82 F.Supp.3d 1350 (CIT. 2015), 14-00104, United States v. Horizon Prods. Int'l, Inc.

Docket Nº:14-00104
Citation:82 F.Supp.3d 1350
Opinion Judge:Leo M. Gordon, J.
Party Name:UNITED STATES, Plaintiff, v. HORIZON PRODUCTS INTERNATIONAL, INC., Defendant
Attorney:No. 14-00104 Daniel B. Volk, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice of Washington, D.C. for Plaintiff United States. On the brief with him were Joyce R. Branda, Acting Assistant Attorney General, Jeanne E. Davidson, Director, Claudia Burke, Assist...
Judge Panel:Before: Leo M. Gordon, Judge.
Case Date:July 24, 2015
Court:Court of International Trade
 
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Page 1350

82 F.Supp.3d 1350 (CIT. 2015)

UNITED STATES, Plaintiff,

v.

HORIZON PRODUCTS INTERNATIONAL, INC., Defendant

No. 14-00104

United States Court of International Trade

July 24, 2015

Motion for summary judgment granted in part and denied in part.

Daniel B. Volk, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice of Washington, D.C. for Plaintiff United States. On the brief with him were Joyce R. Branda, Acting Assistant Attorney General, Jeanne E. Davidson, Director, Claudia Burke, Assistant Director. Of counsel on the brief was Claire J. Lemme, Attorney, Office of the Associate Chief Counsel for U.S. Customs and Border Protection of Miami, Florida.

Peter S. Herrick, Peter S. Herrick, P.A. of St. Petersburg, Florida for Defendant Horizon Products International, Inc.

Before: Leo M. Gordon, Judge.

OPINION

Leo M. Gordon, J.

Gordon, Judge: Before the court is Plaintiff United States' (" the Government" ) motion for summary judgment. Pl.'s Mot. for Summ. J. (Nov. 14, 2014), ECF No. 14 (" Pl.'s Mot." ); see also App'x (Nov. 14, 2014), ECF No. 14 (" Pl.'s App'x I" ); Defendant, Horizon Prods. Int'l's Response to Plaintiff, United States' Mot. for Summ. J. (Jan. 20, 2015), ECF No. 22 (" Def.'s Resp." ); Pl.'s Reply in Supp. of its Mot. for Summ. J. (Feb. 9, 2015), ECF No. 25 (" Pl.'s Reply" ); Remainder of Pl.'s Summ. J. App'x (Feb. 23, 2015), ECF No. 27 (" Pl.'s App'x II" ); Def.'s Proposed Sur-Reply to Pl's Reply in Supp. of its Mot. for Summ. J. (Feb. 20, 2015), ECF No. 30; Nonconfidential App'x -- Redacted Version (Mar. 3, 2015), ECF No. 31 (" Def.'s App'x" ). The Government seeks $394,794 in unpaid duties and penalties from Defendant Horizon Products International, Inc. (" Horizon" ) under Section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592 (2012),1 plus equitable pre-judgment interest on the unpaid duties. Pl.'s Mot. at 1. The court has jurisdiction pursuant to 28 U.S.C. § 1582 (2012).

For the reasons set forth below, the court grants the Government's motion with respect to the unpaid duties and pre-judgment interest, but denies the Government's motion in all other respects.

I. Undisputed Facts

Between 2006 and 2007, Horizon entered or attempted to enter various types of plywood into the United States under inapplicable duty-free provisions of the Harmonized Tariff Schedule of the United States (" HTSUS" ). The majority of Horizon's plywood contained at least one outer ply of non-coniferous wood other than birch, Spanish cedar, or walnut. As a consequence, the correct classification for this plywood was either HTSUS 4412.14.31 or HTSUS 4412.32.31 (the latter becoming effective on February 3, 2007 after the reorganization of HTSUS heading 4412). The original and renumbered provisions are identical in substance, and both carry an 8% duty rate. Defendant's remaining plywood contained an outer ply of sapele, a tropical wood. The correct classification for that plywood was either HTSUS 4412.13.40 (2006) or 4412.31.40 (2007). Again, the substance of those provisions and the applicable 8% duty rate did not change between the 2006 and 2007 versions of the HTSUS. See generally Pl.'s App'x II at A528-661 (invoices, packing lists, entry forms, and other associated documentation); Pl.'s App'x I at A17-34 (relevant provisions of the 2006 and 2007 HTSUS).

In late 2007, U.S. Customs and Border Protection (" Customs" ) issued several notices of action indicating that it would rate-advance (liquidate at a higher rate) 21 of Horizon's plywood entries. Horizon subsequently paid $42,016, representing the full rate-advanced 8% duty on those entries. Customs liquidated the remaining 43 entries at the inapplicable duty-free rate. Pl.'s App'x I at A1-8.

In September 2009, Customs sent Horizon a pre-penalty notice and demand for payment. Customs identified a $162,270 total revenue loss. Of that, Customs specified $42,016 in potential revenue loss relating to the rate-advanced entries and $120,254 actual revenue loss relating to the entries liquidated at the inapplicable duty-free rate. Customs proposed a culpability level of negligence and a corresponding penalty of $324,540, twice the $162,270 total revenue loss. Customs thereafter issued a penalty notice demanding payment of $120,254 in outstanding duties and the $324,540 penalty. Customs eventually recovered $50,000 from Defendant's surety, leaving $70,254 in duties still owed. Pl.'s App'x I at A5-13. See generally Def.'s App'x at Hor. 85-Hor. 87 & n.1 (describing administrative procedural history).

Horizon requested mitigation of the $324,540 penalty. Defendant argued it did not have the means to pay, and provided Customs with supporting documentation, including financial statements and tax filings. Def.'s App'x at Hor. 1-84. In finding that Horizon could not pay the full amount, Customs determined that Defendant had sufficient equity to pay up to $200,000 combined duties and penalty. As a result, Customs mitigated the penalty to $85,278 conditioned on full payment of the duties owed within 60 days. Def.'s App'x at Hor. 85-89.

Horizon countered with an offer in compromise requesting to pay the outstanding duties in two installments within 60 days as well as a mitigated penalty of $1,000. Id. at Hor. 101-19. Customs rejected Horizon's offer, along with each of Defendant's subsequent requests to pay a lower penalty. See id. at Hor. 120-21. On December 20, 2012, after the mitigated penalty's 60-day deadline passed without any payment from Horizon, Customs again demanded the outstanding duties and the full penalty amount. Id. at Hor. 124.

This enforcement action followed. The Government seeks $70,254 in duties plus equitable pre-judgment interest, as well as the full $324,540 penalty without any interest.

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 § 1592 de novo, including the amount of any penalty. 19 U.S.C. § 1592(e)(1); see 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). Rule 56 of...

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