Productions v. United States

• Citation: 963 F.Supp.2d 1348
• Decision Date: 22 January 2014
• Docket Number: Slip Op. 14–5.,Court No. 05–00484.
• Parties: MACCLENNY PRODUCTS, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

963 F.Supp.2d 1348

MACCLENNY PRODUCTS, Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 14–5. Court No. 05–00484.

United States Court of International Trade.

Jan. 22, 2014.

Jerry P. Wiskin, Simons & Wiskin, of South Amboy, NJ, argued for Plaintiff. With him on the brief were Bernard J. Babb and Patrick C. Reed. Of counsel on the brief was Philip Yale Simons.

Amy M. Rubin, Senior Trial Counsel, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY, argued for Defendant. With her on the brief were Stuart F. Delery, Assistant Attorney General, Civil Division, and Barbara S. Williams, Attorney in Charge, International Trade Field Office. Of counsel on the brief was Michael Heydrich, Office of the Assistant Chief Counsel, International Trade Litigation, Bureau of Customs and Border Protection, U.S. Department of Homeland Security, of New York, NY.

OPINION

RIDGWAY, Judge:

In this action, plaintiff Macclenny Products challenges the decision of the United States Customs Service ¹ denying Macclenny's protests contesting the agency's liquidation of entries of “men's suit-type jackets” imported from Nicaragua in 2000 and 2001. See generally First Amended Complaint ¶¶ 3, 6, 8.²

Macclenny raises two claims. Macclenny first contends that Customs erred by appraising the merchandise at issue for liquidation based on “transaction value,” because—according to Macclenny—the price of the goods was influenced by the relationship between the importer-buyer and the foreign manufacturer-seller. Macclenny asserts that the merchandise instead should have been appraised on the basis of “deductive value.” First Amended Complaint ¶¶ 11–24. In addition, Macclenny alleges that, to the extent that the subject merchandise was imported on or after October 2, 2000, the merchandise is entitled to duty-free treatment under the United States–Caribbean Basin Trade Partnership Act (“CBTPA”), which extends trade benefits to certain countries in the Caribbean region. Id. ¶¶ 25–29; 19 U.S.C. § 2703(b) (2000), ³ implemented in U.S. Note 7(b)(i), Ch. 98, Subch. II, Harmonized Tariff Schedule of the United States (“HTSUS”) (2000).⁴

Also at issue in this action is the Government's counterclaim for additional duties. Specifically, the Government contends that, assuming that Customs' use of transaction value is sustained, certain costs that were not included in Customs' liquidation of the merchandise should be added to the transaction value, and Customs should be awarded additional duties based on those additional sums. Answer and Counterclaim ¶¶ 30–33.

Now pending before the Court are the parties' dispositive cross-motions. ⁵ With respect to Macclenny's CBTPA claim, the Government seeks dismissal for lack of subject matter jurisdiction as to all entries at issue other than those covered by Protest No. 1803–04–100056. See Defendant's Memorandum in Support of Motion for Summary Judgment (“Def.'s Brief”) at 2, 9, 11–13.⁶ With respect to Macclenny's CBTPA claim for those entries covered by Protest No. 1803–04–100056, the Government seeks dismissal for failure to state a claim upon which relief can be granted as to the four entries that were made prior to October 2, 2000, the effective date of the CBTPA for goods from Nicaragua— i.e., Entry Nos. WJP–0002399–9, WJP–0002416–1, WJP–0002429–4, and WJP–0002440–1. See id. at 2 & n. 3, 9, 11–13. As to the three entries covered by Protest No. 1803–04–100056 that were entered on or after October 2, 2000 ( i.e., Entry Nos. WJP–0002470–8, WJP–0002492–2, and WJP–0002507–7), the Government seeks summary judgment liquidating the entries duty-free. See id. at 2 & n. 3, 13, 29; Defendant's Reply to Plaintiff's Response to Defendant's Motion for Summary Judgment and Response to Plaintiff's Cross–Motion for Summary Judgment (“Def.'s Reply Brief”) at 3 n. 4, 20; [Defendant's] Supplemental Memorandum in Support of Defendant's Motion for Summary Judgment (“Def.'s Supp. Brief”) at 10.

With respect to all other entries, the Government requests entry of summary judgment sustaining Customs' use of transaction value to appraise the merchandise, based on the “circumstances of the sale” test set forth in the valuation statute. Specifically, the Government argues that use of transaction value was appropriate because—according to the Government—the price of the merchandise was “settled in a manner consistent with the normal pricing practices of the industry,” and thus was not influenced by the relationship between the importer-buyer and the foreign manufacturer-seller. 19 U.S.C. § 1401a(b)(2)(B); 19 C.F.R. § 152.103( l )(1) ⁷; see Def.'s Brief at 9, 13–20, 26, 28, 29; Def.'s Reply Brief at 1–12, 16, 20; Def.'s Supp. Brief at 8–9, passim; Defendant's Reply to Plaintiff's Supplemental Brief (“Def.'s Supp. Reply Brief”) at 1–8.

