United States v. Optrex America, Inc.

Slip Op. 06-73
UNITED STATES COURT OF INTERNATIONAL TRADE
______________________________
:
UNITED STATES, :
:
Plaintiff, :
:
v. : Court No. 02-00646
: Before: Judge Judith M. Barzilay
OPTREX AMERICA, INC., :
:
Defendant. :
______________________________:
MEMORANDUM OPINION AND ORDER
[Defendant’s Motion for Partial Summary Judgment is denied.]
Dated: May 17, 2006
Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director, (Patricia M.
McCarthy), Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department
of Justice (Stephen C. Tosini); Frederick B. Smith, Assistant Chief Counsel, Bureau of Customs
and Border Protection, of counsel, for the plaintiff.
Sonnenberg & Anderson (Steven P. Sonnenberg), M. Jason Cunningham, of counsel, for the
defendant.
Barzilay, Judge: In this 19 U.S.C. § 1592 penalty action based on a claim of
negligence, discovery has been completed, and Defendant, Optrex America, Inc. (“Optrex”),
moves pursuant to USCIT Rule 56 for partial summary judgment against Plaintiff, United States
(specifically, the United States Bureau of Customs and Border Protection) (“Customs” or
“government”). Arguing that there are no genuine issues of material fact, Optrex claims that it is
entitled to a judgment as a matter of law on the issue of its exercise of reasonable care in
Court No. 02-00646 Page 2
classifying subject merchandise. Customs counters that summary judgment is not appropriate
because there are issues of material fact with respect to Optrex’s exercise of reasonable care.
Pursuant to USCIT Rule 56(h), Optrex filed its Statement of Material Facts As to Which There
Are No Genuine Issues to Be Tried (“Optrex Statement of Facts”), and the government filed its
Counterstatement of Material Fact [sic] (“Gov’t Statement of Facts”). The court has exclusive
jurisdiction over this matter pursuant to 28 U.S.C. § 1582, which provides for judicial review of
civil penalties assessed under 19 U.S.C. §1592. Because there remain genuine issues of material
fact, Defendant’s motion is denied.
BACKGROUND FACTS AND PROCEDUR AL HISTORY
The government initiated this action in October 2002, claiming that between October 12,
1997, and June 29, 1999, Optrex introduced into the commerce of the United States certain liquid
crystal display (“LCD”) articles by means of negligent material false statements in violation of 19
U.S.C. § 1592. Specifically, Plaintiff claims that the LCD articles at issue1 were negligently
1
The government avers that the subject articles in this action consist of LCD panels.
Gov’t Statement of Facts ¶ 18 (stating that only LCD panels are at issue in this case); see Pl.’s
Resp. 3 (stating that “this case primarily involves LCD panels). In its response brief in
opposition to Defendant’s summary judgment, the government, however, seems to admit that
there is also a very small number of LCD character modules involved in this case. See Pl.’s
Resp. 24. Either side has yet to delineate which LCD products are precisely involved.
It should be noted that initially Customs’ complaint included LCD modules classifiable
under heading 8531, HTSUS; the government later amended its complaint to correct for clerical
mistakes and to exclude graphic LCD modules. See Def.’s Reply 13; Am. Compl.; 2nd Am.
Compl. According to Optrex’s chief engineer, Mr. Houck, LCD panels – also known as glass
sandwiches, glass panels or LCD glass panels – consist of two layers of glass, have no on-board
drivers, and function only by receiving codes from a computing unit. See, e.g., Houck Dep. 17:2-
10, Jan. 14, 2004. LCD modules, on the other hand, are equipped with on-board electronic
drivers. See Houck Dep. 23:24-15 (testifying that “the addition of some sort of row or column
driver” makes “an LCD module distinct from an LCD panel.”).
Court No. 02-00646 Page 3
misclassified under heading 8531, Harmonized Tariff Schedule of the Untied States (“HTSUS”),
instead of heading 9013, HTSUS, 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
The parties do not dispute that as entered, the subject LCDs were classified under heading 8531,
HTSUS. Optrex Statement of Facts ¶ 19; Gov’t Statement of Facts ¶ 19.
Customs’ investigation into Optrex’s classification of imported LCDs commenced in
June 1998. Gov’t Statement of Facts ¶ 16. After notifying Optrex of the investigation in April
1999, Customs began to review Optrex’s import practices by interviewing employees and
analyzing entry documents. Optrex Statement of Facts ¶¶ 30-34. During the investigation,
Optrex’s counsel maintained that Optrex had administered its import program properly and
acknowledged that although Customs’ review may show some areas of noncompliance, it also
illustrated that Optrex overpaid duties to U.S. Customs for past entries. Letter to Darrel E.
Woodard, Nov. 3, 1999. Subsequently, Optrex provided Customs with a “decision tree”
purporting to show the classification method Optrex used during the time period under review.
Letter to Frank Corace, Nov. 24, 1999, Def.’s S.J. Mem. Ex. B (“November 1999 letter”).
Pursuant to 19 U.S.C. § 1592(b)(A)(i)-(vii), Customs issued a pre-penalty notice in May
2002, which alleged that Optrex’s negligence resulted in a violation of section 1592 and claimed
a $ 2,033,562.10 loss of revenue. Customs demanded a monetary penalty of $ 4,067,124.20.
Def.’s S.J. Mem. Ex. I. The pre-penalty notice charged Optrex with providing insufficient
information in the entry documents to enable Customs to determine the correct classification,
charging as follows: “During the period July 1997 through June 1999, Optrex . . . filed 991
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entries for merchandise that included LCD panels and components subject to classification in
heading 9013, HTSUS. At the time of entry, the LCD panels and components were classified in
HTSUS 8531 on the entry documents submitted to Customs.” Def.’s S.J. Mem. Ex. I.. In
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 of its products.
Hr’g Ex.2 H10 at 7. Customs rejected Optrex’s reasonable care defense on the basis “that
reliance on a broker or exporter alone may not be sufficient to show that an importer exercised
reasonable care.” Hr’g Ex. H12 at 5 (citing United States v. Golden Ship Trading Co., 25 CIT
40, (2001) (not reported in F. Supp. 2d)).
