Court Opinion

ID: 817498
Source: CourtListenerOpinion
Date Created: 2013-02-01 01:53:11.206875+00
Date Added: 2024-06-11T12:55:24.399605
License: Public Domain

SLIP OP. 08-46

               UNITED STATES COURT OF INTERNATIONAL TRADE

                                                   :
UNITED STATES,                                     :
                                                   :
                      Plaintiff,                   :
                                                   :
              v.                                   :
                                                   :
CANEX INTERNATIONAL LUMBER SALES                   :      Before: Jane A. Restani, Chief Judge
LTD., AND XL SPECIALTY INSURANCE                   :
COMPANY,                                           :      Court No. 06-00141
                                                   :
                      Defendants.                  :

                                                   :
XL SPECIALTY INSURANCE COMPANY,                    :
                                                   :
                      Cross-Claimant,              :
                                                   :
              v.                                   :
                                                   :
CANEX INTERNATIONAL LUMBER SALES                   :
LTD.,                                              :
                                                   :
                      Cross-Defendant.             :

                                           OPINION

[Defendant’s motion to dismiss denied.]

                                                                           Dated: May 1, 2008

               Jeffrey S. Bucholtz, Acting Assistant Attorney General; Barbara S. Williams,
Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice (Aimee Lee); Christopher Shaw, Office of Assistant Chief
Counsel, Department of Homeland Security, U.S. Customs and Border Protection, of counsel, for
the plaintiff.

              Joel R. Junker & Associates (Joel R. Junker) for the defendant and
cross-defendant Canex International Lumber Sales Ltd.

              Sandler Travis Rosenberg Glad & Ferguson, PC (Thomas R. Ferguson), for the
COURT NO. 06-00141                                                                 PAGE 2

defendant and cross-claimant XL Specialty Insurance Company.

               Restani, Chief Judge: Between April 12, 2000, and October 23, 2000, defendant

Canex International Lumber Sales Ltd. (“Canex”) entered 151 entries of angle-cut lumber under

Harmonized Tariff Schedule of the United States (“HTSUS”) heading 4418.1 (Compl. ¶¶ 11,

23.) After entry, U.S. Customs and Border Patrol (“Customs”) classified the merchandise under

HTSUS heading 4407.2 (Id. at ¶¶ 13, 25.) Because Canex did not provide proof of the export

permits required for imports under heading 4407, Customs issued notice assessing liquidated

damages against Canex.3 (Id. at ¶¶ 17, 29.) Canex protested Customs’ classification of the

subject merchandise, and subsequently filed an action in this Court challenging Customs’

classification decision. See Canex Int’l Lumber Sales Ltd. v. United States, No. 02-00596.

While the classification case was still pending, plaintiff United States (“Government”) initiated

the current proceedings to recover liquidated damages.4 Canex moves to dismiss on the grounds

that the Government failed to exhaust administrative remedies prior to the commencement of this

       1
        Heading 4418 covers “[b]uilders’ joinery and carpentry of wood,” and is not covered by
the permitting requirements of the United States-Canada Softwood Lumber Agreement (“SLA”).
HTSUS 4418; (Compl. ¶¶ 12, 14, 24.)
       2
         Heading 4407 covers “[w]ood sawn or chipped lengthwise, sliced or peeled,” and is
subject to the SLA’s export permit requirements. HTSUS 4407; (Compl. ¶¶ 13–15, 25–27.)
       3
        The entries were secured by two separate bonds issued by cross-claimant XL Specialty
Insurance Company (“XL”). (Compl. ¶¶ 7–8.)
       4
         Although Customs indicated in a letter dated August 24, 2001, that it would withhold
further action on the liquidated damages claims until “resolution of the filed protest(s),” (Def.
Canex Int’l Lumber Sales Ltd.’s Mot. to Dismiss for Failure to State a Cl. (“Motion to Dismiss”)
at Ex. 1), the Government initiated the current proceedings to recover liquidated damages
following Canex and XL’s refusal to execute statute of limitations waivers as requested by the
Government in 2005. (See Compl. at ¶¶ 19, 31, Confidential Ex. 7.)
COURT NO. 06-00141                                                                   PAGE 3

action.5

               The court has jurisdiction pursuant to 28 U.S.C. § 1582(2). Dismissal will be

denied unless the factual allegations are “‘enough to raise a right to relief above the speculative

level on the assumption that all the allegations in the complaint are true even if doubtful in

fact.’” Corus Staal BV v. United States, 515 F. Supp. 2d 1337, 1345 (CIT 2007) (quoting Bell

Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1959 (2007)).

               Canex argues that the Government failed to exhaust administrative remedies by

commencing this action for liquidated damages without engaging in mitigation proceedings.

