Regent Corp., U.S.A. v. Azmat Bangladesh, Ltd.

• Decision Date: 02 March 1999
• Citation: 686 N.Y.S.2d 24,253 A.D.2d 134
• Parties: 1999 N.Y. Slip Op. 1949, 1999 N.Y. Slip Op. 1950 REGENT CORPORATION, U.S.A., Plaintiff-Respondent, v. AZMAT BANGLADESH, LTD., et al., Defendants, and International Finance Investment and Commerce Bank Limited, Defendant-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 24

686 N.Y.S.2d 24

1999 N.Y. Slip Op. 1949, 1999 N.Y. Slip Op. 1950

REGENT CORPORATION, U.S.A., Plaintiff-Respondent, v. AZMAT BANGLADESH, LTD., et al., Defendants and International Finance Investment and Commerce Bank Limited Defendant-Appellant.

Supreme Court, Appellate Division First Department.

March 2, 1999.

Alan Heblack, of counsel (Ana C. Davis, on the brief, Holland & Knight L.L.P., attorneys) for plaintiff-respondent.

Martin L. Brothers, attorney for defendant-appellant.

JOSEPH P. SULLIVAN, J.P., EUGENE NARDELL, PETER TOM and ANGELA M. MAZZARELLI, JJ.

NARDELLI, J.

Plaintiff, Regent Corporation, U.S.A. (Regent), is a New York corporation which imports finished textile products for resale in the United States. In March and April 1994, Regent contracted with Azmat Bangladesh, Ltd. (Azmat), a textile company located in Bangladesh, for the purchase of bed sheets and pillow cases for import and resale into the United States. An essential condition of the sale was that the goods be manufactured in Bangladesh since such goods were not subject to quota restrictions. However, upon their delivery to New Jersey, United States Customs refused entry for the reason that the goods required a visa designating Pakistan as the country of origin.

The contract between Regent and Azmat required payment by Regent by "100% confirmed irrevocable letter of credit, 90 days from bill of lading date," to be drawn upon by Azmat after it presented documents, including the bill of lading, and an export visa stamp showing the goods originated in Bangladesh. Regent obtained the necessary letters of credit from the Bank of New York and Citibank. Defendant-appellant, International Finance Investment and Commerce Bank Limited (International Bank), acted as Azmat's advising bank, and between April and June 1994, it presented drafts and relevant documents to Citibank and The Bank of New York for payment. Each draft indicated that payment was to be made "at 90 days deferred from bill of lading date" and was accompanied by a dated bill of lading. The Bank of New York made partial payment and Citibank notified International Bank that the requirements for partial payment under its letter of credit were met and indicated it would pay International Bank the amounts requested when due.

However, as noted, the goods were detained for inspection by United States Customs at the port of Newark on the ground they were not manufactured in Bangladesh, but in Pakistan, and therefore Regent sought to enjoin The Bank of New York and Citibank from further payments on the letters of credit, claiming fraud in the transaction by Azmat. International Bank intervened after Regent commenced this action against Azmat, Bank of New York and Citibank. Thereafter, Regent served an amended complaint asserting, inter alia, a first cause of action for fraud against Azmat and International Bank and thereafter sought partial summary judgment on International Bank's liability.

In support of this motion, an affidavit by Hafeez Azmat was submitted to the effect that the goods sold to Regent were not manufactured entirely in Bangladesh and did not satisfy Customs regulations. As of June 1994, Azmat's looms had not been fully operational for several months and could not weave fabric for yarn. As a result, to fill the order from Regent, Azmat was required to use "griege goods," i.e., unfinished goods, which were woven in Pakistan and shipped to Azmat for processing. Azmat printed, cut, hemmed and packaged the griege goods in Bangladesh, but the goods were not dyed in either Bangladesh or Pakistan. Azmat also noted in his affidavit that Customs had visited his facility in Bangladesh and seen that the looms necessary for weaving and dyeing and printing were not operational. He also noted that Customs had advised him during the visit that his finishing operations were insufficient to qualify as goods "made in Bangladesh."

