Court Opinion

ID: 819139
Source: CourtListenerOpinion
Date Created: 2013-02-04 06:05:00.833177+00
Date Added: 2024-06-11T15:26:52.956597
License: Public Domain

Slip Op. 02-12

                UNITED STATES COURT OF INTERNATIONAL TRADE

Before: Judge Judith M. Barzilay
_________________________________________ x
FRONTIER INSURANCE COMPANY (Surety for :
Imagereader, Inc., dba Info Peripherals, Inc.)
                                               :
                      Plaintiff,                             Court No. 00-09-00470
       v.                                      :

THE UNITED STATES OF AMERICA,                        :

                       Defendant                 :
_________________________________________ x
[Plaintiff’s Motion for Summary Judgment denied. Defendant’s Motion for Summary Judgment
granted]

                                                             Decided: February 4, 2002

Law Offices of John M. Daley and Glad & Ferguson P.C., (John M. Daley), for Plaintiff.

Robert D. McCallum, Jr., Assistant Attorney General, United States Department of Justice; John
J. Mahon, Acting Attorney in Charge, International Trade Field Office United States Department
of Justice, (Amy Rubin); Beth C. Brotman, Office of the Assistant Chief Counsel, International
Trade Litigation, U.S. Customs Service, of Counsel, for Defendant.

                                           OPINION

BARZILAY, JUDGE:

                                        I. INTRODUCTION

               This case is before the court on cross-motions for summary judgment. Plaintiff

(“Frontier”) was the surety for the importer. Pursuant to 19 U.S.C. § 1304 (1998), Defendant

(“Customs”) required that Frontier pay a 10% marking duty for the alleged failure of its client to

properly mark the country of origin on the retail packages of imported computer scanners.
Court No. 00-09-00470                                                                    Page 2

Frontier commenced this action for a refund of the marking duties claiming that the imported

merchandise at issue was properly re-marked prior to liquidation. Frontier asserts that Customs

(1) cannot prove the merchandise was not properly re-marked, (2) is not authorized to assess

marking duties on its theory that the importer failed to obtain a release from Customs verifying

that the merchandise was properly re-marked, (3) cannot recover marking duties because the

importer failed to hold the merchandise pending receipt of a release from Customs, and (4)

should have issued a Notice to Redeliver which would have caused Customs to verify the

accuracy of the re-marking of the merchandise. Customs argues that it never received the

required certification from the importer that the merchandise was properly re-marked and that the

importer failed to comply with the relevant statutory and regulatory requirements including the

Notice to Mark. Therefore, Customs alleges it properly assessed a 10% marking duty on the

imported merchandise. This court has jurisdiction pursuant to 28 U.S.C. § 1581(a) (1994).

                                        II. BACKGROUND

       At issue before this court is an entry of imported computer scanners from China. The

computer scanners were imported by Imagereader, Inc., dba Info Peripherals, Inc. (“importer”) on

July 28, 1998, at the Port of San Francisco under entry number K80-0848683-0. The following

facts are not disputed. Frontier acted as surety for the importer and bonded the imported entry at

issue. The retail packages of the scanners were not properly marked to identify the country of

origin. On July 30, 1998, Customs sent the importer a Notice to Mark (Customs Form 4647)

which stated: “[r]etail packaging must be marked with the country of origin. Whenever a U.S.
Court No. 00-09-00470                                                                         Page 3

address is shown the country of origin must be in close proximity in letters of at least equal size.”

See Def.’s Cross-Mot. for Summ. J. (“Def.’s Br.”) at 1.

       According to Jeff Ghielmetti, Vice President of Operations for the importer, the marking

problems were corrected. Aff. of Jeff Ghielmetti (“Ghielmetti Aff.”) at ¶ 3. In his affidavit, Mr.

Ghielmetti declares that he personally signed the “Importer Certification” portion of the Notice to

Mark and mailed the original certification to his broker and a copy to Customs in San Francisco.

Ghielmetti Aff. at ¶ 6. However, the Customs commodity team in San Francisco denies having

received the certification from the importer. Declaration of Brian Carter at ¶ 6. Thus, on June

15, 1999, Customs sent a Notice of Action (Custom Form 29) notifying the importer and its

broker that Customs proposed to liquidate the entry with a 10% marking duty for failure to mark

unless Customs received a response from the importer within 20 days. Since neither the importer

nor the broker responded to the Notice of Action, Customs reliquidated the entry on July 23,

1999, with a 10% marking duty.1 Sometime after it responded to the Notice to Mark and before

the Notice of Action issued, the importer went out of business. Therefore, Customs demanded

that Frontier pay for the marking duties owed on the imported scanners. Frontier filed a timely

protest which was denied because the importer failed to (1) provide a signed release from

Customs that the re-marking was approved and (2) hold the merchandise until receiving a

written release from Customs. Def.’s Br. at 3. Following the protest denial, on August 14, 2000,

Frontier paid the marking duties in accordance with Customs’ payment demand and filed this

action seeking a refund of $41,386.30, plus interest from Customs.