As a result of discovery in this litigation, the government claims that it unearthed
documentary evidence (specifically, attorney-client communications), demonstrating that Optrex
disregarded continuous advice of counsel to correctly classify the subject entries under heading
9013, HTSUS, and that Optrex “contemporaneously kept a separate account on its books and
records reflecting the higher (correct duty rate) despite the fact that Optrex chose to pay the
(incorrect) lower duty rate in contravention of counsel’s express advice” – evidencing that
Optrex knew how to correctly classify LCD products. Pl.’s Resp. 6. Before the close of
discovery in this matter, Plaintiff deposed Optrex’s present employees, Ms. Marsh, Mr. Houck,
2
The court held an evidentiary hearing on February 17, 2005, regarding the government’s
allegation that it discovered new evidence to pursue a fraud claim. The court denied Plaintiff’s
motion to amend its complaint to add two additional claims, fraud and gross negligence, based
on a statutory interpretation of 19 U.S.C. § 1592. See United States v. Optrex Am., Inc., Slip Op.
05-160, 2005 WL 3447611 (CIT Dec. 15, 2005).
At the court’s hearing on February 17, 2005, the court admitted certain exhibits into
evidence. Those exhibits are cited to as “Hr’g Ex.” followed by a number.
Court No. 02-00646 Page 5
and Ms. Tolbert, and former Optrex employee Ms. Terese Banas. Gov’t Statement of Facts ¶ 42.
The government’s claim of negligence centers around three letters from Optrex’s counsel to
Optrex and relevant deposition testimony.
A. The October 1997 Letter
In a October 1997 letter, Optrex’s counsel advised Optrex to follow Sharp, 122 F.3d
1446, a classification case holding that certain LCD glass panels should be classified under
HTSUS 9013. Hr’g Ex. H1 at 4. The letter stated that “the Sharp decision may have an impact
on the manner in which certain LCD displays imported by Optrex are classified,” emphasized
that it was Optrex’s “responsibility to determine the proper tariff classification of merchandise
which it imports,” and recommended that Optrex review its product line to ensure it did not
include any “glass only” LCD panels. Hr’g Ex. H1 at 1. Based on the Sharp decision, Optrex’s
counsel saw a strong argument that such “LCD glass panels are properly classifiable within tariff
subheading 9013” and advised Optrex to “immediately begin classifying any such LCD glass
panels within . . . 9013.” Hr’g Ex. H1 at 1. Counsel also advised Optrex to seek a binding ruling
from Customs to determine whether Sharp affected all types of “glass only” panels. Hr’g Ex. H1
at 1. The government avers that this October 1997 letter demonstrates that Optrex disregarded
the continuous advice of its counsel to correctly classify the subject entries under heading 9013,
HTSUS.
B. The February 1999 Letter
In a February 1999 letter, Optrex’s counsel inquires whether “the accrual rate . . . relate[s]
to the classification of imported merchandise.” Hr’g Ex. H2 at 1. The government claims that
Court No. 02-00646 Page 6
this letter demonstrates that “Optrex maintained an ‘import accrual’ in 1997 and 1998, based
upon the correct rate of duty, HTS 9013, for the subject merchandise.” Pl.’s Resp. 6 (citing Hr’g
Ex. H2).
C. The May 1999 Letter
In a third letter, dated one month after Customs notified Optrex that it was under
investigation, counsel provided Optrex with “the decision tree.” Hr’g Ex. H3 at 1. According to
Optrex’s counsel, the decision tree would “provide Optrex the most favorable method of
classifying products” and was “intended to satisfy both Customs and Optrex in the pursuit of
proper classification.” Hr’g Ex. H3 at 1. The government argues that the “decision tree” was
specifically created “to satisfy Customs” and supports this position by arguing that the tree
presents a classification scheme different from the one outlined in the October 1997 letter.3
Because the October 1997 letter advised Optrex to consider the implications of the Sharp
3
The October 1997 letter included a summary of how counsel at that time believed Optrex
classified its products based on a six-paragraph classification scheme developed by counsel and
Customs in 1995. Hr’g Ex. H1 at 2. According to the first paragraph, LCD panels and modules
dedicated to a specific use fell under HTSUS 8531. Hr’g Ex. H1 at 2. The second paragraph
stated that modules and panels with less than 80 lines were classifiable under HTSUS 8531.
Hr’g Ex. H1 at 2. Paragraphs 3-5 dealt with specific Customs rulings, and the last paragraph
advised that all other panels and modules should be classified under HTSUS 9013. Hr’g Ex. H1
at 2.
According to counsel, the decision tree consists of three levels. The first contains duty
free products classifiable under HTSUS 8471 and 8473. (Products classifiable under Level I are
not at issue in this case.) The second level includes “electric sound or visual signaling apparatus”
classifiable under HTSUS 8531. Hr’g Ex. H3 at 1-2. The diagram for the second level specifies
four subheadings of HTSUS 8531 accompanied with examples. It includes subheading
8531.20.00 covering “LCD’s [sic] with 80 characters or less.” Hr’g Ex. H3. Counsel noted that
“Level II products include the subheadings which Optrex is already utilizing for classification
purposes.” Hr’g Ex. H3. All other products, primarily glass panels that could “not be classified
elsewhere, fell within Level III and corresponded to various higher duty rates under HTSUS
9013.” Hr’g Ex. H3 at 2.
Court No. 02-00646 Page 7
decision, while reaffirming its earlier classification advice given in 1995, and the decision tree
was “created” in May 1999, the government believes that Optrex knowingly misrepresented to
Customs that since 1994 it followed a classification methodology contained in the “decision
tree.” See Pl.’s Resp. 9.
The government’s disagreement with Defendant’s Statement of Material Facts As to
Which There Are No Genuine Issues to Be Tried is best presented by quoting in pertinent part the
paragraphs of the government’s counterstatement:
37. Optrex cooperated with Customs [sic] underlying penalty
investigation by providing access to its files and personnel.4
We dispute this proposed factual finding. Optrex impeded the
investigation as long as possible by misleading investigators and failing to turn
over records sought by the summons. As an example, for months, Optrex
represented to Customs that Mr. Houck was the expert on classification. It was not
until the March 18, 2002 interview with investigating agents that the we [sic]
learned that he had no knowledge of classification matters. [Houck Dep. at 3-5.]
....
44. Optrex provided information sufficient for Customs to determine
classification of the subject articles.
We dispute the proposed finding. Optrex stalled and refused to cooperate
in the investigation until threatened with civil enforcement litigation before finally
providing substantive compliance to the Customs summons. . . .
45. Customs Port of Detroit created a “shipper file” with information
relevant to the classification of Optrex’s imported LCD’s [sic].
