Slip Op. 05-160 UNITED STATES COURT OF INTERNATIONAL TRADE

______________________________ : UNITED STATE S, : : Plai ntiff, :

: v. : Court No. 02-00646 : Before: Judge Judith M. Barzilay OPTREX AMERICA, INC., : : Defendant. : ______________________________:

MEMORAN

DUM OP INION ANDORDER [Plaintiff’s motion requesting leave to amend its complaint to add new counts is denied.] Dated: December 15, 2005 Peter D. Keisler , Assistan t Attorne y G eneral ; David M. Cohen , Director, ( Patricia M. McCarthy ), Assistant Director, Commercial Litiga tion Branch, Civil Division, U.S. Department of Justice ( Stephen C. Tosini ); Frederic k B. Smith , Assistan

t Chief Cou

nsel, Bu reau of Customs and Border Protection, of counsel, for the plaintiff. Sonnenberg &Anderson ( Steven P. Sonnenberg and Michael Jason Cunningham ) for the defendant.

Barzilay, Judge: I

n this 19 U.S.C. § 1592 penalty action, Plaintiff, the United States Bure au of Customs and

Border Protection (“Custom s” or “g overnme nt”), mov ed for le ave to am end its complain t pursuan t to USCI T Rule 15( a). Plain tiff see ks to add two additional claims agains t Defend ant, O ptrex Ameri ca, Inc. ( “Optr ex”). Speci fical ly, the gov ernmen t want s to ch arge Opt rex wit h hi ghe r le vel s of cul pab il it y tha n i ni ti all y cla im ed – gro ss neg li gen ce a nd f rau d. InCourt No. 02-646 Page 2

connection with these new claims, the government also see ks to add new entries. For the reasons outlined below, the court DENIES Plaintiff’s motion. BACKGROUND Customs initiated its penalty proceedings a gainst Optrex in May 2002, issuing aprepenalty notice pursua

nt to 19 U.S.C. § 1592(b)(A), which alleged that Optrex’s neglig ence resulted in a violation. The pre-penalty notice charged Optrex with providing insufficient information in the entry docume nts to enable Customs to determine the correct classification of its imported liquid crystal display (“LCD”) products. I

n response to the pre-penalty notice, Optrex claimed that it had exercised reasonable care by consulting its counsel, its broker, and Customs about the correct classification. Ex. H10 at 5-9, 12. Optrex furnished Customs with a “decision tree,” a classification scheme tha t reflected the company ’s classification policies. Ex. H10 at 7. Customs rejected Optrex’s reasonable care de fense on the basis “that reliance on a broker or exporte

r alone m ay

not be suf

ficient t o show tha

t an import

er exerc ised rea sonable care.” Ex. H12 at 5 (ci ting United Sta tes v. Go lden Ship , 25 CIT 40 (2001)). Customs noted that it did not have “persuasive evidence that during the subject time period the petitioner sought or received expert advice from any of the outside sources it identified.” Ex. H12 at 6. Customs was also “unaware of any

persuasive evidence establishing what spec ific advice these sources allegedly provided the petitioner.” Ex. H12 at 6-7. It concluded that the a lleged misclassification amounted to more tha

n a profe ssional dis agree

ment giv en the “[n ]umerous c ustoms ruli

ngs, courts decisions, and informed compliance publications issued reg arding the classification of LCDs.” Ex. H12 at 6. It also believed that Optrex developed the de cision tree after filing theCourt No. 02-646 Page 3

entries and only for

the purpose of satisfy

ing Customs, since “the petitioner has not produced any evidence that the decision tree method was ever used by any

one at Optrex to determine a classification.” Ex. H12 at 6-7. The final penalty claim against Optrex was based on negligence. The government initiated this action in October 2002, claiming that be tween October 12, 1997, and June 29, 199 9, Optre x introduce d into the c ommerce of the Un

