United States v. Horizon Prods. Int'l, Inc.

• Decision Date: 24 July 2015
• Docket Number: Slip Op. 15–80.,Court No. 14–00104.
• Citation: 82 F.Supp.3d 1350
• Parties: UNITED STATES, Plaintiff, v. HORIZON PRODUCTS INTERNATIONAL, INC., Defendant.
• Court: U.S. Court of International Trade

82 F.Supp.3d 1350

UNITED STATES, Plaintiff,

v.HORIZON PRODUCTS INTERNATIONAL, INC., Defendant.

Slip Op. 15–80.

Court No. 14–00104.

United States Court of International Trade.

July 24, 2015.

Daniel B. Volk, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice of Washington, D.C., for Plaintiff United States. On the brief with him were Joyce R. Branda, Acting Assistant Attorney General, Jeanne E. Davidson, Director, Claudia Burke, Assistant Director. Of counsel on the brief was Claire J. Lemme, Attorney, Office of the Associate Chief Counsel for U.S. Customs and Border Protection of Miami, FL.

Peter S. Herrick, Peter S. Herrick, P.A. of St. Petersburg, FL, for Defendant Horizon Products International, Inc.

OPINION AND ORDER

GORDON, Judge:

Before the court is Plaintiff United States' ("the Government") motion for summary judgment. Pl.'s Mot. for Summ. J. (Nov. 14, 2014), ECF No. 14 ("Pl.'s Mot."); see also App'x (Nov. 14, 2014), ECF No. 14 ("Pl.'s App'x I"); Defendant, Horizon Prods. Int'l's Response to Plaintiff, United States' Mot. for Summ. J. (Jan. 20, 2015), ECF No. 22 ("Def.'s Resp."); Pl.'s Reply in Supp. of its Mot. for Summ. J. (Feb. 9, 2015), ECF No. 25 ("Pl.'s Reply"); Remainder of Pl.'s Summ. J. App'x (Feb. 23, 2015), ECF No. 27 ("Pl.'s App'x II"); Def.'s Proposed Sur–Reply to Pl.'s Reply in Supp. of its Mot. for Summ. J. (Feb. 20, 2015), ECF No. 30; Nonconfidential App'x—Redacted Version (Mar. 3, 2015), ECF No. 31 ("Def.'s App'x"). The Government seeks $394,794 in unpaid duties and penalties from Defendant Horizon Products International, Inc. ("Horizon") under Section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592 (2012),¹ plus equitable prejudgment interest on the unpaid duties. Pl.'s Mot. at 1. The court has jurisdiction pursuant to 28 U.S.C. § 1582 (2012).

For the reasons set forth below, the court grants the Government's motion with respect to the unpaid duties and pre-judgment interest, but denies the Government's motion in all other respects.

I. Undisputed Facts

Between 2006 and 2007, Horizon entered or attempted to enter various types of plywood into the United States under inapplicable duty-free provisions of the Harmonized Tariff Schedule of the United States ("HTSUS"). The majority of Horizon's plywood contained at least one outer ply of non-coniferous wood other than birch, Spanish cedar, or walnut. As a consequence, the correct classification for this plywood was either HTSUS 4412.14.31 or HTSUS 4412.32.31 (the latter becoming effective on February 3, 2007 after the reorganization of HTSUS heading 4412). The original and renumbered provisions are identical in substance, and both carry an 8% duty rate. Defendant's remaining plywood contained an outer ply of sapele, a tropical wood. The correct classification for that plywood was either HTSUS 4412.13.40 (2006) or 4412.31.40 (2007). Again, the substance of those provisions and the applicable 8% duty rate did not change between the 2006 and 2007 versions of the HTSUS. See generally Pl.'s App'x II at A528–661 (invoices, packing lists, entry forms, and other associated documentation); Pl.'s App'x I at A17–34 (relevant provisions of the 2006 and 2007 HTSUS).

In late 2007, U.S. Customs and Border Protection ("Customs") issued several notices of action indicating that it would rate-advance (liquidate at a higher rate) 21 of Horizon's plywood entries. Horizon subsequently paid $42,016, representing the full rate-advanced 8% duty on those entries. Customs liquidated the remaining 43 entries at the inapplicable duty-free rate. Pl.'s App'x I at A1–8.

In September 2009, Customs sent Horizon a pre-penalty notice and demand for payment. Customs identified a $162,270 total revenue loss. Of that, Customs specified $42,016 in potential revenue loss relating to the rate-advanced entries and $120,254 actual revenue loss relating to the entries liquidated at the inapplicable duty-free rate. Customs proposed a culpability level of negligence and a corresponding penalty of $324,540, twice the $162,270 total revenue loss. Customs thereafter issued a penalty notice demanding payment of $120,254 in outstanding duties and the $324,540 penalty. Customs eventually recovered $50,000 from Defendant's surety, leaving $70,254 in duties still owed. Pl.'s App'x I at A5–13. See generally Def.'s App'x at Hor. 85–Hor. 87 & n. 1 (describing administrative procedural history).