The Government also seeks entry of summary judgment on its counterclaim for additional duties. Assuming that summary judgment enters sustaining Customs' decision to appraise the merchandise on the basis of transaction value, the Government requests that the Court order reliquidation of the entries at issue to include in the appraised value a specific sum per unit for entries made in 2000 to reflect “Deferred Production Costs,” and, in addition, “all amounts paid by BCG to or on behalf of KB in 2000 and 2001 that were not offset by payments by KB to BCG or goods shipped by KB to Macclenny/BCG in those years.” Def.'s Brief at 29; see also id. at 9, 20–26; Def.'s Reply Brief at 12–15, 20–21; Def.'s Supp. Brief at 10.

In its cross-motion for summary judgment, Macclenny concurs in the Government's request that Entry Nos. WJP–0002470–8, WJP–0002492–2, and WJP–0002507–7 be liquidated duty-free pursuant to the CBTPA. See Plaintiff's Memorandum in Opposition to Defendant's Motion for Summary Judgment and in Support of Plaintiff's Cross–Motion for Summary Judgment (“Pl.'s Brief”) at 2, 3 n. 1, 12–13, 14, 16–17, 32–33. In addition, Macclenny seeks summary judgment on its claim that the balance of the entries at issue should have been appraised for liquidation based on deductive value. See id. at 2, 13–15, 17–25, 28–31, 32; Plaintiff's Reply to Defendant's Response to Plaintiff's Cross–Motion for Summary Judgment (“Pl.'s Reply Brief”) at 1–11, 17–18; Plaintiff's Supplemental Brief (“Pl.'s Supp. Brief”) at 1–10; Plaintiff's Reply to Defendant's Supplemental Brief (“Pl.'s Supp. Reply Brief”) at 1–4.

With the limitations discussed herein, jurisdiction over Macclenny's claims lies under 28 U.S.C. § 1581(a); and jurisdiction over the Government's counterclaim lies under 28 U.S.C. § 1583. As discussed in greater detail below, the Government's motion to dismiss for lack of jurisdiction Macclenny's CBTPA claim as to all entries other than those covered by Protest No. 1803–04–100056 must be granted. The Government's motion seeking dismissal or denial of Macclenny's CBTPA claim with respect to the four entries covered by Protest No. 1803–04–100056 which were made before October 2, 2000 also must be granted. As to the three specified entries that are subject to the CBTPA (Entry Nos. WJP–0002470–8, WJP–0002492–2, and WJP–0002507–7), the Government's motion for summary judgment must be granted. However, both the Government's motion for summary judgment concerning the proper method of appraisement of all remaining entries and Macclenny's cross-motion for summary judgment on the same issue must be denied.

I. Background

This action concerns 46 entries of men's suit-type jackets imported from Nicaragua in 2000/2001 and presents two basic issues: (1) whether, as the Government contends, it was proper for Customs to appraise the merchandise based on its “transaction value,” notwithstanding the relationship between Macclenny Products (the importer-buyer) and KB Manufacturing Company (the foreign manufacturer-seller); and (2) whether any of the merchandise was eligible for duty-free treatment under the United States–Caribbean Basin Trade Partnership Act, as Macclenny maintains.⁸

As the Court of Appeals has explained, “[i]mported merchandise must be appraised so that the final amount of duty to be paid on the merchandise can be fixed and entries of the merchandise can be liquidated.” VWP of America, Inc. v. United States, 175 F.3d 1327, 1330 (Fed.Cir.1999) (citing 19 U.S.C. § 1500). Customs is required to appraise imported merchandise in the manner specified in the valuation statute, 19 U.S.C. § 1401a. See19 U.S.C. § 1500(a). The statute establishes “transaction value” as the primary method of valuation. 19 U.S.C. § 1401a(a)(1)(A); see also VWP of America, 175 F.3d at 1330, 1335.⁹

“Transaction value” is defined in relevant part as “the price actually paid ... for the merchandise when sold for exportation to the United States,” plus certain statutory additions. 19 U.S.C. § 1401a(b)(1); see also19 U.S.C. § 1401a(b)(4)(A) (defining “price actually paid” as “the total payment ... made ... for imported merchandise by the buyer to ... the seller,” excluding international freight, insurance, and other C.I.F. charges). The “price actually paid” is typically the price that is reflected on the invoice for the merchandise, which is included with the entry papers that an importer files with Customs.

Although transaction value is the primary method of valuing imported goods under the statute, the use of transaction value may be contraindicated where—as here—the buyer and the seller are “related.” See VWP of America, 175 F.3d at 1330–31; 19 U.S.C. § 1401a(b)(2)(B); see also19 C.F.R. § 152.103(j)(1)(iv). In such circumstances, the parties' transaction must be “closely scrutinize[d]” to ensure that the parties have not colluded to lower the invoice price in order to minimize import duties. See generally La Perla Fashions, Inc. v. United States, 22 CIT 393, 395, 9 F.Supp.2d 698, 700–01 (1998), aff'd per curiam,185 F.3d 885 (Fed.Cir.1999) (explaining that potential for related parti...