ited State s certa

in LCD products by means of

negligent material false stateme nts in violation of 19 U.S.C. § 1592. Plaintiff’s original complaint was premised on the theory of negligent misclassification of the LCD products under HTSUS heading 8513, instead of HTSUS heading 9013, in violation of the Federal Circuit’s decision in Sharp Microelecs. Tech., Inc. v. United States , 122 F.3d 1446 (Fed. Cir. 1997). See Compl. ¶¶ 10-12. In this motion, Plaintiff avers that it unearthed evidence establishing a basis for fraud and
gross ne glige

nce cla ims under section 1 592 follow

ing this c ourt’s or

der comp elling O

ptrex to reveal certain of its attorney -client communications. See United States v. Optrex , Slip Op. 04-79 (CIT July 1 , 2004) (“ July 2 004 orde r”); Pl.’s Mot. Requesting Leave Amend Compl. at 3. Based on the disc overy

of this ne w evidence, the governme nt now see

ks leave to amend i

ts complai

nt to plead penalties for fraud and gr oss negligence and to rea ch back to capture entries made by Optrex starting in January 1997. The government argues that prior to this discovery , it attempted to obtain information conce rning th e substan

ce of the legal a dvice tha t Optrex re ceived f

rom itsCourt No. 02-646 Page 4

1 For its reasonable care def ense, Optrex claimed that it consulted with an attorney having expertise about the subject merchandise. The legislative history to the North American Free Trade A greement I

mplementa

tion Act, Pub. L . No. 103- 182, 107 Sta t. 2057 (19 93), note d that in seeking advice for a classific ation issue, an importer is expected to consult with an attorney having technical expertise, provide the expert with full and complete information suff icient for the expert to make entry or to provide advice as to how to make entry . H. Rep. No. 103-361(I) at 120 (1993), as reprinted in 1993 U.S.C.C.A.N. 2552, 2670. The Ways and Means Committee noted that “an honest, good faith professional disag reement as to correct classification of a technic al matter

shall not b e lack of

reasona ble car e unless s uch disag reemen t has no re asonable basis.” Id. counsel in order to evaluate Optrex’s reasonable c are defense. 1 Optrex apparently withheld such information until the court’s July 2004 order. At an evidentiary

hearing held on February 17, 2005, the government proffered thre e letters f rom Optre

x’s counse l to Optre x containin g leg al advic e on the LCD produc ts classifi cation a

nd the dep osition of a

former O ptrex employe e stating

that Optr ex consiste

ntly chose to classify its products under lower tariffs. See Ex. H1 , Ex. H2 , Ex. H3 . The government avers that this evidence forms a basis for its belief that 1) Optre x disregarded its counsel’s advice, 2) Optrex had knowin gly misclassi fied the

subject e ntries of LCD pr oducts an d kept a separate account upon its books and records base d on the amount of duties that it should have paid, 3) t he “dec ision tree ” was cr

eated a s a cover

up. The g overnme

nt claims t

hat Customs

did not have sufficient basis to pursue the claims of gross neg ligence and fraud during

the administrative proceedings because this information wa s not discoverable in the administrative
procee dings, a

nd, there fore, it should be a llowed to a

dd two add

itional co unts for g ross negligence and fr

aud against Optrex.Court No. 02-646 Page 5

DISCUSSION USCIT Rule 15(a

) provide s that the c ourt shoul d gran t a party ’s motion f

or leave to amend its complaint “freely . . . when justice so requires.” USCIT R. 15(a ). The court decides such motions on a case-by -case basis, considering a varie ty of factors, including “(1) the timeliness of the motion to amend the pleadings; (2) the potential prejudice to the opposing party; (3) whe

ther additional discovery

will be necessary ; [and] (4) the procedural posture of the litigation.” Budd Co. v. Travelers Indem. Co. , 109 F.R.D. 561, 563 (E.D. Mich. 1986) (citation omitted). In thi s case, Pl aintiff i s seeking to amend i

ts complai

nt to add tw o additional claims agains t Defend

ant, main taining that it did n

ot have a basis to pu

rsue hig her leve ls of culp ability at the administrative level. In this case, the thr eshold issue turns on whether the Department of Justice ca n bring a “civil pe nalty ” action pursuant to 19 U.S.C. § 1592(e ) to rec over a pe nalty claim for a type

