United States v. Deladiep, Inc.

• Decision Date: 23 August 2017
• Docket Number: Slip Op. 17-108 Court No. 16-00241.
• Parties: UNITED STATES, Plaintiff, v. DELADIEP, INC. and John Delatorre, Defendants.
• Court: U.S. Court of International Trade

255 F.Supp.3d 1326

UNITED STATES, Plaintiff,

v.DELADIEP, INC. and John Delatorre, Defendants.

Slip Op. 17-108 Court No. 16-00241.

United States Court of International Trade.

August 23, 2017

Jason M. Kenner, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY, for Plaintiff the United States. With him on the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was Bayleigh J. Pettigrew, Office of the Associate Chief Counsel, U.S. Customs and Border Protection, of Long Beach, CA.

Before: Jennifer Choe–Groves, Judge

OPINION

Jennifer Choe–Groves, Judge

The United States ("Plaintiff" or "Government") brought this action against Deladiep, Inc. ("Deladiep") and John Delatorre ("Mr. Delatorre") (collectively, "Defendants") to recover unpaid duties and a civil penalty under Section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592 (2006).¹ See Summons, Nov. 4, 2016, ECF No. 1; Compl., Nov. 4, 2016, ECF No. 3. Deladiep is a Delaware corporation with its principal place of business in Sugar Land, Texas, and Mr. Delatorre is the owner, president, and sole corporate officer of Deladiep. See Compl. ¶ 4. Plaintiff alleges, inter alia , that Defendants made two entries of raw flexible magnets from the People's Republic of China ("China") and provided material false information to U.S. Customs and Border Protection ("Customs") indicating that the entries were not subject to antidumping or countervailing duties. See id.¶¶ 23–30. Plaintiff contends that Defendants are jointly and severally liable for unpaid duties and a civil penalty because they failed to exercise reasonable care to ensure that the statements made in connection with the entries were complete and accurate. See id.

Before the court is Plaintiff's Motion for the Entry of a Default Judgment.² See Pl.'s Mot. Entry Default J., May 5, 2017, ECF No. 17. Because Defendants have failed to plead or otherwise defend themselves in this action, the Government requests the court to enter a default judgment against Defendants in the amount of $32,931.53 for unpaid customs duties, plus pre-judgment interest, and $87,740.60 as a civil penalty for negligent violations of 19 U.S.C. § 1592(a). See id. at 13.

As explained below, the well-pled facts in Plaintiff's complaint and supporting declarations accompanying Plaintiff's motion establish that Defendants are jointly and severally liable for negligent violations of 19 U.S.C. § 1592(a). The court grants in part Plaintiff's motion for default judgment and enters a default judgment against Defendants in the amount of $32,931.53 for unpaid customs duties, together with pre-judgment interest, and $17,548.12 as a civil penalty, which is twenty percent of the maximum penalty allowed by statute.

BACKGROUND

On September 17, 2008, the U.S. Department of Commerce ("Commerce") issued antidumping and countervailing duty orders on imports of raw flexible magnets from the People's Republic of China ("China"). See Raw Flexible Magnets from the People's Republic of China, 73 Fed. Reg. 53,847 (Dep't Commerce Sept. 17, 2008) (antidumping duty order) ("AD Order"); Raw Flexible Magnets from the People's Republic of China, 73 Fed. Reg. 53,849 (Dep't Commerce Sept. 17, 2008) (countervailing duty order) ("CVD Order"). The scope of both orders covers "certain flexible magnets regardless of shape, color, or packaging." AD Order, 73 Fed. Reg. at 53,847 ; CVD Order, 73 Fed. Reg. at 53,850. Magnets subject to these orders imported from exporters that have not been assigned an individual rate are subject to an antidumping duty rate of 185.28 percent and a countervailing duty rate of 109.95 percent. See AD Order, 73 Fed. Reg. at 53,848 ; CVD Order, 73 Fed. Reg. at 53,850. To assist Customs in determining whether imported merchandise is subject to these antidumping and countervailing duty orders, the scope of both orders provides that products subject to the orders are classifiable principally under subheadings 8505.19.10 and 8505.19.20 of the Harmonized Tariff Schedule of the United Sates ("HTSUS").³ See AD Order, 73 Fed. Reg. at 53,847 ; CVD Order, 73 Fed. Reg. at 53,850.