Import Specialist Frank Corace testified about these records at the
evidentiary hearing upon our motion to amend. [Hr’g Tr. at 44-45.] The “shipper
file” itself provides the best evidence of its contents, and Mr. Corace’s testimony
provides the best evidence of his use of the Optrex “shipper file.” Thus, we
dispute this proposed finding.
46. The information contained in the shipper file was sufficient for
Customs to determine whether classification of imported LCD’s [sic] was
4
Each paragraph in the government’s counterstatement of facts begins with quoting of
Defendant’s averments, which are italicized for the reader’s convenience.
Court No. 02-00646 Page 8
correct.
We dispute the proposed finding. Optrex imported a wide variety of
products. Some of these products were new and the information in the shipper file
was dated. Only in a limited number of cases was this shipper file information
sufficient to ascertain the proper classification. See generally Corace Dec. [sic] at
¶¶ 1-6.
47. Before the underlying investigation began, Optrex had provided
Customs with Optrex’s LCD product catalog.
We dispute this proposed finding as it implies that the catalog was a
“current” catalog. Instead, the catalog reflected Optrex's product line as of 1995,
which was well before the entries relevant to this case were made.
48. LCD product catalogs are relevant to the classification of LCD’s
[sic].
We dispute this proposed finding because it is a legal conclusion which
requires no response. Moreover, Optrex does not claim that the specific 1995
catalog that it provided was relevant to the classification of its 1997 through 1999
entries of LCD panels that are at issue in this case.
49. Before the underlying investigation began, Optrex had provided
Customs with Optrex’s LCD part number key.
We dispute this proposed finding as much of the part number key was
dated and not reflective of the full universe of products. In addition, not all fields
were complete on the list. Accordingly, we dispute this proposed finding.
Moreover, Optrex does not certify the completeness of its number key. See
generally Corace Dec. [sic] at ¶¶ 1-6.
50. Optrex’s LCD part number key is relevant to the classification of the
subject LCD’s [sic].
We dispute this proposed finding because it is a legal conclusion which
requires no response.
....
53. Optrex furnished information sufficient to permit Customs to
determine the final classification of the subject LCD’s [sic].
We dispute this proposed finding because it is a legal conclusion which
requires no response. Moreover, Optrex does not address when or how it allegedly
provided information concerning classification of the subject LCD panels. Indeed,
Optrex admits by omission that the entry documents that it submitted to Customs
were insufficient to determine the classification of the subject LCD panels.
54. Optrex consulted with its licensed customs broker regarding the
Court No. 02-00646 Page 9
classification and entry of the subject articles.
We dispute this finding because the only evidence in this case
demonstrated that this statement is patently inaccurate. Specifically, Ann
Fitzpatrick, the manager of administration and accounting for Nippon Express in
Detroit, Fitzpatrick Dep. at 16:17-18 (available at Tosini Decl. at Ex. 4), made
clear that Optrex never sought Nippon Express' advice and that Optrex had
directed Nippon Express to classify Optrex's LCD panels under HTS Ch. 8531.
Specifically, when asked “how often would Optrex personnel come to you for
advice on the property clarification concerning LCD modules and panels?,” Ms.
Fitzpatrick answered: “They wouldn't.” Id. at 48:24-49:2; see also id. at
49:14-50:23 and at Ex. 2 (testimony and Optrex documents that Optrex provided
Nippon Express with the HTS codes to be used for Optrex's LCDs); id. at 53
(establishing that the employees supervised by Ms. Fitzpatrick did not meet
independently with Optrex with respect to classification of LCDs); id. at
55:23-56:4 (testifying that she did not provide LCD classification advice to
Optrex); id. at 66:18-67:7 (“just want to clarify that Optrex is a different -- than
our other clients. Like I said, as far as classification we -- I never advised them on
their LCD not knowing what the merchandise is. But as far as other
classifications, like I said, if they received books, pamphlets, something out of the
ordinary, we would discuss the classification. Q. And why wouldn't you advise
them concerning classification of LCD products? A. Because I have -- I know
they're very complex as far as their nature, they're programmed or not
programmed, or something about how many characters, or their application, and I
have no knowledge as to what they do with their -- you know, how that's applied
to their merchandise").
Ms. Fitzpatrick also testified that she was not provided with Optrex's
so-called decision tree until 1999 or 2000, id. at 62 and at Ex. 10 thereto, and that
neither Optrex nor Optrex's counsel sought her advice concerning the so-called
decision tree. Id. at 64:4-12.
55. Optrex consulted with Customs attorneys regarding the classification
and entry of the subject articles.
We agree that “Optrex consulted with Customs attorneys regarding the
classification and entry of the subject articles.” However, Optrex disregarded the
advice that it was given and then took affirmative steps to cover up this fact
during Customs’ investigation and Court proceedings. Specifically, counsel
explicitly advised Optrex to classify glass panel displays -- the subject
merchandise in this case -- under HTS 9013. Exs. H-24; H-1 at 2,4; and H-2. The
new information also revealed that Optrex contemporaneously kept a separate
account on its books and records reflecting the higher (correct duty rate) despite
the fact that Optrex chose to pay the (incorrect) lower duty rate in contravention of
counsel's express advice. Specifically, a February 17, 1999, letter from counsel
Court No. 02-00646 Page 10
reveals that Optrex maintained an “import accrual” in 1997 and 1998, based upon
the correct rate of duty, HTS 9013, for the subject merchandise. Ex. H-2. The only
testimony of any Optrex employee involved in the classification of the LCD
panels subject to this action further demonstrates that Optrex based its import
accrual upon the known correct rate of duty for its merchandise:
Q: So what Optrex did . . . was it told Customs when it classified the
merchandise coming in that it was classifiable at the lower rate, however,
it set aside the amount of duties that would be owed if it were paying the
higher rate into a separate account . . . [f]or specific products?
A: Yep.
Q: And those specific products were LCD displays?
A: That's all we did, that's what was imported for Optrex, was LCD
displays.
Banas Dep.5 at 80:7-21 (available at Tosini Dec. [sic] at Ex. 3).
Q: Why didn't Optrex just import the merchandise under the higher code if
it believed that that was the duties that would be owed?
A: That was not my decision to do that. That was the decision of the
president of the company and the sales director at the time.
Id. at 81:6-11.
Q: . . . You stated that the effect of the rate of the import accrual was really
to govern what the parent company would see about the subsidiary's
profits and losses, right?
A: Yes.
Id. at 95:18:22.
Likewise, Optrex affirmatively concealed its knowledge that the subject
entries should have been classified under HTS 9013, throughout the investigation
and this case.