of violation – namely, g

ross negligence or fr

aud – not made before the age ncy. See 19 U.S.C. § 1592 (2004). Because section 1592 provides for spec ific administrative proceedings prior to the commencement of a recovery action before the court, this inquiry directly conc erns the court’s exercise of jurisdiction over penalty claims that were not pursued at the administrative level. The court has “exclusive jurisdiction of any civil action which arises out of an i

mport tra nsaction and which is commen

ced by the Unite d States . . . to reco ver a ci vil penalty under [19 U .S.C. § 1592 ].” 28 U.S.C . § 1582. I n a secti on 1592 action, the c ourt must, “where appropriate, require the exhaustion of administrative remedies.” 28 U.S.C. § 2637. The government claims that section 1592 does not prevent it from bringing claims before this Court for increased culpability levels because the relevant provisions of the law provide for aCourt No. 02-646 Page 6

2 19 U.S.C. § 1 592(e) s tates: Notwithstanding any othe r provision of law, in any pr oceeding commenced by

the United States in the Court of International Trade for the recovery

of any monetar

y penalty claimed unde

r this section-- (1) all issues, including the amount of the penalty , shall be tried de novo; (2) if the monetary

penalty is based on fr

aud, the United States shall have the burden of proof to establish the alleged violation by clear and convincing evidence; (3) if the monetar y pe nalty is based o n gross neglig ence, th e United S tates sha ll have the burden of proof to establish all the elements of the alleg ed violation; and (4) if the monetary

penalty is based on ne gligence, the United States shall have the burden of proof to establish the act or omission constituting the violation, and the alleged violator shall have the burden of proof that the act or omission did not occur as a result of neglig ence. de novo standar

d of revi ew in penalty

actions. 2 “[S]o long a s the Unite d States commences a section 1592 action, there is no limitation upon the “issues” addressed or the “amount of the penalty.” Pl. Br. 11-12 (emphasis in original). Plaintiff thus maintains that the level of culpability is one of the issues that this Court decides independe nt of the administrative proceedings underly

ing each penalty

action. The court, however, disagre es with the government’s reading of se ction 1592 with respect to its definition of a “penalty claim.” 1. Section 1592 Section 15 92 deline ates the administr

ative pr ocedura l require ments for Customs’ pe

nalty proceedings. See 19 U.S.C. § 1592(b) (2004). When it has “reasonable cause to believe that there ha s been a v

iolation,” Customs has

to first iss

ue a pre -penalt

y no tice “of

its intentio

n to issue a claim for a monetary penalty.” Id. The pre -penalt y no tice must: (i) describe the merchandise; (ii) set forth the details of the entry or introduction, the attempted entry or introduction, or the aiding or procuring of the e ntry or introduction; (iii) specify

all laws and regulations allegedly violated;Court No. 02-646 Page 7

(iv) disclose all the material facts which establish the alleg ed violation; (v) state whether th e allege d violation

occurre d as a resul

t of fraud, g

ross negligence, or negligence ; (vi) state the estimated loss of lawful duties, taxes, and fees if any, and, taking into account all circumstances, the amount of the proposed monetary penalty; and (vii) inform such person that he shall have a reasona ble opportunity to make repres entation s, both ora

l and writ ten, as to why a claim f or a mone tary penalty should not be issued in the amount stated. § 1592(b)(1)(A) (emphasis added). “A fter considering representa tions, if any” made by

the importer, upon Customs’ determination that a violation has occurred, Customs has to issue a “penalt y c laim,” wh

ich “spe cif[ies] al l chang es in the information provide d under c lauses ( i) through (vi) of paragr

aph (1)(A).” § 1592(b)(2) Following the mandatory issuance of a “written penalty claim,” the importer is afforded an opportunity to “make r epresentations . . . seeking remission or mitigation of the monetar y penalty” unde

r 19 U.S.C. § 1618. Id. Finally, Customs provides the importer with a wr itten statement “which sets forth the final determination and the findings of fact and conclusions of law on whi ch such d

