880 F.Supp.2d 1335 (CIT 2012), 06-00434, United States v. C.H. Robinson Co.

Docket Nº:Court 06-00434.
Citation:880 F.Supp.2d 1335
Opinion Judge:GORDON, Judge:
Party Name:UNITED STATES, Plaintiff, v. C.H. ROBINSON COMPANY, Defendant. Slip Op. 12-134.
Attorney:Steven M. Mager and Shelley D. Weger, Trial Attorneys, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., argued for Plaintiff United States. With them on the brief were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, ...
Case Date:November 07, 2012
Court:Court of International Trade
 
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Page 1335

880 F.Supp.2d 1335 (CIT 2012)

UNITED STATES, Plaintiff,

v.

C.H. ROBINSON COMPANY, Defendant.

Slip Op. 12-134.

Court No. 06-00434.

United States Court of International Trade.

November 7, 2012

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Steven M. Mager and Shelley D. Weger, Trial Attorneys, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., argued for Plaintiff United States. With them on the brief were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of counsel was Andrew Kosegi, Deputy Assistant Chief Counsel, U.S. Customs and Border Protection, of Indianapolis, IN.

John M. Peterson and Richard F. O'Neill, Neville Peterson LLP, of New York, NY, argued for Defendant C.H. Robinson Company.

OPINION AND ORDER

GORDON, Judge:

This opinion follows a bench trial. Plaintiff United States (the " Government" ) brought this action pursuant to Section 553 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1553 (2006)1, and 19 C.F.R. § 18.8(c), to recover certain duties, taxes, and fees from Defendant C.H. Robinson Company (" C.H. Robinson" ). The court has jurisdiction pursuant to 28 U.S.C. § 1582(3) (2006). For the reasons set forth below, the court adjudges C.H. Robinson liable for the duties, taxes, and fees demanded by the United States.

I. Background

This action involves the Government's claim that C.H. Robinson, a bonded carrier,

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owes duties, taxes, and fees accruing to the United States for three entries (" subject entries" ) of wearing apparel (" subject merchandise" ) from the People's Republic of China. The subject entries were made as transportation and exportation entries, covering merchandise destined for Mexico after passing through the United States from the Port of Los Angeles, California to the Port of Laredo, Texas.

The vast majority of merchandise brought into the United States is entered by means of consumption entries by an importer of record. A consumption entry requires that merchandise entered into the commerce of the United States meet several statutory and regulatory requirements, including the payment of duties owing upon the entered merchandise, unless the merchandise is subject to duty-free treatment. See generally 19 U.S.C. § 1505.

As an exception to this general rule, Congress established that merchandise may be entered into the United States for the sole purpose of transporting such merchandise to a foreign port of destination. In particular, " [a]ny merchandise ... shown by the manifest, bill of lading, shipping receipt, or other document [such as a Customs Form 7512] to be destined to a foreign country, may be entered for transportation in bond through the United States by a bonded carrier without appraisement or the payment of duties and exported under such regulations as the Secretary of the Treasury shall prescribe." 19 U.S.C. § 1553(a). A transportation and exportation entry (" T & E entry" ) is the type of entry that is used when merchandise is transiting the United States for eventual export from the United States. It is only when merchandise is being transported to a foreign destination and exported that duties are not owed.

Based on its clear statutory authority, U.S. Customs and Border Protection (" CBP" ) developed a broad regulatory scheme in which transportation and exportation entries would operate. See 19 U.S.C. § 1553(a); see also 19 C.F.R. §§ 18.20-18.24 (2001).2 CBP's regulatory scheme for T & E entries is designed to ensure that merchandise destined to a foreign port of entry is, in fact, exported. This scheme provides a multi-layered approach to overseeing such entries, including safeguards against non-compliance. Among these safeguards is the provision found at 19 C.F.R. § 18.8(c), which requires that a " carrier shall pay any internal-revenue taxes, duties, or other taxes accruing to the United States on the missing merchandise, together with all costs, charges, and expenses caused by the failure to make the required transportation, report, and delivery."

The regulatory scheme also sets forth the timing of certain events regarding the transit of in-bond merchandise. For example, bonded merchandise destined for export from the United States and transported by land is required to be delivered to CBP at the port of exportation within 30 days after the date of receipt by the forwarding carrier at the port of origin. See 19 C.F.R. § 18.2(c)(2). As a safeguard, if this requirement is not met, the regulation provides that failure to deliver the merchandise within the 30-day period constitutes an irregular delivery and the initial bonded carrier is subject to applicable civil penalties. Id. (citing 19 C.F.R. § 18.8).