Horizon requested mitigation of the $324,540 penalty. Defendant argued it did not have the means to pay, and provided Customs with supporting documentation, including financial statements and tax filings. Def.'s App'x at Hor. 1–84. In finding that Horizon could not pay the full amount, Customs determined that Defendant had sufficient equity to pay up to $200,000 combined duties and penalty. As a result, Customs mitigated the penalty to $85,278 conditioned on full payment of the duties owed within 60 days. Def.'s App'x at Hor. 85–89.

Horizon countered with an offer in compromise requesting to pay the outstanding duties in two installments within 60 days as well as a mitigated penalty of $1,000. Id. at Hor. 101–19. Customs rejected Horizon's offer, along with each of Defendant's subsequent requests to pay a lower penalty. See id. at Hor. 120–21. On December 20, 2012, after the mitigated penalty's 60–day deadline passed without any payment from Horizon, Customs again demanded the outstanding duties and the full penalty amount. Id. at Hor. 124.

This enforcement action followed. The Government seeks $70,254 in duties plus equitable pre-judgment interest, as well as the full $324,540 penalty without any interest.

II. Standard of Review

The U.S. Court of International Trade reviews all issues in actions brought for the recovery of a monetary penalty under § 1592 de novo, including the amount of any penalty. 19 U.S.C. § 1592(e)(1) ; see United States v. ITT Indus., Inc., 28 CIT 1028, 1034–35, 343 F.Supp.2d 1322, 1329 (2004), aff'd, 168 Fed.Appx. 942 (Fed.Cir.2006). Rule 56 of the Rules of this Court permits summary judgment when "there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law." USCIT R. 56(c) ; see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In considering whether material facts are in dispute, the evidence must be considered in the light most favorable to the non-moving party, drawing all reasonable inferences in its favor.

See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) ; Anderson, 477 U.S. at 261 n. 2, 106 S.Ct. 2505.

On materiality, "the substantive law will identify which facts are material." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. On the question of genuineness, the standard for determining whether there is a genuine issue "mirrors the standard for a directed verdict[,] ... which is that the trial judge must direct a verdict if, under the governing law, there can be but one reasonable conclusion as to the verdict.... In essence, ... the inquiry under each is the same: whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 248–52, 106 S.Ct. 2505 ; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ( Rule 56 "mandates the entry of summary judgment ... against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial."). On a motion for summary judgment, "[t]he Court should credit the nonmovant's evidence and must draw all justifiable inferences from the evidence in the nonmovant's favor." Netscape Commc'ns Corp. v. Konrad, 295 F.3d 1315, 1319 (Fed.Cir.2002) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505 ); see also Wanlass v. Fedders Corp., 145 F.3d 1461, 1463 (Fed.Cir.1998) ("In determining the propriety of summary judgment, credibility determinations may not be made....").

III. Discussion

A. Duties

Horizon concedes that it misclassified the entries at issue in this action and that it is therefore liable to the Government for $70,254 in unpaid duties. Def.'s Resp. at 16; 19 U.S.C. § 1592(d) ("[I]f the United States has been deprived of lawful duties, taxes, or fees as a result of a violation of [ § 1592(a) ], the Customs Service shall require that such lawful duties, taxes, and fees be restored, whether or not a monetary penalty is assessed."). Accordingly, the court will order Horizon to pay the Government $70,254 in unpaid duties.

B. Interest

The Government also seeks an award of pre-judgment interest on the outstanding duty amount. This Court has discretion to award pre-judgment interest. United States v. Imperial Food Imps., 834 F.2d 1013, 1016 (Fed.Cir.1987). Pre-judgment interest "compensate[s] for the loss of use of money due as damages from the time the claim accrues until judgment is entered, thereby achieving full compensation for the injury those damages are intended to redress." West Virginia v. United States, 479 U.S. 305, 310 n. 2, 107 S.Ct. 702, 93 L.Ed.2d 639 (1987) ; see United States v. Goodman, 6 CIT 132, 140, 572 F.Supp. 1284, 1289 (1983) (Pre-judgment interest "is awarded to make the wronged party whole."). Factors considered include "[1] the degree of personal wrongdoing on the part of the defendant, [2] the availability of alternative investment opportunities to the plaintiff, [3] whether the plaintiff delayed in bringing or prosecuting the action, and [4] other fundamental considerations of fairness." United States v. Great Am. Ins. Co. of N.Y., 738 F.3d 1320, 1326 (Fed.Cir.2013) (quoting Osterneck v. Ernst & Whinney, 489 U.S. 169, 175–76, 109 S.Ct. 987, 103 L.Ed.2d 146 (1989) ) (internal quotation marks omitted). In determining whether to award equitable prejudgment interest, though, "full...