56. Optrex sought guidance from the Customs service by submitting a
detailed classification process letter to Import Specialist Frank Corace in
November of 1999.
We dispute this proposed finding as this was not the purpose of this
document. Optrex is referring to the decision tree it created in response to the
investigation underlying this litigation. . . . The entries had already been filed by
the time this document was created. The letter was an effort to respond to the
investigation - not to seek Customs’ guidance. Accordingly, we dispute the
proposed finding and it should be disregarded.
5
Ms. Banas is a former Optrex employee, who during the relevant time period (1997-
1998) had supervisory responsibility for Optrex’s accounting personnel and operations. Banas
Dep. 19:1-13.
Court No. 02-00646 Page 11
57. Optrex consulted engineer Allen Houck for technical information
related to the classification of the subject LCD’s [sic].
We dispute this proposed finding as it implies that Mr. Houck had some
knowledge of classification matters when he did not. [Referring to response to no.
59]. Accordingly, we dispute this proposed finding and it should be rejected.
....
59. Optrex relied upon the specialized technical knowledge of in-house
experts, including engineer Allen Houck, regarding classification of the
subject articles.
We dispute this finding because the only evidence in this case
demonstrates that this statement is inaccurate. The only employee identified in
this proposed finding testified that he had no involvement in the creation of the
so-called decision tree and had no knowledge of how a classification decision
would be made using that document:
Q: What, if any, involvement did you have in the creation of this decision
tree?
A: I didn’t have any involvement in the creation of this.
Q: Do you know how a classification decision here at Optrex is made
utilizing this decision tree as depicted in Exhibit 6 before you?
A: No, I don’t.
Houck Dep. at 14:5-11.
60. Optrex created a classification decision tree for imported LCD’s [sic].
We dispute this proposed finding because the decision tree is a
self-serving document created after the entries at issue in this case were filed for
the purpose of creating a facade of compliance with Optrex's reasonable care
responsibilities. . . .
63. Customs provided Optrex with no written response to Optrex’s
decision tree as provided in the letter of November 1999.
We dispute this proposed finding. At the hearing, we demonstrated that
Customs responded [sic] Optrex’s letter of November 1999 with a number of
summons’ [sic] and written requests for information substantiating whether
Optrex actually followed its so-called “decision tree.” See, e.g., Ex. H-5
(summonses issued to Optrex); Ex. H-8 (letter from Customs to Optrex of
November 2, 2001, requesting information concerning Optrex’s so-called
“decision tree”).
....
67. Customs 2001 informed compliance publication regarding the
classification of LCD’s [sic] was modified by the agency in 2004.
We dispute this proposed finding since the publications are the best
evidence of its contents. Accordingly, we dispute the proposed finding and it
Court No. 02-00646 Page 12
should be disregarded.
....
69. Optrex formulated and applied an LCD classification process that
recognized that LCD’s [sic] are prima facie classifiable under HTSUS
chapters 84, 85, and 90.
We dispute this proposed finding because it is contradicted by the
evidence of this case and there is absolutely no evidence to support this proposed
finding. [Referring to responses to nos. 54, 55, 57, and 59.] Accordingly, we
dispute the proposed finding and it should be disregarded.
Gov’t Statement of Facts ¶¶ 37, 44, 45, 46, 47, 48, 49, 50, 53, 54, 55, 56, 57, 59, 60, 63, 67, 69.
In its motion for partial summary judgment, Optrex asserts that there are two parts to a 19
U.S.C. § 1592 action based on negligence: 1) the Government’s proof of an action or inaction
and 2) a determination of the level of culpability. See Def.’s S.J. Br. 9. When Optrex filed its
motion for partial summary judgment, it maintained that the first part was not appropriate for
summary judgment because in a parallel classification case, the Court had not yet decided the
proper classification of products at issue. See Optrex Am., Inc. v. United States, Court. No. 00-
08-00382. Since Optrex filed the pending motion, the Court has adjudicated that classification
case, finding for the government on all issues of classification of the subject merchandise. See
Optrex Am., Inc. v. United States, Slip Op. 06-26, 2006 WL 473896 (CIT Feb. 27, 2006), appeal
docketed, No. 2006-1375 (Fed. Cir. May 2, 2006). There are no arguments before the court that
the outcome in the classification case has an effect on the present case. Regardless, Plaintiff
correctly observes that Defendant essentially seeks summary judgment because the exercise of
reasonable care is a complete defense to this action, as explained below. See Pl.’s Resp. 17 n.4.
Court No. 02-00646 Page 13
I. STANDARD OF REVIEW AND SUMMARY JUDGMENT
Summary judgment is appropriate when “there is no genuine issue as to any material fact
and . . . the moving party is entitled to a judgment as a matter of law.” USCIT R. 56(c)
(emphasis added); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed. R. Civ. P.
56(c)) (summary judgment is appropriate “if the pleadings [and the discovery materials] show
that there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.”) “[I]f the dispute about a material fact is ‘genuine,’ that is, if the
evidence is such that a reasonable jury could return a verdict for the nonmoving party,” summary
judgment will not be awarded. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “As
to materiality, the substantive law will identify which facts are material. Only disputes over facts
that might affect the outcome of the suit under the governing law will properly preclude the entry
of summary judgment.” Id. The court must view the evidence, draw all reasonable inferences in
favor of the non-moving party, and determine “whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that one party must
prevail as a matter of law.” Id. at 259 (internal citation omitted). Accordingly, “a court has an
independent obligation to determine, on the basis of parties’ submissions, whether a movant is
entitled to judgment as a matter of law.” United States v. T.J. Manalo, Inc., 26 CIT 1117, 1119,
240 F. Supp. 2d 1255, 1257 (2002). “[T]he party opposing summary judgment does not have the
burden of showing that there is a genuine issue for trial until the movant has produced
evidentiary material showing that there is no genuine issue as to any material fact and he is
Court No. 02-00646 Page 14
entitled to judgment as a matter of law.” 2361 State Corp. v. Sealy, Inc., 402 F.2d 370, 375 (7th
Cir. 1968).
If summary judgment cannot be rendered upon the whole case, partial summary judgment
may be granted in some circumstances. See USCIT R. 56(d). “Partial summary judgment is
appropriate ‘when it appears that some aspects of a claim are not genuinely controvertible [and]
. . . genuine issues remain regarding the rest of the claim.’” Ugg Int'l, Inc. v. United States, 17
CIT 79, 83, 813 F.Supp. 848, 852 (1993) (ellipsis in original).
