U.S. v. Ups Customhouse Brokerage, Inc.

Decision Date28 June 2006
Docket NumberSlip Op. 06-98. Court No. 04-00650.
Citation442 F.Supp.2d 1290
PartiesUNITED STATES, Plaintiff, v. UPS CUSTOMHOUSE BROKERAGE, INC., d/b/a UPS Supply Chain Solutions, Inc., Defendant.
CourtU.S. Court of International Trade

Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Melinda D. Hart, Nancy Kim), Edward Greenwald Department of Homeland Security, Bureau of Customs and Border Protection, Of Counsel, for Plaintiff.

Akin, Gump, Strauss, Hauer & Feld, LLP (Lars-Erik Hjelm, Lisa W. Ross, Thomas J. McCarthy), Washington, DC, for Defendant.

Tompkins & Davidson, LLP (Laura Siegel Rabinowitz), New York, New York, for Amicus (National Customs Brokers & Freight Forwarders Association of America, Inc.).


CARMAN, Judge:

[Plaintiffs motion to strike is denied. Defendant's partial motion for summary judgment is denied.]

This matter comes before the Court on Defendant's Rule 56 Motion for Summary Judgment ("Summary Judgment Motion") and Plaintiffs Motion to Strike Defendant's $10,000 Penalty Refund Claim ("Motion to Strike"). Defendant, UPS Customhouse Brokerage, Inc. ("UPS" or "Defendant") and Plaintiff, the United States ("Plaintiff' or "Customs") each filed timely responses and replies to the respective briefs. The Court, having considered the parties' submissions and for the reasons that follow, denies both motions.


Defendant is a licensed customs broker responsible for preparing and filing customs entry documents on behalf of its clients. On May 15, 2000,1 the United States Customs Service (now the Bureau of Customs and Border Protection) ("Customs") concurrently issued three pre-penalty notices to UPS for violations of section 641 of the Tariff Act of 1930, 19 U.S.C. § 1641 (2000)2 ("the broker statute").3 The broker statute requires that Customs notify a broker prior to enforcing a penalty against it for a violation of the statute. 19 U.S.C. § 1641(d)(2)(A) (2000) ("§ 1641(d)(2)(A)").4 On September 15, 2000, Customs issued three penalty notices covering the three pre-penalty notices issued on May 15, 2000. (Def.'s Statement of Material Facts Not in Dispute ("Def.'s Stmt. of Facts") ¶ 8; Pl.'s Statement of Genuine Issues ("Pl.'s Stmt. of Facts") ¶ 8.) On October 1, 2001, Defendant remitted to Customs $5,000 in satisfaction of each of the three May 15, 2000, pre-penalty notices, for a total remission of $15,000. (Def.'s Stmt. of Facts ¶ 9.)

On July 11, 2000, Customs issued another three pre-penalty notices,5 and on August 8, 2000, Customs issued two more pre-penalty notices.6 On September 26, 2000, Customs issued three penalty notices to UPS for violations of the broker statute noticed in the July 11, 2000, pre-penalty notices. (Def.'s Stmt. of Facts ¶ 2; Pl.'s 1st Am. Compl. ¶¶ 8-10.) On October 19, 2000, Customs issued an additional two penalty notices to UPS for violations of the broker statute noticed in the August 8, 2000, pre-penalty notices. (Def.'s Stmt of Facts ¶ 2; Pl.'s 1st Am. Comp. ¶¶ 11-12.) The May 15, July 11, and August 8, 2000, pre-penalty notices each alleged violations of the responsible supervision and control provision of the broker statute regarding the erroneous classification of merchandise entered between January 10 and May 10, 2000. (Def.'s Stmt. of Facts ¶ 1, ¶ 4; Pl.'s 1st Am. Compl. ¶¶ 8-12.)

UPS failed to remit the $75,000 in penalties imposed by the September 26, and October 19, 2000, penalty notices. On December 17, 2004, Plaintiff filed a complaint against UPS seeking to enforce the monetary penalties Customs imposed on Defendant. On February 14, 2006, with leave of Court, Plaintiff filed its First Amended Complaint seeking to recover $75,000, in total, for the five unpaid penalties assessed against Defendant.7

On April 21, 2005, Defendant filed its answer to Plaintiffs complaint. The answer included nine affirmative defenses and no counterclaims. On August 2, 2005, Defendant filed its Summary Judgment Motion.8 Defendant's Summary Judgment Motion requests that this Court hold "that 19 U.S.C. § 1641(d)(2)(A)9 bars Plaintiff ... from collecting more than a single monetary penalty, not to exceed $30,000, for all violations of 19 U.S.C. § 1641 ... preceding the issuance of a Pre-penalty notice." (Def.'s Summ. J. Mot. at 1 (footnote added).) Defendant's Summary Judgment Motion also included a prayer for the refund of $10,000 Defendant previously paid to Customs in the form of a penalty. (Id. at 3; see also Mem. of Law in Supp. of Def.'s Mot. for Summ. Judg. ("Def.'s Summ. J. Br.") at 30.)

Also on August 2, 2005, the National Customs Brokers & Freight Forwarders Association of America, Inc. ("NCBFFAA") filed a partial consent motion to appear as amicus curiae in this matter. On August 22, 2005, Customs filed its opposition to the NCBFFAA's motion to appear in this case. On January 13, 2006, this Court granted-over Plaintiff's objections-the NCBFFAA's motion to appear as amicus curiae.