Plaintiff alleges that Defendants made two entries of flexible magnet sheets from China on November 10, 2011 (Entry No. GL502557066) ("November Entry") and January 3, 2012 (Entry No. GL502608083) ("January Entry") through the ports of Los Angeles and Long Beach, California.⁴ See Compl. ¶ 5; see also Compl. Ex. A (entry summaries). The entry documents for the November Entry classified the imported magnets under HTSUS subheading 8505.19.3000⁵ and the commercial invoice described the imported merchandise as five thousand pieces of "Magnetic Rubber Sheet[s]." See Compl. Ex. A; Decl. Supervisory Import Specialist Paul Sumbi in Supp. Gov't's Mot. Default J. Ex. 1, May 5, 2017, ECF No. 17–6 ("Sumbi Decl."). The entry documents for the January Entry classified the merchandise under HTSUS subheading 8505.19.1000 and the commercial invoice described the imported merchandise as two thousand pieces of "rubber magnet sheet[s]." See Compl. Ex. A; Sumbi Decl. Ex. 4. Defendants declared that both entries were Type 01 entries not subject to antidumping and countervailing duties. See Compl. Ex. A; Decl. Robert Theirry in Supp. Gov't's Mot. Default J. ¶ 3, May 5, 2017, ECF No. 17–3 ("Theirry Decl."); Sumbi Decl. ¶¶ 2, 4. Defendants did not deposit antidumping and countervailing duties for either entry.⁶ See Sumbi Decl. ¶¶ 2, 4.

On May 30, 2012, Customs issued a request for information to Deladiep seeking a sample of the magnetic rubber sheets contained in the November Entry.⁷ See id. at Ex. 6. Customs did not receive a response and issued a notice of action for the November Entry on July 29, 2012, which proposed (1) changing the classification of the merchandise from HTSUS subheading 8505.19.3000 to HTSUS subheading 8505.19.1000, (2) changing the entry type from a Type 01 entry to a Type 03 entry to reflect that the imported magnets were subject to antidumping and countervailing duties pursuant to the orders on raw flexible magnets from China, and (3) rate-advancing the entry.⁸ See id. at Ex. 7. The notice of action also directed Deladiep to submit antidumping duties at a rate of 185.28 percent, countervailing duties at a rate of 109.95 percent, and a non-reimbursement statement.⁹ See id. In the event that Deladiep disagreed with the proposed action, Customs advised Deladiep that it must provide a sample of the imported magnetic rubber sheets and provide a reason why the product is outside the scope of the antidumping and countervailing duty orders on raw flexible magnets from China within twenty days. See id.

On behalf of Deladiep, Mr. Delatorre sent a letter to Customs dated July 30, 2012 that contained a sample of the magnetic rubber sheets and product information from a website that purportedly sells the merchandise to law enforcement entities. See id. at Ex. 8. The letter neither referenced nor disputed the changes proposed by Customs in the notice of action. Mr. Delatorre sent an additional e-mail to Customs on August 14, 2012 stating that the merchandise was imported for a friend's business rather than for his own business endeavors. See id. at Ex. 11. The e-mail also requested that Customs refrain from assessing antidumping and countervailing duties on the imported merchandise because Mr. Delatorre's new customs broker had not informed Mr. Delatorre that the imported magnets were subject to the orders. See id. The e-mail did not provide any reason regarding why the magnets were outside the scope of the orders. Customs also received a letter on August 30, 2012 from a company called SooHoo, Inc.¹⁰ disagreeing with Customs' decision that the magnet sheets imported by Deladiep were within the scope of the antidumping and countervailing duty orders because the merchandise fell within an exception for printed flexible magnets.¹¹ See id. at Ex. 13. Upon examination of the sample submitted by Mr. Delatorre, Customs confirmed that the imported magnets were in fact subject to antidumping and countervailing duties and that the exception for printed flexible magnets did not apply because the printing on the imported magnets consisted of only stripes, lines, a trade name, or trade mark.¹² See Theirry Decl. ¶¶ 4, 7; Sumbi Decl. ¶¶ 13–14, Ex. 14.

In the interim, Customs issued a similar notice of action for the January Entry on August 13, 2012. See Sumbi Decl. Ex. 10. Customs directed Deladiep to submit the antidumping and countervailing duties along with a non-reimbursement statement. See id. Defendants neither paid the duties for the two entries nor submitted a non-reimbursement statement following the issuance of the notices of action. See Compl. ¶¶ 11, 12; see also Theirry Decl. ¶ 10.

Customs issued an informed compliance notice to Deladiep on September 28, 2012, explaining that the imported merchandise was subject to antidumping and countervailing duties and requesting a deposit for the duties owed. See Sumbi Decl. Ex. 15. Customs informed Deladiep again that it could resubmit a post entry amendment after paying the requested duties. See id. Customs also provided Deladiep with information regarding how to request a scope ruling from Commerce if Deladiep believed that the imported magnets were outside the scope of the orders. See id. Defendants did not respond to the notice, did not deposit the requested duties, and there is no indication that Defendants requested a scope ruling regarding the imported magnets. See id.¶ 15.

Pursuant to liquidation instructions issued by Commerce, Defendants' entries were liquidated at the cash deposit rate in effect at the time of entry. See Compl. ¶ 14; see also Theirry Decl. ¶ 9; Decl. Jessica Vandemark in Supp. Gov't's Mot. Default J. ¶¶ 3, 5, May 5, 2017, ECF No. 17–5 ("Vandemark Decl."). Customs assessed antidumping...