United States v. Juan Carlos Chavez, & Chavez Import & Export, Inc.
| Decision Date | 10 October 2017 |
| Docket Number | Court No. 12-00104,Slip Op. 17 - 140 |
| Court | U.S. Court of International Trade |
| Parties | UNITED STATES, Plaintiff, v. JUAN CARLOS CHAVEZ, and CHAVEZ IMPORT & EXPORT, INC., Defendants. |
Before: R. Kenton Musgrave, Senior Judge
OPINION[Motion for default judgment on customs penalty action granted.]
Albert S. Iarossi, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington DC, for the defendant. On the brief were Chad E. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of Counsel was Adam M. Cornette, Office of the Chief Counsel, U.S. Customs and Border Protection.
Musgrave, Senior Judge: As previously alluded, see 40 CIT ___, Slip Op. 16-26 (Mar. 25, 2016), ECF No. 43, the plaintiff commenced this case against defendants Juan Carlos Chavez ("Chavez") and Chavez Import & Export, Inc. ("CIE") pursuant to 19 U.S.C. §1592 and 28 U.S.C. §1582 seeking collection of unpaid duties totaling US$40,288.82, plus penalties totaling US$131,358.22, plus interest and costs, for certain misrepresentations on entry documents, as further described below. Slip Op. 16-26 granted summary judgment in favor of the plaintiff for the portion of such items claimed against Chavez,1 and the plaintiff now moves for entry of default judgment against CIE.
To date, the corporate defendant CIE has remained unrepresented by counsel, has not answered the complaint, and has had default entered against it. ECF No. 23 (May 5, 2015). See USCIT Rule 55(a) (). The papers on the current motion for judgment state that CIE was a Florida corporation prior to being administratively dissolved by the Florida Secretary of State on September 26, 2008, for failing to file an annual report. See April 12, 2012 Complaint (Compl.) at ¶ 5; ECF No. 4. CIE had two shareholders, directors, and officers from the time of its incorporation until the time of its dissolution: Augusto E. Chavez (President) and co-defendant Juan Carlos Chavez (Vice President and Secretary). Compl. ¶ 7.
The plaintiff further avers: that from June 24, 2005 to October 2, 2006, CIE, as importer of record, caused to be entered or introduced ten entries of "Soft Dairy Express" and "White Cheese" by means of entry documents filed with U.S. Customs and Border Protection (CBP); thatthe entry numbers for these shipments were APJ-00061195, AWB-00044747, AWB-00046304, AWB-00060297, AWB-00060305, AWB-00068779, AWB-00069173, AWB-00069934, AWB-00070965, and AWB-00073258; that on the entry forms for their respective entries CIE falsely classified the "Soft Dairy Express" under HTSUS 0405.20.4000, which applies to dairy spreads: butter substitutes, whether in liquid or solid state, other than those containing over 45 percent by weight of butterfat; that on the entry forms for their respective entries, CIE falsely classified the "White Cheese" under HTSUS 0406.90.9900, which applies to cheeses and curds that do not contain cow's milk; that for some entries, in addition, the incorrect HTSUS classifications were preceded by the letter "E", which provides for duty-free treatment under the Caribbean Basin Economic Recovery Act (CBERA) (Pub. L. 98-67); that the "Soft Dairy Express" should have been classified under HTSUS 1901.90.4300, which applies to certain dairy products containing over 10 percent by weight of milk solids; that the "White Cheese" should have been classified under HTSUS 0406.90.9700, which applies to cheeses and curds that do contain cow's milk; that had the "Soft Dairy Express" and "White Cheese" been properly classified under HTSUS 1901.90.4300 and HTSUS 0406.90.9700, they would have been subject to additional duties under HTSUS subheadings 9904.04 and 9904.06; that neither of the correct classifications qualified for duty-free treatment under the CBERA; that the invoices and entry documents for the entries at issue did not provide meaningful descriptions of the products sufficient to correctly classify the merchandise; that, rather, it was only through laboratory analyses conducted by CBP that the correct HTSUS classifications could be determined; that some of the entries at issue also contained false valuations, allowing them to be processed through informal entries without surety bonds; that the loss of revenue from misclassifying CIE's entries was $53,263.54; that because three entries were liquidated with rate advances totaling $8,403.57, and because four entries were covered by bonds for which the insurer paid $13,344.92, the duties still owed are $31,505.15; that the domestic value of the merchandise that was the subject of the false statements, acts and/or omissions by CIE was $105,916.50; that the false statements, acts, and/or omissions described above were material because they influenced CBP's collection of duties; that until CBP discovered