On October 14, 2005, Plaintiff concurrently filed its Motion to Strike Defendant's inclusion of the $10,000 penalty refund demand, which appears for the first time in Defendant's partial Summary Judgment Motion, and Plaintiffs Brief in Opposition to Defendant's Motion for Summary Judgment ("Plaintiffs Summary Judgment Response").10

The parties are in substantial agreement on the facts as presented and as relevant to the issues presently before this Court. Before this Court are Plaintiffs Motion to Strike and Defendant's Summary Judgment Motion.

A. Plaintiff's Contentions

The essence of Plaintiffs argument is that UPS failed to raise the issue of the requested $10,000 penalty refund in its answer as a counterclaim and failed to seek leave of this Court to amend its answer to properly plead a counterclaim. (Pl.'s Mot. at 1.) Plaintiff states that Court of International Trade Rule 13(a)11 requires that all claims against an opposing party be set forth in a pleading. If not set forth in a pleading, Plaintiff asserts that the pleader must seek leave of court to amend its pleading and add the counterclaim. (Pl.'s Mot. at 2 (quoting USCIT R. 13(e)12).) Plaintiff posits that Defendant's penalty refund claim is not only "impermissible and improperly asserted, but ... also inexcusably late." (Pl.'s Mot. at 2.) As a result, Plaintiff urges this Court to strike Defendant's penalty refund claim.

In the alternative, Plaintiff argues that Defendant's penalty refund claim is outside the scope of this Court's counterclaim jurisdiction. (Id. at 3.) Plaintiff cites 28 U.S.C. § 1583(a) as controlling this issue. The statute states that

In any civil action in the Court of International Trade, the court shall have exclusive jurisdiction to render judgment upon any counterclaim, cross-claim, or third-party action of any party, if (1) such claim or action involves the imported merchandise that is the subject matter of such civil action, or (2) such claim is to recover upon a bond or customs duties relating to such merchandise.

19 U.S.C. § 1583 (2000). "[E]ven assuming, for argument's sake, that UPS's penalty refund claim had been the subject of a counterclaim, it would involve imported merchandise unrelated to the 45 merchandise entries that are the subject of this civil action." (Pl.'s-Br. at 3.) Plaintiff contends that the monies for which UPS claims a refund involve entries that are not subject to this litigation and, therefore, are not within the jurisdiction of this Court. (Id.) As such, Plaintiff concludes that Defendant's penalty refund claim must be rejected.

B. Defendant's Contentions

Defendant first argues that Plaintiff's Motion is untimely under Court of International Trade Rule 12(f)13 "because Plaintiff did not file the Motion within 20 days of Defendant's service of its August 2, 2005 pleading, i.e., Defendant's Rule 56 Motion for Summary Judgment." (Def.'s Resp. in Opp'n to Pl.'s Mot. to Strike Def.'s $10,000 Penalty Refund Claim & Def.'s Alternative Mot. to Treat the Affirmative Defense & Prayer for Relief as a Countercl. or to Set Up the Countercl. by Amendment ("Def.'s Resp.") at 1.) Defendant submits that Plaintiff's failure to obtain an extension of time to file its motion renders the motion out of time. Defendant also complains that—in violation of Court of International Trade Rule 7(b)14Plaintiff failed to consult with Defendant prior to filing Plaintiff's Motion. (Id. at 2.)

Defendant next suggests that its fifth affirmative defense in its answer "squarely interposed the affirmative defense that Customs exceeded its statutory authority and sought the Court's order for further relief as is just and proper." (Id.) Defendant purports that its "affirmative defense and prayer for relief amount to a counterclaim that Customs make [UPS] whole for Customs' conduct that exceeds its statutory mandate." (Id. at 3.)

Next, Defendant insists that "this Court has plenary authority under [Court of International Trade] Rule 8(d)15 to treat the designation of an affirmative defense and prayer for relief as a counterclaim, if justice so requires." (Id. (footnote added).) As such, Defendant requests that this Court "treat the designation of the affirmative defense and prayer for relief as a counterclaim for the refund of the $10,000 assessed" by Customs. (Id.)

Defendant maintains that the merchandise "at issue in the two penalty cases for which [UPS] seeks a $10,000 refund" is merchandise Customs alleges UPS misclassified under Harmonized Tariff Schedule of the United States ("HTSUS") subheading 8473.30.9000. (Id.) Defendant offers that the merchandise at issue in this case is also merchandise that Customs alleges that Defendant misclassified under HTSUS subheading 8473.30.9000. (Id.) Defendant reasons, therefore, that the merchandise that is the subject of...

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6 cases
  • US v. UPS Customhouse Brokerage, Inc.
    • United States
    • U.S. Court of International Trade
    • January 28, 2010
    ...Court denied Defendant's motion for partial summary judgment and Plaintiff's motion to strike. United States v. UPS Customhouse Brokerage, Inc., 30 CIT 808, 442 F.Supp.2d 1290 (2006) ("UPS I"). The Court certified an interlocutory appeal by Defendant, but the Court of Appeals denied permiss......
  • Cormorant Shipholding Corp. v. U.S.
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    ...involve those entries at issue in plaintiff's claim"), amended by, 24 CIT 1158 (2000), with United States v. UPS Customhouse Brokerage, Inc., 442 F.Supp.2d 1290, 1303-04 (CIT 2006) (finding the court did not have jurisdiction over the counterclaim because "it lacks jurisdiction over the und......
  • U.S. v. Ups Customhouse Brokerage, Inc.
    • United States
    • U.S. Court of International Trade
    • May 28, 2008
    ...would hamper Customs's enforcement authority, and read a restriction into 19 U.S.C. § 1641 that does not exist. See UPS I, 30 CIT at ___, 442 F.Supp.2d at 1309 ("[n]either the broker penalty statute nor Customs regulations place any temporal [or numerical] restriction on a penalty issued by......
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