etermina tion is base d.” 19 U.S .C. § 1592. If th e liable i mporter f ails to petition for relief or to pay the penalty, Customs can then re fer the case to the Department of Justice. See 19 C.F.R. § 162.32. The language of sec

tion 1592 evidences that the level of culpability forms the core around which the government must construct each pena lty claim it wishes to bring: Eac h level of culpability ge

nerates a new separate c laim. Subsection 1592(b) makes the level of culpability an essential element of the “violation” for which a “pena lty” is claimed. See § 1592(b)(1)(A)(v). Subsection 1592(c) sets out the maximum monetary penalty for each ty

pe of violation – negligence, g

ross negligence, and fr

aud – treating each as a diff erent “civil penalty .” SeeCourt No. 02-646 Page 8

3 Cf. Things Remembered, Inc. v. Petrarca , 516 U.S. 124, 127-28 (1995) (explaining applica tion of this

rule of c onstruct

ion in inter

preting two subse ctions of

statute) . “This [ in pari materia ] principle of statutory construction provides that leg islative intent ‘is to be deduced from the whole statute and every material part of the same.’” Dal-Tile Corp. v. United States , 17 C.I.T. 764, 768, 829 F. Supp. 394, 397 (1993) (citations omitted).

4 Such interpretation views section 1592(e) as crea ting a cause of action for the United States to enforce a penalty claim before this Court. Customs’ own regulations do not shed light on how to in

terpret the statu

te, but re fer to the

procee dings be fore this

Court as “ civil enforc ement” o f section

1592 clai ms: A monetary pe

nalty incurre d under section 592 . . . may be remitted or mitigated under section [19 U.S.C. § 1618] . . ., if it is determined that there are mitigating circumstances to justify r emission or mitigation. . . . The guidelines below will be used by the Customs Service in arr iving at a just and reasonable assessment and disposition of liabilities arising under section 592 within the stated limitations. . . . The assessed penalty

or penalty amount set for th in Customs administrative disposition determined in accordance with these guidelines doe s not limit the penalty amount which the Government may seek in bringing a civil enforcement action pursuant to section 592(e). 19 C.F.R. Pt. 171, App. B (emphasis added). 19 U.S.C. § 1592(c). In addition, reading section 1592(e) in pari mate ria 3 with section 1592(b), the lang uage “ any monetar y pe nalty claimed” before this Court r

efers b ack to the

“writte n penalty claim” issued in the administrative proceedings, sugg esting that it is the same claim. The term “recovery ” underscores that a 1592 action before this Court is an enforcement suit allowing the
gover nment to re cover on

a claim th at it perf

ected in the admin

istrative procee dings. 4 See 19 U.S.C. § 1592. The gov ernment

argue s that the “

notwithsta

nding a ny o ther pro vision of la

w” clau se combined with the de novo review provision enforces its argument that “ as long as the United States commences a section 1592 action, there is no limitation upon the ‘issues’ addressed or the ‘amount of the penalty .’” Pl. Br. 11-12. Th e “notwit hstanding any other pr ovision of law” cla useCourt No. 02-646 Page 9

5 Section 1592(b)(2) provides for a mitigation procedur e following the agency ’s written penalty claim and the

n final determination: The written penalty

claim shall specify a

ll changes in the information provided under clauses (i) throu gh (vi)of para

graph (1)(A) . Such person shall h ave a re asonable opportunity under section 1618 of this title to make re presentations, both oral and written, seeking remission or mitigation of the monetary penalty. At the conc lusion of any proceeding under such section 1618, the Customs Service shall provide to the person concerned a written statement which sets forth the f inal determination and the findings of fact and conclusions of law on which such determination is based. 19 U.S.C. § 1592(b)(2). gener ally “connote s a legi slative in tent to disp lace an

y ot her prov ision of la w that is c ontrary

to the [statute].” Shoshone Indian Tribe of Wind River Reservation v. United States , 364 F.3d 1339, 1346 (2004). The “notwithstanding any other provision of law” clause in section 1592 modifies each of the four subpara graph s that foll ow the cla use: subpa