       1
        As explained in Customs’ brief “the entry had been mistakenly liquidated ‘no change’
by Customs on June 11, 1999.”
Court No. 00-09-00470                                                                          Page 4

                                         III. STANDARD OF REVIEW

       Summary judgment is appropriate when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show that 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). Moreover, summary judgment is a favored procedural device ‘“to secure

the just, speedy and inexpensive determination of every action.’” Celotex Corp. v. Catrett, 477

U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1); Sweats Fashions, Inc. v. Pannill Knitting Co.,

833 F.2d 1560, 1562 (Fed. Cir. 1987). Whether a disputed fact is material is identified by the

substantive law and whether the finding of that fact might affect the outcome of the suit. See

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “Civil actions contesting the denial

of a protest. . .” shall be tried de novo. 28 U.S.C. § 2640(1)(a) (1994).

                                           IV. DISCUSSION

       The requirements for the proper marking of merchandise imported into the United States

are specified at 19 U.S.C. § 1304 which states in pertinent part:

               (a) Marking of articles

               Except as hereinafter provided, every article of foreign origin (or its container, as
               provided in subsection (b) hereof) imported into the United States shall be marked
               in a conspicuous place as legibly, indelibly, and permanently as the nature of the
               article (or container) will permit in such a manner as to indicate to an ultimate
               purchaser in the United States the English name of the country of origin of the
               article.

                ....
Court No. 00-09-00470                                                                       Page 5

              (h) Additional duties for failure to mark

               If at the time of importation any article (or container, as provided in subsection
              (b) of this section) is not marked in accordance with the requirements of this
              section, and if such article is not exported or destroyed or the article (or its
              container. . .) marked after importation in accordance with the requirements of
              this section (such exportation, destruction, or marking to be accomplished under
              customs supervision prior to the liquidation of the entry covering the article, and
              to be allowed whether or not the article has remained in continuous customs
              custody), there shall be levied, collected, and paid upon such article a duty of 10
              per centum ad valorem, which shall be deemed to have accrued at the time of
              importation, shall not be construed to be penal, and shall not be remitted wholly or
              in part nor shall payment thereof be avoidable for any cause.

The Customs regulations found in 19 C.F.R. § 134 (1998) detail further requirements and

necessary action that an importer must undertake to properly mark the imported merchandise

after entry to avoid the assessment of a 10% marking duty.

              Articles not marked as required by this part shall be subject to additional duties of
              10 percent of the final appraised value unless exported or destroyed under
              Customs supervision prior to the liquidation of the entry. . . .

19 C.F.R. § 134.2.

              (a) Notice to mark or redeliver. When articles or containers are found upon
              examination not to be legally marked, the port director shall notify the importer on
              Customs Form 4647 to arrange with the port director’s office to properly mark the
              article or containers, or to return all released articles to Customs custody for
              marking, exporting, or destruction.

              ....

              (c) Supervision. Verification of marking, exportation, or destruction of articles
              found not to be legally marked shall be at the expense of the importer and shall be
              performed under Customs supervision unless the port director accepts a
              certification of marking as provided for in § 134.52 in lieu of marking under
              Customs supervision.
Court No. 00-09-00470                                                                         Page 6

19 C.F.R. 134.51(a), (c). To comply with the “supervision” requirement of 19 C.F.R. §

134.51(c) by a certificate of marking, the importer is obligated to act in accordance with the

requirements of 19 C.F.R. § 134.52.

               (a) Applicability. Port directors may accept certificates of marking supported by
               samples of articles required to be marked, for which Customs Form 4647 was
               issued, from importers or from actual owners complying with the provision of
               § 141.20 of this chapter, to certify that marking of the country of origin on
               imported articles as required by this part has been accomplished.

               (b) Filing of certificates of marking. The certificates of marking shall be filed in
               duplicate with the port director, and a sample of the marked merchandise shall
               accompany the certificate. The port director may waive the production of the
               marked sample when he is satisfied that the submission of such sample is
               impracticable.

