United States v. Millenium Lumber Distribution Co.

Decision Date02 January 2013
Citation887 F.Supp.2d 1369
PartiesUNITED STATES of America, Plaintiff, v. MILLENIUM LUMBER DISTRIBUTION CO. LTD. and XL Specialty Insurance Company, Defendants.
CourtU.S. Court of International Trade

OPINION TEXT STARTS HERE

Aimee Lee, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY, argued for Plaintiff. With her on the brief were Tony West, Assistant Attorney General, and Barbara S. Williams, Attorney in Charge, International Trade Field Office. Of counsel on the brief was Christopher Shaw, Office of the Assistant Chief Counsel, Bureau of Customs and Border Protection, U.S. Department of Homeland Security, of New York, NY.

Joel R. Junker, Joel R. Junker & Associates, of Seattle, WA, argued for Defendant Millenium Lumber Distribution Co. Ltd. With him on the brief was William N. Baldwin.

T. Randolph Ferguson, Sandler, Travis & Rosenberg and Glad & Ferguson, P.C., of San Francisco, CA, argued for Defendant XL Specialty Insurance Company. With him on the brief was Arthur K. Purcell, of Sandler, Travis & Rosenberg, P.A., of New York, NY.

OPINION

RIDGWAY, Judge:

The Government commenced this action against defendant Millenium Lumber Distribution Co. Ltd. and its surety, defendant XL Specialty Insurance Company, to collect $1,826,531.80 in liquidated damages. See Complaint ¶¶ 1, 21, 31, 42, 44. According to the Government, Millenium breached the terms of its customs bonds by not providing Customs with export permits required by the U.S.-Canada Softwood Lumber Agreement.1See id. ¶¶ 17–20, 28–31, 39–42. The Government contends that Millenium and XL are therefore jointly and severally liable for liquidated damages. See id. ¶¶ 10–11.

Now pending before the Court are Millenium's Motion for Summary Judgment, XL's Motion for Summary Judgment, and the Government's Cross–Motion for Summary Judgment.

In its Motion for Summary Judgment, Millenium claims that no breach of its customs bonds occurred and that there is thus no basis for Customs' assessment of liquidated damages. According to Millenium, Customs improperly reclassified the company's merchandise—which Millenium describes as “angle-cut softwood lumber”—without providing notice and an opportunity to comment. Millenium contends that its lumber is therefore properly classifiable as Millenium entered it, under a tariff heading that is not subject to the Softwood Lumber Agreement. See, e.g., Memorandum of Points and Authorities in Support of Defendant Millenium's Rule 56 Motion for Summary Judgment (“Millenium's Motion”) at 2, 3–4; see generally Reply in Support of Defendant's Motion for Summary Judgment (“Millenium's Reply Brief”).

XL seconds Millenium's position, adopting and incorporating by reference Millenium's Motion for Summary Judgment and other papers in its own Motion for Summary Judgment. See Defendant XL Specialty Insurance Company's Rule 56 Motion for Summary Judgment (“XL's Motion”) at 1–2; see generally Reply in Support of Defendant's Motion for SummaryJudgment and Memorandum in Opposition to Plaintiff's Cross–Motion for Summary Judgment (“XL's Reply Brief”).

The Government, in turn, contends that Millenium's failure to obtain export permits for its merchandise violated the terms of the Softwood Lumber Agreement and related customs regulations, and put both Millenium and XL in breach of the applicable customs bonds, rendering the two jointly and severally liable for the assessed liquidated damages. See, e.g., Memorandum in Support of Plaintiff's Cross–Motion for Summary Judgment and in Opposition to Defendant's Motion for Summary Judgment (“Pl.'s Cross–Motion) at 6, 9–10, 10–13; Reply Memorandum in Support of Plaintiff's Cross–Motion for Summary Judgment (“Pl.'s Reply Brief”) at 1–2.

The Government emphasizes that the instant action is a collection action, and argues that Millenium and XL are barred from pressing their notice-and-comment claim here in an attempt to mount an attack on what is, according to the Government, essentially a matter of tariff classification that has already been “fully and finally litigated.” Pl.'s Cross–Motion at 7; see also Memorandum in Opposition to Defendant's Motion for Summary Judgment (“Pl.'s Response Brief”) at 5 (stating that tariff classification of Millenium's goods has been “litigated ... to judicial finality”). The Government further argues that—even if Millenium and XL were permitted to pursue their notice-and-comment claim in this collection action—they nevertheless could not prevail on the merits of that claim, because, according to the Government, the statute on which the claim is based did not apply in the circumstances of this case. See generally Pl.'s Response Brief at 18–29; Pl.'s Cross–Motion at 22–33; Pl.'s Reply Brief at 10–14.

Jurisdiction lies under 28 U.S.C. § 1582(2) (2000).2 For the reasons that follow, Millenium's Motion for Summary Judgment must be denied, as must XL's Motion for Summary Judgment. The Government's Cross–Motion for Summary Judgment, on the other hand, must be granted.