ragra ph (1) ad dresses de novo review; subparagraphs (2) to ( 4) address the burden of proof for ea ch type of violation. For example, the modification of the de novo standar d of revi ew by

the “notw

ithstandin g” cla use emphasizes lack of deference to Customs’ final determination, including its findings of fact under section 1592(b)(2). 5 The cour t’s power to revie w penalty claims de novo under 19 U.S.C. § 1592(e) ensures that the defendant rec eives a hearing without any deference to the age

ncy’s findings, placing the burden of proof on the government. However, the de novo standard refers to the issues in the context of a specific claim based on one of three ty pes of section 1592 violations and does not allow the court to review entirely new penalty c laims. Finally , a meani ngful in terpretation of a

statute mu st take int

o accou nt the stat ute’s ba sic
purpose. See Dole Food Co. v. Patrickson , 538 U.S. 468, 484 (2003). The statute was designed to give an importer an opportunity to fully resolve a pe

nalty procee ding before Customs, before
any action in this Court:Court No. 02-646 Page 10

6 The Customs Courts Act of 1980 substituted the text “proceedings commenced by the United States in the Court of International Trade ” for “proceedings in a United States district court commenced by

the United States pursuant to section 1604 of this title” in section 1952(e). See Pub. L. 96-417 If the customs officer issues a penalty claim and the

importer petitions for mitigation under [19 U.S.C. § 1618], then the importer would have the opportunity to make written and ora l representations to the service. Notice of the final decision in a mitigation proceeding, including f indings of fact and conclusions of law, would be required to be sent to the importer. This provision would enact into law existing practice with several chang es: (1) the importer would have the right to make representa tions in a mitigation proceeding before any decision on mitiga

tion is made , and (2)the service would be requi red to supply the importer with a detailed e xplanation of the factual and legal basis for its mitigation decision. If an importer ref

uses to pay a sec

tion 592 monetary penalty and is sued by the United States in a district court 6 , all issues, including the appropriateness of the pena lty a mount, wou

ld be cons idered by th e court. S. Rep. 95-778, at 19-20 (1978), as reprinted in 1978 U.S.C.C.A.N. 2211, 2230-31. Thus, the legisla tive histor

y su pports the analy sis that the

administr

ative pe nalty claim und

erlies th e suit brought by the

United States under section 1592(e).

2. Exhaustion of Administrative Remedies The government alternatively argues that the Court should waive the exhaustion of administrative remedies in this case and allow it to add its claims of gross neg ligence and fraud. At the hearing, by

way of testimonial and doc umentary evide

nce, and through its submission of supplemental documents, the government demonstrated that Customs did not have sufficient bases to pursue fraud on the administrative level because it could not have discovered relevant evidence prior to the court’s July 2004 order. After careful examination of the law, howe ver, the court declines to waive the exhaustion of administrative remedies because the remedies involvedCourt No. 02-646 Page 11

in this case are mandated by the statute. The relevant statute provides that “[i]n any civil action not specified in this section, the Court of International Trade shall, where appropriate, require the e xhaustion of administrative remedies.” 28 U.S.C. § 2637. The government arg ues that by excluding sec tion 1592 actions from the mandatory

exhaustion requirement, Congress intended that the Court not be constrained by the penalty

notice issued by Customs. I ndeed, in some penalty a

ctions, where “sufficient compliance with the statutory pr ocedures was found,” the courts have w aived certain aspects of administrative procedures under section 1592(b). United Sta tes v. Ae gis Sec. I ns. Co ., Slip Op. 05-278, a t 3, 2005 WL