In actions brought by the United States to recover monetary penalties “all issues,
including the amount of the penalty, shall be tried de novo.” 19 U.S.C. § 1592(e)(1) (2000).
II. DISCUSSION
A. Negligence and the Defense of Reasonable Care
Section 1592 provides that “no person through fraud, gross negligence, or negligence may
enter, introduce, or attempt to enter or introduce any merchandise into the United States by
means of a material false document or statement, or a material omission.” United States v. Jac
Natori Co., 108 F.3d 295, 298 (Fed. Cir. 1997) (citing 19 U.S.C. § 1592(a)). The Department of
Justice can bring a “civil penalty” action pursuant to 19 U.S.C. § 1592(e) to recover a penalty
claim it sought on the administrative level. United States v. Optrex Am., Inc., Slip Op. 05-160,
2005 WL 3447611, at *7 (CIT Dec. 15, 2005); see 19 U.S.C. § 1592 (2000). When the monetary
claim brought by the government is based on negligence, “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
Court No. 02-00646 Page 15
negligence.” 19 U.S.C. § 1592(e)(4). Thus, section 1592(e)(4) “derogates from common law
negligence (i.e., duty, breach, causation, and injury) by shifting the burden of persuasion to the
defendant to show lack of negligence.” United States v. Ford Motor Co., 29 CIT ___, ___, 395 F.
Supp. 2d 1190, 1208 (2005). In particular, Customs defines negligence as a violation that
results from an act or acts (of commission or omission) done through either the
failure to exercise the degree of reasonable care and competence expected from a
person in the same circumstances either: (a) in ascertaining the facts or in drawing
inferences therefrom, in ascertaining the offender's obligations under the statute;
or (b) in communicating information in a manner so that it may be understood by
the recipient. As a general rule, a violation is negligent if it results from failure to
exercise reasonable care and competence: (a) to ensure that statements made and
information provided in connection with the importation of merchandise are
complete and accurate; or (b) to perform any material act required by statute or
regulation.
19 C.F.R. Pt. 171, App. B(C)(1) (2005); see H.R. Rep. No. 103-361(I) (1993) (stating same).
Thus, the court does not have to find scienter in a negligence case. See Ford Motor, 395 F. Supp.
2d at 1208; United States v. Hitachi Am., Ltd., 21 CIT 373, 380, 964 F. Supp. 344, 355-56
(1997), aff’d in part, rev’d in part on another grounds, 172 F.3d 1319 (Fed. Cir. 1999) (quoting
19 C.F.R. Pt. 171, App. B(B)(1) with approval).
To meet its burden of proof, “Customs must establish by a preponderance of the evidence
that the materially false act or omission occurred.” Ford Motor, 395 F. Supp 2d at 1208; see also
United States v. Washington Int’l Ins. Co., 29 CIT ___, ___, 374 F. Supp. 2d 1265, 1270, 1275
(2005). “A preponderance of the evidence is . . . [e]vidence which is . . . more convincing than
the evidence . . . offered in opposition to it . . . .”6 Greenwich Collieries v. Director, OWCP, 990
6
“Unlike other standards of proof such as reasonable doubt or clear and convincing
evidence, the preponderance standard ‘allows both parties to share the risk of error in roughly
equal fashion,’ except that ‘when the evidence is evenly balanced, the [party with the burden of
Court No. 02-00646 Page 16
F.2d 730, 736 (3d Cir. 1993), aff’d, 512 U.S. 267 (1994). The importer then bears the burden of
showing that it did not act negligently. Limited case law explicates how this shift of burden
operates and what the alleged violator must establish to disprove negligence as a legal
conclusion. See, e.g., Ford Motor, 395 F. Supp 2d at 1208; United States v. Rockwell Int’l Corp.,
10 CIT 38, 43 n.5, 628 F. Supp. 206, 211 n.5 (1986). For the purposes of administrative
proceedings, Customs’ guidelines provide how an importer can demonstrate that it did not act
negligently – by showing that it acted with “reasonable care”:7
Reasonable Care. General Standard: All parties, including importers of record or
their agents, are required to exercise reasonable care in fulfilling their
responsibilities involving entry of merchandise. These responsibilities include, but
are not limited to: providing a classification and value for the merchandise;
furnishing information sufficient to permit Customs to determine the final
classification and valuation of merchandise; taking measures that will lead to and
assure the preparation of accurate documentation, and determining whether any
applicable requirements of law with respect to these issues are met. In addition, all
parties, including the importer, must use reasonable care to provide accurate
information or documentation to enable Customs to determine if the merchandise
may be released. Customs may consider an importer's failure to follow a binding
Customs ruling a lack of reasonable care. In addition, unreasonable classification
will be considered a lack of reasonable care (e.g., imported snow skis are
classified as water skis). Failure to exercise reasonable care in connection with the
importation of merchandise may result in imposition of a section 592 penalty for
fraud, gross negligence or negligence.
19 C.F.R. Pt. 171, App. B(D)(6). The drafting committee of the Mod Act noted its expectations
persuasion] must lose.’” Metro. Stevedore Co. v. Rambo, 521 U.S. 121, __, 117 S. Ct. 1953,
1963 n.9 (1997) (internal citations omitted).
7
The “reasonable care” requirement was added to 19 U.S.C. § 1484, which governs
importers’ obligations with respect to entry of merchandise, by the Customs Modernization and
Informed Compliance Act (“Mod Act”), passed as part of the North American Free Trade
Agreements Implementation Act, Pub. L. 103-182 § 637, Sect. 621, 107 Stat. 2057 (1993).
Customs then extended this concept of reasonable care to penalty cases.
Court No. 02-00646 Page 17
about an importer’s actions in fulfilling its burden of reasonable care:
In meeting the “reasonable care” standard, the Committee believes that an
importer should consider utilization of one or more of the following aids to
establish evidence of proper compliance: seeking guidance from the Customs
Service through the pre-importation or formal ruling program; consulting with a
customs broker, a customs consultant, or a public accountant or an attorney; or
using in-house employees such as counsel, a customs administrator, or if
valuation is an issue, a corporate controller, who have experience and knowledge
of customs laws, regulations and procedures8. . . .
H. Rep. No. 103-361 at 120, 1993 U.S.C.C.A.N. 2670 (1993).
This Court has adopted Customs’ guidance in evaluating whether the alleged violator
meets its burden of proof that it did not act with negligence. See United States v. Pan Pac.