I. Background

Between late April 2000 and early January 2001, Millenium entered 168 entries of certain softwood lumber products—described by Millenium as angle-cut softwood lumber—into the United States from Canada. See Plaintiff's Statement of Undisputed Material Facts (“Pl.'s Statement of Facts”) ¶¶ 1–4; Defendant's [XL's] Response to Plaintiff's Statement of Material Facts Not in Issue (“XL's Response to Statement of Facts”) ¶¶ 1–4; [Defendant Millenium's] Rule 56 Statement of Material Facts Not in Dispute (“Millenium's Statement of Facts”) ¶ 1; Plaintiff's Response to Defendant's [Millenium's] Statement of Material Facts Not in Issue (“Pl.'s Response to Millenium's Statement of Facts”) ¶ 1. 3 Millenium entered the lumber under heading 4418 of the Harmonized Tariff Schedule of the United States (HTSUS) (2000). See Pl.'s Statement of Facts ¶ 5; XL's Response to Statement of Facts ¶ 5.4

Millenium's entries were secured by three bonds issued by the company's surety—XL Specialty Insurance Company, or its predecessor, Intercargo Insurance Company. See Pl.'s Statement of Facts ¶¶ 2–4; XL's Response to Statement of Facts ¶¶ 2–4. As a condition of each bond, Millenium and its surety agreed that they would comply with all customs laws and regulations, including relevant provisions of the U.S.-Canada Softwood Lumber Agreement. See Pl.'s Cross–Motion at 2; see also19 C.F.R. § 113.62(k) (incorporating requirements of Softwood Lumber Agreement into customs bonds, as part of bond conditions). Millenium and its surety also agreed that they would be jointly and severally liable for liquidated damages in the event of a breach or default. Pl.'s Statement of Facts ¶ 14; XL's Response to Statement of Facts ¶ 14.

Following entry, Customs reclassified Millenium's merchandise under HTSUS heading 4407. See Pl.'s Statement of Facts ¶ 6; XL's Response to Statement of Facts ¶ 6.5 Unlike merchandise classified under heading 4418, certain merchandise falling within heading 4407 is subject to the Softwood Lumber Agreement, and requires export permits issued by the government of Canada for entry into the United States. See Pl.'s Statement of Facts ¶ 6; XL's Response to Statement of Facts ¶ 6; 19 C.F.R. § 12.140; 19 C.F.R. § 113.62(k).

Customs issued Notices of Action (“CF 29s”) informing Millenium that the Softwood Lumber Agreement required the company to provide proof of issuance of the requisite export permits for its merchandise, and stating that, absent Millenium's submission of the necessary documentation, liquidated damages would be assessed. See Pl.'s Statement of Facts ¶¶ 7–9; XL's Response to Statement of Facts ¶¶ 7–9. However, Millenium failed to provide Customs with proof of the required permits. See Millenium's Statement of Facts ¶ 17; Pl.'s Response to Millenium's Statement of Facts ¶ 17. Customs therefore issued Liquidated Damages Notices to Millenium—with copies to XL—for all 168 entries. See19 C.F.R. § 172.1(a); 6 Pl.'s Statement of Facts ¶¶ 12–13; XL's Response to Statement of Facts ¶¶ 12–13.7 The Liquidated Damages Notices informed Millenium and XL of the amount of liquidated damages assessed. See Pl.'s Statement of Facts ¶ 13; XL's Response to Statement of Facts ¶ 13.

In the meantime, Millenium filed protests with Customs contesting the agency's classification of the company's merchandise. See Millenium's Motion at 2. In its protests, Millenium asserted, inter alia, that it had entered its merchandise under HTSUS heading 4418 in reliance on two prior Customs ruling letters— i.e., N.Y. B81359 and N.Y. B88564—which classified specified angle-cut softwood lumber components under that heading. See Millenium's Statement of Facts ¶ 6; NY B81359 (Feb. 6, 1997); NY B88564 (Sept. 9, 1997).

Customs denied Millenium's protests, and Millenium brought suit in this court challenging that denial. See HQ 965262 (July 10, 2002) (denying Millenium's protests); Millenium Lumber Distrib. Ltd. v. United States, Court No. 02–00595 (filed Sept. 12, 2002). Customs' classification determination was sustained by this Court, which, in turn, was affirmed on appeal. See Millenium Lumber Distrib. Ltd. v. United States, 31 CIT 575, 2007 WL 1116148 (2007), aff'd,558 F.3d 1326 (Fed.Cir.2009) (holding that Millenium's merchandise is properly classified under HTSUS heading 4407).

In this related collection action, the Government seeks to recover liquidated damages from Millenium and XL for breach of the relevant customs bonds.

II. Standard of Review

Under USCIT Rule 56(a), summary judgment is appropriate where “there is no genuine issue as to any material fact” and the moving party is entitled to judgment as a matter of law. USCIT Rule 56(a); see generally Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In this case, there is no...

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