2740876 ( CIT O ct. 24, 20 05) (den yin g defe ndant’s motion to dism

iss duty collecti on suit des

pite pend ing admi nistrativ e proce edings w

ith respe ct to pena

lty c laims, fi nd in g t ha t c ol le ct io n o f d ut ie s m ay p ro ce ed wh et he r o r n ot pe na lt ie s a re as se ss ed ). Imp or ta nt ly, with one exception, the exhaustion of administrative remedies has been waived reg arding procedural requirements under Customs’ reg ulations, not the statutory requirements of se ction 1592. See, e.g ., United States v. Maxi Switch, Inc. , 22 CIT 778, 785, 18 F. Supp. 2d 1040 (1998) (finding that Custom s’ prema

ture re ferra

l of case to Depar tment of Just

ice was harmless b ecause of importer’s untimely filing of its supplemental petition); United Sta tes v. Ob ron Atl. Cor p ., 18 CIT 77 1, 775-76 , 862 F. Su pp. 378, 38 2 (CI T 1994) ( finding jurisdict ion wher e Customs improperly imposed seven- day response period because defendant was not depr ived of opportuni ty to be hear d as it submi

tted mate rials and made ora l repre sentation s followin g both
pre-pe nalty and pena lty n otices); United States v. Modes, Inc ., 13 CIT 780, 785, 723 F. Supp. 811, 815 (1989) (finding jurisdiction where Customs did not respond to supplemental petitionCourt No. 02-646 Page 12

because defendant was not deprived of opportunity to be heard a s it made oral presentation and was provided with written determination stating findings of fac t and conclusions of law supporting decision to mitigate). In one case, the F ederal Circuit waived a statutorily prescribed administrative requirement. See United States v. Priority Prods., Inc. , 79 3 F. 2d 2 96, 299 (Fe d. C ir. 198 6). In Priority P

roducts , the Federal Circuit found that, although the pena lty claim in that case wa s originally a ssessed against the company and not its shareholders personally , the shareholders were on notice of the penalty assessed against their company and could be directly

sued in the penalty action. Id. The Federal Circuit concluded that “nothing in [§ 1592] or its legislative history demonstrate [sic] that Congress intended to nar rowly circ

umscribe the subject matter jurisdict ion of [this Co

urt] to enc ompass onl

y those suits b rought by th e Gover nment ag ainst parties expressly named in the a dministrative proceedings.” Id. Specifically, the Court of Appeals stated that “so long as some ‘civil penalty exists’ the Court of International Trade ca n assume ju risdictio n over an

y c omplaint to

recove r that pe nalty , and the i ssue of w

ho is ultima

tely responsible for pay

ment of the penalty is subject to de novo consideration.” Id. This case is distinguishable, however, because the F ederal Circuit considered how Customs could “preserve its right to sue all possible parties” when pursuing a penalty action against a corporation. Id . at 300.
In the

pending case, th e court d

eclines the gov ernment ’s invitat ion to waiv e statutor

ily prescribed administrative procedures bec ause no precedent supports waiving all statutory require ments for a partic ular cla im. Such a wa

iver wou ld requir e the cou rt to cons ider a c laimCourt No. 02-646 Page 13

7 In c onnection with its fr aud clai m, the go vernmen

t’s propo sed amen

ded compl aint also seeks to a dd new en

tries of s ubject me rchandi se that we

re made in the fir st half of

1997. The se new entries were not part of the pre- penalty or pena

lty notices. As the court finds that sec tion 1592 does not permit the government to add different leve ls of culpability not pursued on the administr ative lev el, addit

ion of new

entries i n connection with th e gove rnment’s fraud c laim is not an issue in this ca se. Howe ver, as w ith the lev el of cul

pability , the iden tity of each entry is a central element of any

penalty claim. See 19 U.S.C. § 1 592(b) ( requirin g that Cu stoms “set

forth the details of the entry

or introduction” of subject merchandise in pre-pena lty notice). The gover nment ca nnot by pass this u

nambigu ous statutory

provision

as it ensu res that a n importer

is on notice of which entries it is responsible for in a section 1592 penalty enforcement action. Cf. United States v. Rotek, Inc ., 22 C.I.T. 503, 508, 509-10 (1998) (not reporte d in F. Supp.) (retain ing juri sdiction w

here imp orter c laimed “shifting , inconsis tent clai ms” in pre -penalt

y notice, penalty notice , and mitigation decision, noting that items included in complaint were “the exact items described in the penalty notice and the mitigation decision”). that did not go through administrative proceeding s, vitiating the entire statutory framework. 7 Additionally, bringing

a new gross neglige

nce or fraud claim would require more tha n just an exhaustion of administrative remedies; it would result in denial of the protections afforded by the statute of limitations.