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Additionally, CBP's regulations require that " [p]romptly, but no more than 2 working days, after arrival of any portion of the in-bond shipment at the port of exportation, the delivering carrier shall surrender the in-bond manifest [CF 7512] to the port director as notice of arrival of the merchandise." 19 C.F.R. § 18.7(a). This regulation also states that " [f]ailure to surrender the in-bond manifest or report the arrival of bonded merchandise within the prescribed period shall constitute an irregular delivery and the initial bonded carrier shall be subject to applicable penalties (see § 18.8)." Id. (parenthetical in original).

Submission of a CF 7512 provides CBP with notice that the carrier has complied with the requirement of 19 C.F.R. § 18.2(c)(2) to deliver the merchandise to the port of exportation within 30 days of receipt. It also commences the 20-day period for the carrier to notify CBP that the in-bond merchandise has not been entered. See 19 C.F.R. § 4.37(b). However, if the carrier chooses to enter, rather than export, the in-bond merchandise, the carrier must make that entry (for consumption, for additional movement by another carrier, or for entry into warehouse) within 20 days after arrival at the port of destination. Id.

Pursuant to 19 C.F.R. § 18.7(b), " [t]he port director shall require only such supervision of the lading for exportation of merchandise covered by an entry or withdrawal for exportation or for transportation and exportation as is reasonably necessary to satisfy him that the merchandise has been laden on the exporting conveyance." 19 C.F.R. § 18.7(b). In late 2001 and early 2002, the time of the subject entries, CBP used a self-regulating process at the Port of Laredo in which CBP did not require (1) a carrier to report separately its arrival at the port of destination and the carrier's exportation of the merchandise, and (2) the supervised exportation of each T & E entry. Pl.'s Resp. to Def.'s Mot. In Limine, App. 29-30 (Dickinson Dec.), Jan. 8, 2010, ECF No. 71. Instead, at that time, CBP gave exporting carriers the benefit of the doubt that merchandise subject to a T & E entry was exported after having merely received notice of the merchandise's arrival at the port, unless such notice was called into question.

CBP is authorized to verify the presumption of exportation it granted an exporting carrier of a T & E entry. Pursuant to the procedures set forth in 19 C.F.R. § 18.7(c), " [w]henever the circumstances warrant, and occasionally in any event, port directors shall request the Office of Enforcement to check export entries ... against the records of the exporting carriers. Such check or verification shall include an examination of the carrier's records of claims and settlement of export freight charges and any other records which may relate to the transaction. The exporting carrier shall maintain these records for 5 years from the date of exportation of the merchandise." 19 C.F.R. § 18.7(c) (emphasis added). A bonded carrier's failure to ensure exportation or other lawful disposition of T & E merchandise exposes the carrier to liabilities for any non-delivery at the port of exportation. See id. at §§ 18.7(c) and 18.8. Any non-delivery of T & E merchandise is " presumed to have occurred while the merchandise was in the possession of carrier, unless conclusive evidence to the contrary is produced." 19 C.F.R. § 18.8(a); see also Assessment of Liquidated Damages Under Carrier's Bonds, 47 Fed. Reg. 2,086-01, 2,087 (Dep't of Treasury Jan. 14, 1982) (final rule). In addition to liability for payment of liquidated damages on the

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bond, the bonded carrier's liability covers " any internal-revenue taxes, duties, or other taxes accruing to the United States on the missing merchandise, together with all costs, charges, and expenses caused by the failure to make the required transportation, report, and delivery." 19 C.F.R. § 18.8(c).

Here, CBP conducted an audit under 19 C.F.R. § 18.7(c) to verify whether C.H. Robinson as the bonded carrier of the subject entries exported the subject merchandise. CBP concluded that C.H. Robinson could neither show that the subject merchandise was nor otherwise account for the merchandise's whereabouts. CBP therefore presumed that the merchandise remained in the United States and determined that non-delivery of T & E merchandise had occurred for which C.H. Robinson was responsible. Accordingly, CBP made a demand on C.H. Robinson, pursuant to 19 U.S.C. § 1553 and 19 C.F.R. § 18.8(c), for payment of $106,407.86, plus interest, for duties owed on the subject entries (" CBP's duty demand" ). Joint Ex. 23. CBP's duty demand explained that C.H. Robinson owed duties on the subject entries because " C.H. Robinson failed to insure that the goods were exported to Mexico" and, " [c]onsequently, the quota/visa-restricted merchandise was diverted into the commerce of the United States, resulting in the loss of duties owed to the Government." Id. CBP's duty demand advised C.H...

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