               (c) Notice of acceptance. The port director shall notify the importer or actual
               owner when the certificate of marking is accepted. Such notice of acceptance may
               be granted on the duplicate copy of the certificate of marking by use of a stamped
               notation of acceptance. The port director is authorized to spot check the marking
               of articles on which a certificate has been filed. If a spot check is performed, the
               approved copy of the certificate, if approval is granted, shall be returned to the
               importer or actual owner after the spot check is completed.

19 C.F.R. § 134.52 (a)-(c).

       Frontier argues that Customs has failed to produce any evidence that shows that the retail

packages of the scanners were not properly marked in compliance with the Notice to Mark.

Frontier claims that the Affidavit of Mr. Ghielmetti supports a finding that the importer properly

marked the packages and mailed the signed certification to Customs. Ghielmetti Aff. at ¶¶ 3-6.

Similarly, notwithstanding Customs’ claim that it never received the certification, Frontier argues

that Customs lacks the authority to assess marking duties based upon the failure to provide a

signed release or upon the alleged failure of the importer to hold the merchandise prior to
Court No. 00-09-00470                                                                         Page 7

receiving a release from Customs. Frontier asserts that

                   under existing law, Customs’ sole remedy for the importer’s alleged violation of
                   its duty to ‘hold’ the merchandise in response to the Notice to Mark would have
                   been to issue a Notice to Redeliver the merchandise for the purpose of permitting
                   Customs to verify the accuracy of the certification of re-marking, and to assess
                   liquidated damages if it failed to do so.

Mem. of Points and Authorities in Supp. Pl.’s Mot. for Summ. J. (“Pl.’s Br.”) at 1. Additionally,

Frontier claims that Customs cannot prove that the importer failed to hold the merchandise

because Customs allowed 10 months to pass before acting on the Notice to Mark. The alleged

“delay” resulted in Customs’ inability to locate the importer after its business ceased.

                   The sole basis for the Customs’ claim that the importer “failed to hold the
                   merchandise” pending receipt of the release is the fact that “when the import
                   specialist called the involved Customs broker about why there was no response to
                   the marking notice [in June of 1999], he was advised that the importer was out of
                   business;” in other words the evidence only shows that Customs could not contact
                   the importer, not that the importer did not “hold” the merchandise.

Pl.’s Br. at 16.

        Customs claims that Frontier failed to comply with the specific statutory and regulatory

requirements of the Notice to Mark. Customs asserts

                   Frontier’s entire case rests on its assertion that the merchandise had been
                   physically re-marked in accordance with this section of the Notice to Mark.
                   While Frontier is correct that Customs could have assessed only liquidated
                   damages and not marking duties if the goods had been properly marked prior to
                   liquidation but beyond the 30 day period contained in the Notice to Mark, whether
                   marking is “proper” cannot be determined by the importer or its surety; “proper”
                   marking includes compliance with all statutory requirements.

Def.’s Br. at 12 (footnote omitted). Specifically, Customs claims Frontier failed to (1) comply

with the requirements of section 15 of the Notice to Mark, (2) re-mark the scanners “under the

supervision of Customs” as required by the regulations of 19 C.F.R. § 134, and (3) retain the
Court No. 00-09-00470                                                                            Page 8

merchandise until corrective action was accepted by Customs. Customs alleges that because of

these failures a 10% marking duty was properly assessed on the reliquidated merchandise.

       The parties do not dispute that the merchandise was not properly marked at the time of

importation. Therefore, the court must determine if the importer complied with the statutory and

regulatory requirements for re-marking the merchandise. As Customs correctly concludes,

§ 1304 mandates the assessment of a 10% marking duty when (1) at the time of importation an

article is not marked in accordance with the provisions of § 1304(a) and (2) the merchandise is

not exported, destroyed or re-marked under the supervision of Customs prior to the liquidation of

the entry. Furthermore, there are specific regulatory requirements the importer must comply with

before the merchandise can be released into the commerce of the United States. The importer

must (1) ensure that the merchandise is properly re-marked in accordance with 19 U.S.C. § 1304,

(2) re-mark the merchandise under the supervision of Customs “unless the port director accepts a

certificate of marking as provided for in § 134.52 in lieu of marking under Customs supervision”

and (3) wait for the re-marking to be reviewed or receive notification that the certificate of

marking has been accepted by the port director. 19 C.F.R. § 134.51(c). Until these requirements

are satisfied, it is the responsibility of the importer to physically retain the merchandise. This is

specifically stated in section 14 of the Notice to Mark “WARNING: all merchandise must be

retained until you are notified by Customs that corrective action is acceptable.” Additionally, the