the false statements, defendants were depriving the United States of duties lawfully owed; that CIE failed to ensure that the HTSUS classifications were complete and accurate; that in March 2010, the United States issued an amended pre-penalty notice and demand for duties and an amended penalty notice to CIE regarding the entries for which CIE was the importer of record; that Mr. Juan Carlos Chavez, CIE's Vice President and Secretary (and co-defendant in this case) received these notices on behalf of CIE at his then-current address in North Brunswick, New Jersey; that on April 14, 2010, a waiver of the statute of limitations was executed with respect to the entries for which CIE was the importer of record, which waiver indicated that Mr. Chavez, acting in his "individual and personal capacity, and also on behalf of Chavez Import & Export, Inc.", would "not assert any statutes of limitations defense in any action brought by the United States Government" for two years beginning from the date of execution; that Mr. Chavez and a CBP official signed the waiver; that CBP did not receive any written notice from CIE, pursuant to Fla. Stat. §607.1406, informing CBP of any claims that CBP might be entitled to assert against CIE; that CIE also did not publish or file a notice of dissolution, pursuant to Fla. Stat. §607.1407, in order to address claims that were known to it; and that, accordingly, there is no time limit or statute of limitations under Florida law that would prevent this proceeding against CIE. See generally Complaint, ECF No. 4 (Apr. 12, 2012).
Jurisdiction here over this penalty action is conferred by 28 U.S.C. §1582(1). The court's Rules provide that after entry of default, if "the plaintiff's claim is for a sum certain or for a sum that can be made certain by computation, the court -- on the plaintiff's request with an affidavit showing the amount due -- must enter judgment for that amount and costs against a defendant who has been defaulted for not appearing." USCIT R. 55(b). However, because "a party in default does not admit mere conclusions of law", the question "to consider [is] whether the unchallenged facts constitute a legitimate cause of action". 10A Charles A. Wright, Arthur R. Miller & Mary K. Kane, Federal Practice and Procedure §2688, at 63 (3d ed. 1998). Towards that end, all "well-pled" facts in the complaint are taken as true, e.g., United States v. Callanish Ltd., 34 CIT 1423, 1426 (2010), but consideration of matters outside the complaint are permissible whenever needed to "determine the amount of damages or other relief . . . establish the truth of an allegation by evidence; or . . . investigate any other matter." USCIT R. 55(b).2
Pursuant to 19 U.S.C. §1592, it is unlawful for any person to introduce merchandise into the United States by means of a material false statement or document, or a material omission evidencing fraud, gross negligence, or negligence. 19 U.S.C. §1592(a)(1); United States v. Jac Natori Co., Ltd., 108 F.3d 295, 298 (Fed. Cir. 1997). A statement or document is "material" if it has"the tendency to influence Customs' decision in assessing duties." United States v. Thorson Chemical Corp., 16 CIT 441, 448, 795 F. Supp. 1190, 1196 (1992); see also 19 C.F.R. Pt. 171, App. B(B) ("[a] document, statement, act, or omission is material if it has the natural tendency to influence . . . a Customs action regarding the classification, appraisement, or admissibility of merchandise[,] . . . determination of an importer's liability for duty[,] . . . [or] determination as to the source, origin, or quality of merchandise").
The plaintiff averments, unchallenged, constitute a legitimate cause of action. The level of culpability asserted in this case is negligence. See 19 U.S.C. §1592(c) (). To prove negligence, the government need only establish the false and material act or omission constituting the violation, and the burden then shifts to the alleged violator to prove that the act or omission did not occur as a result of negligence. 19 U.S.C. §1592(e)(4). The plaintiff's complaint satisfies its burden by averring that CIE's classifications of the ten entries were false in light of the laboratory analyses conducted by CBP. See Compl. ¶18. The complaint further alleges that the fat content of the "Soft Dairy Express" as determined by CBP rendered it inapplicable for the classification chosen by CIE (id. ¶¶ 11, 14), and that the "White Cheese" was actually made from cow's milk, as determined and further alleged by CBP, and was falsely classified by CIE under a tariff provision for cheese not made from cow's milk . In addition, for some of the entries, the incorrect classifications were preceded by the prefix "E" to enable them to receive duty-free treatment under the CBERA, and had the correct classifications...
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