Textile Group, Inc., 29 CIT ___, ___, 395 F. Supp. 2d 1244, 1255 n.19 (2005) (stating that
whether importer was negligent turns on whether it exercised reasonable case, and citing to 19
C.F.R. Pt. 171, App. B(C)(1)); Ford Motor, 395 F. Supp. 2d at 1208 (citing to 19 C.F.R. pt. 171,
App. B(B)(1) for the definition of negligence, stating that defendant bears burden of showing that
it “exercised reasonable care under the circumstances and that the alleged violation was not
caused by its negligence,” and concluding that “negligence does not require the trier of fact to
determine intent”). Importantly, the defense of reasonable care operates as a complete defense to
8
The drafting committee of the Mod Act stated that
The following are two examples of how the reasonable care standard should be
interpreted by Customs: (a) the failure to follow a binding ruling is a lack of
reasonable care; and (b) an honest, good faith professional disagreement as to
correct classification of a technical matter shall not be lack of reasonable care
unless such disagreement has no reasonable basis (e.g. snow skis are entered as
water skis).
H.R. Rep. No. 103-361 at 120.
Court No. 02-00646 Page 18
a negligence claim. See Ford Motor, 395 F. Supp 2d at 1208-09 (finding negligence where
importer failed to declare assists on its entry documents or thereafter and failed to declare that
values stated in entry documents were not final); United States v. Yuchius Morality Co., 26 CIT
1224, 1231 (2002) (not reported in F. Supp.) (finding negligence where importer lacked record
keeping and showed no effort to fully and accurately account for relevant transactions); United
States v. Golden Ship Trading Co., 25 CIT 40, 47-48 (2001) (not reported in F. Supp.) (finding
negligence where importer failed to exercise reasonable care even though she demonstrated that
she relied on information provided by exporter and licensed customshouse broker because she
did not even attempt to verify or ascertain correctness of information contained in entry
documents regarding merchandise’s country of origin as it was supplied by exporter and provided
by broker).
B. Issues of Material Fact As to Optrex’s Reasonable Care Arguments
Optrex’s defense is premised on Customs’ guidelines on the standard of reasonable care.
In particular, Optrex argues 1) that it consulted with Customs professionals, 2) that it cooperated
with Customs in the underlying administrative proceedings, 3) that it attempted to comply with
Customs laws while Customs failed to furnish Optrex with adequate guidelines on classifying the
subject merchandise, 4) that its classification policies reflect Optrex’s professional disagreement
with Customs, and 5) that Optrex followed its decision tree created in good faith to comply with
Customs laws and regulations. In deciding whether Optrex met its burden in establishing that it
exercised reasonable care, the court will evaluate the evidence in connection with each of
Optrex’s arguments.
Court No. 02-00646 Page 19
1. Optrex’s Claim That It Consulted with Customs Professionals
Optrex claims that it exercised reasonable care in classifying the subject LCDs because it
consulted with customs professionals including a licensed customs broker, in-house technical
experts, and legal counsel. Def’s Mem. 13 (citing Banas Dep. 25-26, 36). The court, at this
point, cannot rule on this issue on summary judgment because each party has put forth sufficient
evidence to place it in dispute. Specifically, Ms. Banas, as one of the personnel responsible for
final classification of the company’s products, testified that she consulted with Nippon Express
regarding classification of the company’s products. See Banas Dep. 36. However, controverting
evidence raises issues as to whether Optrex consulted its Customs broker. See Fitzpatrick Dep.
48:24-49:2, Dec. 10, 2003 (testifying that Optrex did not seek advice regarding classification of
its LCD products from Nippon Express,9 the only Customs Broker Optrex indicated that it had
used in response to Customs’ questionnaire); Fitzpatrick Dep. 64 (testifying that she did not see
the decision tree until 1999). Because of this inconsistent testimony, the court cannot conclude
summarily that Defendant’s evidence outweighs Plaintiff’s evidence. In such cases, credibility of
testimony is best tested through the method of cross-examination.10
9
In its reply brief, Defendant offered another piece of evidence – a letter Nippon Express
wrote to Optrex’s predecessor, Asahi Glass, dated August 1991, stating that tariff under heading
8531 is the correct tariff. See Def’s Reply Br. Ex. H. The relevance of this evidence to the time
period in this case is tenuous.
10
Personal examination at trial “(1) insures that the witness will give his statements under
oath - thus impressing him with the seriousness of the matter and guarding against the lie by the
possibility of a penalty for perjury; (2) forces the witness to submit to cross-examination, the
‘greatest legal engine ever invented for the discovery of truth’; [and] (3) permits the jury that is to
decide the defendant's fate to observe the demeanor of the witness in making his statement, thus
aiding the jury in assessing his credibility.” Maryland v. Craig, 497 U.S. 836, 845-46 (1990)
(quoting California v. Green, 399 U.S. 149, 158 (1970) (footnote & quotations omitted)
Court No. 02-00646 Page 20
Optrex’s claim that it relied on the knowledge of its in-house experts is vitiated by the
testimony of Mr. Houck, one of its experts, who testified that he was neither involved in the
creation of the decision tree, nor was aware of its application. Houck Dep. 14:5-11, Jan. 14,
2004. In addition, aside from a naked assertion that its “in-house personnel reviewed the relevant
technical drawings, specification, and sales information,” Def. S.J. Mem. 20, Optrex did not
provide other evidentiary support.11 See Int’l Longshoremen’s Ass’n v. Davis, 476 U.S. 380, 398
(1986) (stating that in moving for summary judgment, or for directed verdict, appellant failed to
point to any evidence to support its claim).
The record indicates that Optrex did in fact seek and receive classification advice from its
(brackets in original)).
11
Unsupported statements of fact are not sufficient to meet the movant’s burden on a
motion for summary judgment. See, e.g., Lujan v. Nat’l Wildlife Fed., 497 U.S. 871, 888-89
(1990); Anderson, 477 U.S. at 249 (Movant cannot rest on his allegations to win summary
judgment “without ‘any significant probaitve evidence tending to support’” his case.) (citation
omitted). It should be noted that USCIT Rule 56(e) requires the movant to support its assertions
with admissible evidence and, therefore, lay out foundation for each piece of evidence. See
USCIT R. 56(e)
Supporting and opposing affidavits [in support of motion for summary judgment]
shall be made on personal knowledge, shall set forth such facts as would be
admissible in evidence, and shall show affirmatively that the affiant is competent
to testify to the matters stated therein. . . . The court may permit affidavits to be
supplemented or opposed by depositions, answers to interrogatories, or further
affidavits. When a motion for summary judgment is made and supported as
provided in this rule, an adverse party may not rest upon the mere allegations or
denials of the adverse party's pleading, but the adverse party's response, by
affidavits or as otherwise provided in this rule, must set forth specific facts
showing that there is a genuine issue for trial. If the adverse party does not so
respond, summary judgment, if appropriate, shall be entered against the adverse
party.
