US v. WATCHES, WATCH PARTS, CALCULATORS, ETC.

• Decision Date: 27 July 1988
• Docket Number: No. 87-1814-Civ.,87-1814-Civ.
• Citation: 692 F. Supp. 1317
• Parties: UNITED STATES of America, Plaintiff, v. WATCHES, WATCH PARTS, CALCULATORS & MISC. PARTS, Defendant, Golden Star Enterprise, Darrison Ltd., T.S.J.M. Electronics, Claimants.
• Court: U.S. District Court — Southern District of Florida

692 F. Supp. 1317

UNITED STATES of America, Plaintiff, v. WATCHES, WATCH PARTS, CALCULATORS & MISC. PARTS, Defendant Golden Star Enterprise, Darrison Ltd., T.S.J.M. Electronics, Claimants.

No. 87-1814-Civ.

United States District Court, S.D. Florida.

July 27, 1988.

Karen Wherry, Asst. U.S. Atty., Miami, Fla., for U.S.

Leonard L. Rosenberg, Robert G. Schrader, Sandler Travis & Rosenberg, P.A., Miami, Fla., for claimants.

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

ATKINS, District Judge.

This cause comes before the court on the parties' cross motions for summary judgment. After careful consideration of the motions, responses, and replies, and after a hearing, it is

ORDERED AND ADJUDGED that the plaintiff United States of America's motion is hereby GRANTED and the claimants' motion is DENIED.

From October of 1985, until March of 1986, United States Customs agents seized shipments containing thousands of counterfeit watches, watch parts, offset plates, and stamping dies. Offset plates are used to place a name or mark in ink on the face of a watch; stamping dies imprint the name or mark into the metal casing. The plates and stamping dies as well as the counterfeit watches and watch faces displayed the United States registered trademark names of "Casio," "Citizen," and "Swatch." The claimants, Darrison, Ltd., T.S.J.M. Electronics Co., Ltd., and Golden Star Enterprises are sellers of the seized merchandise.

On October 31, 1985, Customs agents seized a ninety two carton shipment from Hong Kong destined for Mercurio, S.R.I. Stroessner, Paraguay.¹ The entry documents indicated that the merchandise contained within was "watch parts." After close inspection, agents discovered thousands of quartz watch movements in cases with straps but lacking faces or crystals ("watch bodies"), counterfeit watch faces bearing the name "Casio," several hundred "Swatch" watches, two "Casio," stamping dies, and four "Casio" offset plates. Thereafter, shipments arriving from Hong Kong destined for Mercurio, S.R.L. Stroessner, Paraguay were carefully scrutinized. On November 1, 1985, Customs observed yet another shipment of twenty two cartons arriving from Hong Kong with the same ultimate destination. The inventory listed the contents as "plastic straps," but the cartons actually held offset plates, stamping dies, 21,000 faceless wafer digital watches, and other similiar merchandise. The shipment was seized for falsifying documents and trafficking in counterfeit goods.

Between November of 1985, and March of 1986, Customs inspected and seized a total of thirteen shipments, seven of which originated with the three claimants represented in this action. Five of those shipments are the subject of this forfeiture action. The claimant Golden Star withdrew its claim to two of the shipments and other merchandise was released after payment of a penalty; the particular items released were not counterfeit or reproductions of protected merchandise. The claimants agreed to forfeit operational counterfeit watches with faces and crystals bearing the protected marks of "Casio," "Citizen," and "Swatch," as well as the stamping dies and offset plates, but seek return of the fully operational watch bodies that lack crystals or faces.

The government's complaint seeking forfeiture of the watch bodies alleges that the claimants violated Title 18 U.S.C. § 545² by importing merchandise that bears a protected mark, as defined by 15 U.S.C. § 1127³, in violation of 15 U.S.C. § 1124 and 19 U.S.C. § 1595a. Title 19 U.S.C. § 1526(e) provides for forfeiture of merchandise found violative of 15 U.S.C. § 1124.

The claimants' Motion for Summary Judgment and their Opposition to the government's Motion are based on two grounds. The claimants assert that the watch bodies are discrete products which, absent faces and crystals that bear the identifying or protected marks, do not violate the trademark laws. Alternatively, the claimants posit that, though this court finds the merchandise to be counterfeit, it was not "imported" into the United States for the purposes of applying the trademark laws nor was it "entered" at a customs house.

The government supports its contention that the faceless watch bodies are counterfeit merchandise by resort to the "doctrine of entireties," a judicially created rule of classification applied to determine whether goods are components dutiable separately or whether they are to be considered one entity for tariff purposes. The doctrine, which had its genesis in Altman & Co. v. United States, 13 Ct.Cust.Appls. 315, 318, T.D. 41232 (1925) states that:

If an importer brings into the country, at the same time, certain parts, which are designed to form, when joined or attached together, a complete article of commerce, and when it is further shown that the importer intends to so use them, these parts will be considered for tariff purposes as entireties, even though they may be unattached or inclosed in separate packages, and even though said parts might have a commercial value and be salable separately.