Customs Form 4647 Information and Instructions document instructs the recipient of the Notice

to Mark to “[r]etain control of all merchandise described on Customs Form 4647 [Notice to

Mark]. The merchandise must be held intact; it cannot be moved or distributed until authorized

by the Customs Service.”
Court No. 00-09-00470                                                                           Page 9

       In this instance it is clear that the importer failed to comply with the statutory and

regulatory requirements. Frontier claims that Customs can neither prove that the merchandise

was not properly re-marked nor that importer did not retain the merchandise. The court does not

agree. Clearly, once the merchandise is determined to be improperly marked, it is the importer’s

responsibility to re-mark in accordance with the statutory and regulatory requirements. As in this

case, if Customs is willing to accept a certification of marking, the regulations clearly require that

the importer file the certificate of marking and retain the merchandise until Customs notifies the

importer that the re-marking is in compliance with the statutory requirements. See 19 C.F.R.

§ 134.51(a), (c); 19 C.F.R. § 134.52 (a)-(c). Customs must be able to verify the proper marking.

“The port director is authorized to spot check the marking of the articles on which a certificate

has been filed. If a spot check is performed, the approved copy of the certificate, if approval is

granted, shall be returned to the importer or actual owner after the spot check is completed.” 19

C.F.R. § 134.52(c). This is why the Notice to Mark clearly and specifically warns the importer to

retain the merchandise until Customs authorizes that the re-marking is proper. Frontier’s

position would allow the importer to “self-regulate” because the importer would then determine

if the merchandise was properly re-marked. This clearly contradicts the meaning and purpose of

19 U.S.C. § 1304 by removing the final authority for country of origin marking compliance from

the agency charged with that responsibility.

       Although there is a disputed issue of fact regarding whether Frontier did send the

certification to Customs, it is undisputed that the importer failed to obtain authorization from

Customs to release the merchandise into the commerce of the United States. Frontier’s claims

that (1) the importer sent the certification and (2) Customs failed to act on the Notice to Mark for
Court No. 00-09-00470                                                                        Page 10

10 months, does not allow it to avoid its obligation under the import bond that its client would

hold the merchandise and receive approval from Customs prior to releasing the scanners for

delivery to its customers. The burden was on the importer to ensure that it undertook the clearly

communicated, mandated corrective action to properly re-mark the retail packages of the

scanners. Similarly, if the importer was concerned with undue delay during this process, it

should have initiated contact with Customs. It could not unilaterally determine, contrary to the

clear terms of the Notice to Mark, that it did not need notification from Customs that its

certificate of marking was accepted.

       Finally, the court finds unpersuasive Frontier’s claim that Customs’ sole remedy was to

issue a Notice to Redeliver and assess liquidated damages if the importer failed to “hold” the

merchandise and allow Customs to verify the certification. In accordance with 19 C.F.R.

§ 134.51, the Notice to Mark tells the importer that it must either properly mark the merchandise

on the importer’s premises or return to Customs’ custody for marking, exportation or destruction.

If the importer does not take one of these actions within 30 days, or within such additional time

as the Port Director may allow, liquidated damages may be assessed in an amount equal to the

entered value of the merchandise. See 19 C.F.R. § 134.54. Although Frontier is correct that if

the merchandise had not been properly re-marked beyond the 30 day period contained in the

Notice to Mark then liquidated damages could have been assessed, it is not a requirement that

Customs send an additional Notice to Redeliver in order to assess the 10% marking duty.

        Frontier’s argument that Customs’ sole remedy was to send a subsequent Notice to

Redeliver and possibly assess liquidated damages for non-compliance incorrectly interprets the

regulatory scheme. As discussed above, an importer is subject to marking duties if it fails to
Court No. 00-09-00470                                                                        Page 11

properly re-mark the merchandise under the supervision of Customs. See 19 C.F.R. §134.51(c).

Similarly, Frontier’s assertion that Customs cannot prove that Frontier did not “hold” the

merchandise does not change the fact that the importer cannot show the required notification

from Customs that it accepted the importer’s certification. The court finds that the importer

failed to comply with the statutory and regulatory requirements for proper re-marking of the

scanners and that Customs properly assessed a 10% marking duty. Therefore, as surety Frontier

must pay that duty.

                                        V. CONCLUSION

       For the foregoing reasons, the court holds that Customs properly assessed a 10% marking

duty on entry number K80-0848683-0. Judgment will be entered accordingly.

Dated:___________________                            ___________________________
       New York, NY                                  Judith M. Barzilay
                                                     Judge