USCIT R. 56(e).
Court No. 02-00646 Page 21
Customs attorney. See, e.g., Hr’g Exs. H1, H2, H3. The government does not dispute this fact,
but instead argues that what was required of Optrex “at the very least is [to] actually follow its
attorney’s advice.” Pl.’s Resp. 20. Optrex claims that it followed its attorney’s advice pointing
to the decision tree.12 See Def.’s Reply 10. Aside from the decision tree, Optrex does not present
other evidence to buttress its assertion. However, the decision tree alone is not a highly
probative piece of evidence because it was prepared during the administrative investigation and,
therefore, arguably in response to Customs’ investigation. See Hr’g Ex. 3 (counsel informing
Optrex that “the ‘decision tree’ is intended to satisfy both Customs and Optrex in the pursuit of
proper classification”). In addition, the Mod Act’s legislative history is neither talismanic of
what constitutes exercise of reasonable case; nor is consulting a Customs professional a safe
harbor for importers. Rather, the Mod Act suggests means of establishing evidence of reasonable
care. Thus, consultation with an attorney is evidence of compliance; it is not compliance in itself.
12
It should be noted that the government effectively highlights that in its Statement of
Facts, Optrex claimed to have merely “consulted” with its licensed Customs broker and legal
counsel regarding the classification and entry of the subject merchandise and that Optrex “relied”
on the “specialized technical knowledge of in-house experts, including engineer Allen Houck.”
Optrex Statement of Facts ¶¶ 54-55, 59. Although Optrex’s word choices are noteworthy, they
have no probative value. In other words, “consulting” does not mean that Optrex did not attempt
to comply with attorney’s advice.
In its reply brief, citing to a document admitted into evidence at the February 17, 2005,
hearing, Optrex stated that it believed that “the advice from counsel did not necessarily require
classification under Heading 9013 or 8531, but might be more appropriate under Chapter 84 as a
part of an automatic data processing machine. The document states,
Our attorney Sonnenberg thinks we have good grounds to make an argument with
Customs to keep the reclassified parts in question in a 2.7 percent category. Even
if the Detroit Customs local office doesn’t accept our argument, we still have a
chance to win at a higher level by asking for a ruling.
Def.’s Reply 9 (citing Hr’g Tr. 110; Hr’g Ex. H24). However, Optrex never sought a ruling from
Customs.
Court No. 02-00646 Page 22
Other evidence may, accordingly, contradict that indicia of compliance. Thus, in this case, there
is evidence that at least some entries at issue were classified contrary to the legal advice given.
See Hr’g Exs. H1, H2, H24 (supporting government’s claim that attorney’s advice was express in
that certain LCD panels were classifiable only under heading 9013, HTSUS).
2. Optrex’s Argument That It Cooperated with Customs
Optrex argues that it exercised reasonable care by cooperating with Customs. The record
shows that Customs’s officials interviewed three Optrex employees who had knowledge relevant
to the classification of imported LCDs. Optrex also claims that it gave Customs full access to its
files, allowing Customs to review the company’s product catalogs, part number keys, and
spreadsheets showing the end use of the LCDs. Def.’s S.J. Mem. 16-17. For example, Optrex
cites to the in-court testimony of Frank Corace, Customs’ import specialist responsible for
electronics in Detroit, stating that Optrex provided him with a parts catalog, which allowed him
to understand what the product was and thus to classify it. Hr’g Tr. 46-47.
While there is evidence in the record supporting Optrex’s claim of cooperation, the
government pinpoints certain instances that weaken Optrex’s claim of cooperation. For example,
Ms. Banas testified that she could not remember whether she consulted with Customs concerning
classification of merchandise or sought any advice, and that she never read any Customs rulings
concerning the same or similar merchandise that Customs had published. Banas Dep. 27. In
addition, the company maintained import accrual accounts that arguably suggest that the importer
knew that certain LCD products were properly classifiable under a higher duty rate, and that it set
aside an “import accrual” reflecting the duties, which would be owed in the event of the
Court No. 02-00646 Page 23
discovery of the company’s incorrect classification practices. At the same time, the court notes
that Optrex’s accrual account is not an unusual accounting practice, and that it had been reviewed
by Optrex’s auditors. See Hr’g T. 83-94, 95-102, 106, 108-110. The court cannot decide its
significance on summary judgment.
3. Informed Compliance and Shared Responsibility
Optrex claims that Customs’ own inability to consistently classify the imported LCD
products shows the weakness of a penalty claim based on alleged misclassification. Optrex
argues that it followed Customs’s regulations and rulings as well as judicial decisions by way of
informed compliance. This argument is premised on Mod Act, Pub. L. 103-182 § 623, which
applied two new concepts to classification – informed compliance and shared responsibility13 –
requiring Customs to inform the trade community of its legal obligations through sharing and
13
These concepts appear in the legislative history underlying the Mod Act:
The guiding principle in our discussions with the trade community is that of “shared
responsibility”. Customs must do a better job of informing the trade community of
how Customs does business; and the trade community must do a better job to assure
compliance with U.S. trade rules.
....
As a general statement, Customs supports the JIG concept of “informed compliance.”
Importers have the right to be informed about Customs rules and regulations, and its
interpretive rulings and directives, and to expect certainty that the ground rules would
not be unilaterally changed by Customs without the proper notice and an opportunity
to respond.
Customs Modernization and Informed Compliance Act: Hearing on H.R. 3935 Before the House
Comm. on Ways and Means, Subcomm. on Trade, 102d Cong. 91 (1992) (statement of
Commissioner Carol Hallett, United States Customs Service); see also S. Rep. No. 103-189 at 64
(1993) (“Title VI also implements the concept of ‘informed compliance,’ which is premised on
the belief that importers have a right to be informed about customs rules and regulations, as well
as interpretive rulings, and to expect certainty that the Customs Service will not unilaterally
change the rules without providing importers proper notice and opportunity for comment.”).