Under 19 C.F.R. § 172.1(b) and 19 U.S.C. § 1623(c), a principal or surety can petition Customs

for relief from payment of liquidated damages through such proceedings. See United States v.

Cocoa Berkau, Inc., 990 F.2d 610, 615 (Fed. Cir. 1993). Mitigation proceedings are voluntary

and informal, and relief is granted at the discretion of Customs. United States v. Ataka Am.,

Inc., 826 F. Supp. 495, 502 (CIT 1993) (holding that a “mitigation proceeding for liquidated

damages under 19 U.S.C. § 1623(c) . . . is voluntary”); Cocoa Berkau, 990 F.2d at 615 (“[T]he

determination whether to authorize cancellation of a bond under section 1623(c) falls within the

discretion of [Customs].”). Although exhaustion of mandatory administrative remedies is

generally required prior to action before the court, see 28 U.S.C. § 2637(d),6 mitigation

        5
        Canex mistakenly filed its motion to dismiss pursuant to USCIT R. 12(b)(6).
(See Motion to Dismiss at 1.) The court will treat the motion as filed pursuant to the proper
provision, USCIT R. 12(b)(5). See United States v. Ford Motor Co., Slip Op. 05-24, 2005 WL
400399, at *1 n.3 (CIT Feb. 18, 2005).
        6
       “[T]he Court of International Trade shall, where appropriate, require the exhaustion of
administrative remedies.” 28 U.S.C. § 2637(d).
COURT NO. 06-00141                                                                    PAGE 4

proceedings are permissive and need not be resolved prior to the commencement of a suit to

recover liquidated damages. Ataka, 826 F. Supp. at 502 (“These discretionary and informal

proceedings need not be resolved in order for the government to recover liquidated damages

under a bond through court action.”); Cocoa Berkau, 990 F.2d at 615 (“[N]othing in either the

express language or the legislative history of section 1623(c) indicates that Congress intended

that a bond surety be required to file a petition for mitigation or that such a petition must be filed

before the government can bring suit to recover liquidated damages.”). Accordingly, the

Government was not required to postpone its filing of the instant action until Canex exercised its

right to request mitigation proceedings.

               Canex’s reliance upon Warner-Lambert Co. v. United States, 24 CIT 205 (2000),

and United States v. Bavarian Motors, Inc., 4 CIT 83 (1982), is misplaced. Warner-Lambert

dismissed a complaint alleging threat of sanctions by Customs where sanctions proceedings had

not yet been initiated and Customs had denied its intent to seek sanctions for claims still under

active agency consideration. Warner-Lambert, 24 CIT at 205–10. Such is not the case here. As

discussed above, mitigation proceedings are not required prior to the commencement of an

action before the court, and the instant case is ripe for action. In addition, Ataka noted that

Bavarian Motors, which dismissed a suit for failure to exhaust administrative remedies, was

decided prior to the effective date of 19 U.S.C. § 1505(c), which gave the Government an

immediate right to sue for liquidated damages. Ataka, 826 F. Supp. at 503 (“[S]ince the

effective date of 19 U.S.C. § 1505(c), completion of protest proceedings has not been a

requirement for suit to collect.”). Even if Canex had protested the assessment of liquidated

damages, “the payment obligation runs independently of the protest proceedings.” Id.
COURT NO. 06-00141                                                                    PAGE 5

                 Finally, Canex asserts that it had not yet petitioned for mitigation proceedings

because the letter from Customs dated August 24, 2001, indicated that Customs would “continue

to update [the liquidated damages] cases with a holding status until resolution of the filed

[classification] protest(s).” (Motion to Dismiss at Ex. 1.) In subsequent correspondence dated

May 23, 2005, however, Customs noted that the six-year statute of limitations on its liquidated

damages claims was approaching,7 and requested a waiver of the statute of limitations from

Canex and XL. (Compl., Confidential Ex. 7 at 2.) Customs indicated its intent to pursue legal

action to protect its interests if the waiver was not executed. (Id.) Canex was therefore notified

of the possibility of further proceedings with regard to liquidated damages and had ample

opportunity to execute the statute of limitations waiver or petition for mitigation proceedings as

necessary. Canex’s argument that it was deprived of the opportunity to do so is therefore

without merit.

                 Accordingly, defendant Canex International Lumber Sales Ltd.’s Motion to

Dismiss is DENIED.

                                                                /s/ Jane A. Restani
                                                               Jane A. Restani
                                                               Chief Judge

Dated this 1st day of May, 2008.
New York, New York.

       7
        Under 28 U.S.C. § 2415(a), a complaint to recover liquidated damages must be filed
“within six years after the right of action accrues or within one year after final decisions have
been rendered in applicable administrative proceedings required by contract or by law,
whichever is later.” 28 U.S.C. § 2415(a); see also Ataka, 826 F. Supp. at 500.