3. Statute o f Limitat ions The government sugge sts that due to Defendant’s concealment of information on the administrative level, it was unable to obtain information to pursue a gross negligence claim. At the evidentiary he aring, Customs demonstrated that it could not have discovered evidence of
gross ne glige

nce duri ng the f ive-y ear wind ow. Howe

ver, this argume nt is not re levant in

this case be cause Co ngress

specific ally

establish ed a stat

ute of limi

tations of five y ears fr om the dat

e of entry of subje ct merchandise for neglig ence and gross neglig ence claims. See 19 U.S.C. § 1621(1). The statute of limitations is designed to ensure that penalty proceedings are conducte d with reasonable dispatch and that penalty claims have finality a

fter a certain date. This five-y earCourt No. 02-646 Page 14

statute of limitations

for brin ging a penalty action e nables th e gove

rnment to c omplete f

ull administr ative pr oceedin gs: cond uct inves tigation , issue a pre-penalty notice, a notice of penalty claims, and 19 U.S.C. § 1618 mitigation procedures. I n this case, the importer refused to waive the rele vant statu te of limita

tions of fi ve y ears fr om the dat

e of entr y f or neg ligenc e and g

ross negligence claims in response to Customs’ reque st, and Customs was on notice that it would not be able to pursue gross neglig ence after five y ears for all entries it investigated. Congress specifically

has addressed cases where importers act in bad faith and conceal informat ion that is l ater disc overed by pr oviding t hat the sta

tute of lim

itations f or frau d claims begins to run from the date of discovery of fraud. See 19 U.S.C. § 1621(2). Cf. US JVC Corp. v. United States , 22 CI T 687, 691, 15 F. Supp . 2d 906, 91 1 (1998) ( “The doctrine of e quitable tolling permits a plaintiff to avoid the bar of a statute of limitations, if ‘despite all due diligence , [the plaintiff] is unable to obtain essential information concerning the existence of [his] claim.’” (quot ing Wed

del v. Sec’y of He

alth and Hu man Serv

s. , 100 F.3d 929, 931 (Fed. Cir. 1996)). Thus, eve n if the g overnme

nt proves that it did n

ot have a ccess to certain informat ion that le d to its discovery of a ba sis to pursue gross negligence until five years f

rom the date of the last entry at issue in this case , waiving

the statut e of limita

tions for g

ross neg ligenc e is not ap

propria te where allegedly

fraudulent concealment is involved and pursuing a f raud claim remains an option. The discovery of fraud rule ensures that the gover nment will not lose out on revenue when fr aud is invo lved. I

n this cas e, the g overnme nt would ha

ve five y ears fr om the dat

e it discovered the alleged fra ud to sue Optrex on that claim. However, prior to that it must perfect its fraud claim by conducti ng the st atutorily require d proced

ures.Court No. 02-646 Page 15

CONCLUSION Section 1592 provides for a mandatory issuance of a “written penalty claim,” which underlies a recovery

action before this Court. The level of culpability is an inextricable part of a particu lar pena lty c laim issue d pursuan

t to section 1592(b) (2), and allowing the gov ernment

to amend its complaint to include penalty cla ims that have not been perfected through the administrative process would be contrary to the statutory scheme a nd the statute of limitations. Further more, de spite the t

iming of the disco very

of new e vidence , this cas e does no t merit a

wa iv er of ad mi ni st ra ti ve re me di es . T he re fo re , i t i s h er eb y ORDERED that Plaintif

f’s motion

for lea ve to ame nd its comp laint to ad

d the culp ability levels of fraud and gross neg ligence and new entries is DENI ED.

December 15, 2005 /s/ Judith M. Barzilay

_____________________________ ______________________________ New York, NY Judi th M. Barzi lay, Jud ge