St. Paul contends that the total length of time of the extensions for each entry, which ranged from thirteen to twenty-nine months, was unreasonable under the circumstances.⁴ Memorandum of Points and Authorities in Support of Plaintiff's Motion for Summary Judgment on the Complaint or, in the Alternative, for Summary Adjudication as to Ten Entries at 1-2.

Defendant responds that Customs made a determination that Item 807.00, TSUS, was the proper classification for the merchandise, that it extended liquidation to obtain information needed to liquidate the entry according to its correct classification, and that the court should defer to Customs' determination. Additionally, defendant contends that the second and third extensions of liquidation were proper because Customs found it more efficient to give the importer "the benefit of the doubt" until it had cause to determine that the required information would not be forthcoming. Defendant's Memorandum in Support of its Motion for Summary Judgment and in Opposition to Plaintiff's Motion for Summary Judgment at 17.

The court addressed the issue of whether an extension for insufficient information under Section 1504(b)(1) was justified in Detroit Zoological, 10 CIT 133, 630 F.Supp. 1350. There, the court held that the term "information," as used in § 1504(b)(1), "should be construed to include whatever is reasonably necessary for proper appraisement or classification of the merchandise involved." 10 CIT at 138, 630 F.Supp. at 1356. Specifically, the court held "information" to include internal Customs advice requested by the importer.

Subsequently, in International Cargo, the court interpreted the term "information" to include internal information sought by Customs. 15 CIT at ___, 779 F.Supp. at 178. These interpretations of the term "information" in Detroit Zoological and International Cargo are sufficiently broad to...