Court No. 02-00646 Page 24
communication of information. Optrex maintains that informed compliance “requires clear,
consistent, well-reasoned publications and guidance from Customs,” which Customs failed to
provide. Def.’s S.J. Mem. 21. Specifically, Customs failed to respond to the November 1999
letter, and therefore “it was remiss in its duties of ‘shared responsibility’ and ‘informed
compliance.’” Def.s S.J. Mem. 19. Most critically, Optrex claims that Customs has remained
confused as to the proper classification of the subject LCDs throughout administrative and
judicial proceedings. For instance, Customs first alleged that certain graphic module LCDs were
improperly classified under HTSUS heading 8531, but in its third complaint, Customs dropped
its allegations of misclassification regarding the graphic module LCDs, “implicitly announc[ing]
that each and every graphic module that it removed has actually been properly classified by
Optrex.” Def.’s S.J. Mem. 25.
The government explains that none of the “inconsistent” rulings Optrex cites involve
merchandise subject to this action. It maintains that Optrex purposefully sidesteps the following
facts: (1) Customs gave Optrex specific guidance in 1995, Hr’g Ex. H-24; (2) Optrex’s attorney
advised Optrex to classify its LCD panels under heading 9013, Hr’g Exs. H-24, H-1; (3) Optrex’s
attorney reiterated its advice that Optrex classify its LCD panels under HTSUS heading 9013,
after issuance of the Sharp decision in 1997, Hr’g Ex. 1; and (4) Optrex’s attorney again
reiterated his advice that Optrex classify LCD panels under HTSUS Ch. 9013, in February 1999,
less than two months before Optrex learned that it was under investigation, Ex. H-2. Pl.’s Resp.
23.
The government’s argument has significant support in the record. Precisely because the
Court No. 02-00646 Page 25
classification of LCD products was such a complex area, Optrex should have sought a ruling
from Customs if it desired certainty. In addition, the decision tree was formulated after the
entries at issue had already been filed. It is questionable whether the November 1999 letter was
written to seek Customs’ guidance. As far as the parties’ arguments with respect to compliance
and shared responsibility are intertwined with their factual disagreements, the court cannot
decide at this stage whether Optrex’s actions were compliant.
4. Optrex’s Argument of Professional Disagreement
In a related argument, Optrex maintains that professional disagreement about the
classification of merchandise is not a breach of reasonable care. In support, Optrex argues that
Customs published rulings regarding LCD classification that were “incomprehensible.” Def.’s
S.J. Mem. 23-24. “The professional disagreement between the parties appears to be rooted in the
final application of the process to the subject LCD’s [sic].” Def.’s S.J. Mem. 22. In defense,
Optrex argues that it entered the subject merchandise under Heading 8531, HTSUS, with the
knowledge that Customs had reviewed documents and samples, using an experienced customs
broker and providing commercially acceptable invoices.
The government raises certain factual issues as to Optrex’s conclusion that there was a
professional disagreement concerning the appropriate classification of LCD products at issue by
emphasizing that Customs changed its classification with respect to LCD modules and not with
respect to LCD panels.14 The government underscores that the classification of LCD panels is
not a contentious area because Customs has consistently held that LCD panels are classifiable
14
The government obliquely referred to a small number of LCD character modules
capable of displaying more than 80 characters as being involved in this case. See Pl.’s Resp. 24.
Court No. 02-00646 Page 26
under heading 9013, HTSUS. Optrex’s position is also undermined by the testimony of Ms.
Banas, who stated that with respect to some LCD products, the company ignored and did not
abide by the Customs ruling or Customs interpretation of the correct tariff heading. Banas Dep.
30:10-13; 31:11-25, 32:9-17.
5. Optrex’s Argument that It Followed Its “Decision Tree” Policy
Optrex maintains that its classification of merchandise under heading 8531 is reasonable
because the imported LCDs are prima facie classifiable under headings 8471, 8531 and 9013.
Def.’s S.J. Mem. 13 (citing 19 C.F.R. Pt. 171, App. B(C)(1)). It represents that the decision tree
does not contravene Customs law because it incorporates judicial precedent, Customs Rulings,
the Explanatory Notes, Optrex’s in-house technical experts (specifically, Optrex’s Director of
Engineering Allen Houck). The decision tree’s classification process is also consistent with the
pre-1997 classification advice it received from Customs counsel. In addition, the process
outlined in Customs’2001 Informed Compliance Publication regarding the classification of flat
panel displays “closely follow[ed] Optrex’s classification process as outlined in the 1999 letter to
Customs.” Def’s S.J. Mem. 21.
Even if the court accepts Optrex’s claim that the decision tree reasonably reflected
Customs law at the time, there is no testimony before the court by Optrex’s employees, past or
present, that demonstrates that Optrex actually followed the procedures outlined in the decision
tree. While Optrex suggests that Optrex employees Dee Tolbert, Michele Marsh, and Allen
Houck corroborated that Optrex followed the “decision tree,” other evidence contradicts this
assertion. See Ratermann Decl. Ex. 8 (stating that Ms. Tolbert did not became responsible for
Court No. 02-00646 Page 27
classification matters until June or July of 1999); Marsh Dep. 25:15-24 (stating that as account
manager at relevant times, Marsh had no responsibilities relating to classification of
merchandise); Ratermann Decl. Ex. 5 (stating that Mr. Houck, as an engineer, was not involved
in final classification of products); Houck Dep. 14:5-11 (testifying that Houck had no
involvement in the creation of the “decision tree.”). The government also presented
contradictory evidence regarding Optrex’s assertion that Mike Manese, Optrex’s deceased
employee, was involved in the company’s classification decision. See Banas Dep. 19:25-20:4
(testifying that Mr. Manese had no responsibility over classification of merchandise). Finally, it
is problematic that the decision tree was formulated after the entries of the subject merchandise
were made, and that counsel informed Optrex that “the ‘decision tree’ was intended to satisfy
both Customs and Optrex in the pursuit of proper classification.” Hr’g Ex. H3. This evidence
vitiates Optrex’s assertion that the company followed the decision tree.
III. CONCLUSION
The court’s independent review of the record establishes that Optrex failed to
demonstrate that there are no genuine issues as to any material fact for summary judgment to be
granted at this time.
Accordingly, it is hereby
ORDERED that Defendant’s motion for summary judgment is DENIED.
May 17, 2006 /s/ Judith M. Barzilay
_____________________________ ______________________________
New York, NY Judith M. Barzilay, Judge