Also in support of the motion, Regent submitted an affidavit from J. Robert Dorsett an import specialist with the Office of Field Operations for the United States Customs Service. Dorsett indicated that he had visited the Azmat facilities in Bangladesh in the beginning of June 1994 to determine whether the textiles were manufactured or processed there. At the conclusion of this inquiry, he wrote, edited and filed a June 24, 1994 report, which he annexed. This report indicated that only 17 of Azmat's 202 looms were producing fabric during his visit. One hundred looms were rusted and not useable. Thirty-three looms had yarn set up but were not operating and 50 looms were idle, showing no signs of recent use. Dorsett also noted there were Pakistani invoices for fabric with widths commonly used for American-sized beds and there were sufficient quantities of that fabric to cut and sew about 2.2 million bed sheets for U.S. export. Azmat processed these sheets by bleaching and printing them, cutting them on two sides and hemming them, which did not satisfy Customs regulations for the "substantial transformation" of a product. During Dorsett's visit, Hafeez Azmat called to ask how to prevent problems with United States and Bangladesh authorities. Dorsett told Azmat that to be a Bangladesh product, the Pakistani fabric would have to be substantially transformed in Bangladesh by either (a) weaving or cutting on four sides plus additional work such as adding elastic, piping, ruffles, etc., or (b) by "dyeing and printing." After learning that Dorsett had obtained the records of fabric shipments from Pakistan, Azmat admitted the fabric for the sheet shipment to the United States was woven in Pakistan.

The IAS court granted Regent's motion for partial summary judgment against International Bank on the issue of liability and denied International Bank's cross motion for a commission to take depositions in Bangladesh. Thus, the motion court determined that the affidavit of Hafeez Azmat demonstrated he knew the requirements for goods to qualify as being made in Bangladesh but shipped goods which did not meet those requirements with the intent to deceive Regent, which constituted fraud in the transaction. The court found that each draft declared on its face that it was payable a specified number of days subsequent to the bill of lading date on another writing, and that, therefore, the drafts were non-negotiable instruments. Since it found these drafts to be non-negotiable instruments, the court concluded that International Bank could not be a holder in due course and was a mere transferee of a claim. In light of the findings of fraud, the court denied the cross motion by the Bank for a closed commission to depose former Azmat employees in Bangladesh on that issue.

International Bank asserts that the affidavit of Hafeez Azmat was procured by fraud. In support of this, the Bank submitted an unsworn letter from the attorneys for Azmat. However, absent an affidavit from Azmat himself, this evidence was not in admissible form and failed to raise any triable issue of fact (see, Friends of Animals v. Associated Fur Manufacturers, 46 N.Y.2d 1065, 416 N.Y.S.2d 790, 390 N.E.2d 298). In addition, the Bank claimed that the report by the Customs agent, Dorsett, was inadmissible because International Bank could not depose or cross examine Customs officials. However, the report was properly admissible as a business record pursuant to CPLR 4518. Dorsett attested to the fact that it was made in the regular course of business, that it was his duty to make it, and that it was accurate as to Azmat. In addition, the report was clearly made within a reasonable time after Dorsett's inspection of the Azmat facility. While International Bank claimed it could not depose Dorsett or subpoena him, it offered no evidence to support this contention. In addition, while the Bank objected to redactions in portions of the report, Dorsett attested that the redactions only concerned persons, places and entities which were unconnected to Azmat.

Finally, we agree with the contention of plaintiff that since International Bank failed to appeal Customs's rejection of the goods, Customs's determination was final and binding on the issue of whether the goods were manufactured in Bangladesh or in Pakistan, and the Customs's determination cannot be challenged in this Court (see, United States v. Utex Int'l, 857 F.2d 1408, 1412 (C.A.Fed. 1988)). Absent a timely protest, Customs' determination is final as to all aspects of the entry and the importer, surety and government are bound by and have the right to rely on its finality (id.; see also, R.J.F. Fabrics v. United States, 651 F.Supp. 1431, 1435 [Court of International Trade] [action which requires a determination as to country of origin of merchandise excluded for possible violations of quota requirements is the type of matter that should be decided only in the Court of Trade] ). In any event, International Bank's attempt to show that Customs erred in applying 19 CFR § 12.130(e) in finding that the goods were not "substantially transformed" in Bangladesh was, on its face, without evidentiary support. International Bank asserts that material will be...