In cases in which imported parts were declared an entirety it was determined either that the combination of the parts resulted in a separate and distinct article, or that the imported article needed all of the parts to function as a whole. See E.M. Stevens Corp. v. United States, 49 Cust.Ct. 203, 204 (1962). E.M. Stevens makes it clear that the doctrine is equally applicable to parts that though contained in the same shipment are packaged separately. See also Standard Brands Paints, Inc. v. United States, 511 F.2d 564, 567 (C.C.P.A. 1975) ("the importer is selling, `using,' and/or `treating' the imported merchandise as unassembled picture frames, albeit one-half of each frame is sold in a separate package"). In Standard Brands Paint, the pieces were not intended to be assembled until they reached the consumer. In the present case, then, the watch parts, though packaged separately,⁴ are essentially parts of a whole and not discrete products. The article needs all of the parts to function as a whole, a conclusion recognized and asserted unequivocally by the claimants. See Claimant's Reply to Government's Opposition to Motion for Summary Judgment and Claimant's Reply to Government's Cross Motion for Summary Judgment at 10 ("The watch bodies are not finished watches; they must be joined with the faces to make complete watches."); see also id. at 11 ("In the instant case, there is no question that the merchandise being sought was shipped in parts, i.e., that they needed to be assembled with other components to actually make a complete article.") The watch bodies and the faces and crystals, though packaged separately, should be treated as one product.

Claimants argue strenuously that the doctrine of entireties is inapplicable to this case because it is purely a tariff classification tool that has no place in the context of "in bond" merchandise that is not subject to the imposition of a duty. The claimants support this contention by pointing out that the doctrine has never been employed as the government now urges it should be. This argument is particularly unpersuasive.

The doctrine of entireties was fashioned to resolve a particular import problem, calculation of proper tariffs. It is true that it has been used exclusively in classifying products to determine the proper duty owed. See e.g., Computime, Inc. v. United States, 772 F.2d 874 (C.A.Fed.1985); Nichimen Co., Inc. v. United States, 726 F.2d 1580 (C.A.Fed.1984); Amico, Inc. v. United States, 586 F.2d 217 (C.C.P.A.1978); Stella D'Oro Biscuit Co., Inc. v. United States, 570 F.2d 945 (C.C.P.A.1978); Karoware, Inc. v. United States, 564 F.2d 77 (C.C.P.A.1977); New York Merchandise, Inc. v. United States, 459 F.2d 1047 (C.C.P. A.1972); United States v. Baldt Anchor, Chain & Forge Division of the Boston Metals Co., Albert Maurer Co., 459 F.2d 1403 (C.C.P.A.1972); Tanross Supply Co. v. United States, 433 F.2d 1332 (C.C.P.A. 1970); C.R. Industries v. United States, 8 I.T.R.D., 1183 (Ct.Int'l Trade 1986) available on WESTLAW, 1986 WL 9273. The fact that a span of sixty odd years has witnessed an expansion in the nature of import and tariff questions requires creation of new theories or adaptation of established theories to resolve them. The doctrine of entireties is particularly well suited to this instance because its primary aim is to identify and classify merchandise and therefore its function is not inexorably linked to the present tariff schedule. Cf. Tanross Supply Co., 433 F.2d at 1335 n. 5 ("Although the doctrine of entireties is not applicable here, it is still very much alive, despite the passage of the new tariff schedules."). The efficacy of the doctrine is independent of the regulations imposed upon the product once it is identified and classified. Proper classification of merchandise when the doctrine was developed allowed proper application of tariffs. In this case, application of the doctrine to the defendant merchandise will aid in determining whether it is subject to section 526 of the Tariff Act of 1930, 19 U.S.C. § 1526(e) which is at issue in this case. It thus retains its character as a tariff classification tool although no duties are ultimately imposed upon the subject merchandise. Therefore this court concludes that through application of the doctrine of entireties, the merchandise consisting of watch bodies and faces and crystals which bear protected trademarks shall be considered entireties and are thus counterfeit.

Under Title 18 U.S.C. § 545, "whoever fraudulently or knowingly imports or brings into the United States any merchandise contrary to law" shall suffer forfeiture of the offending property. The government alleges that the claimants violated section 545 by importing the subject merchandise in violation of 15 U.S.C. § 1124. Merchandise in violation of this latter section is subject of forfeiture under 19 U.S.C. § 1526(e).

Title 15 U.S.C. § 1124 provides...