United States v. Yuchius Morality Co.

Slip Op. 99 - 79
UNITED STATES COURT OF INTERNATIONAL TRADE
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UNITED STATES OF AMERICA, :
Plaintiff, :
Consolidated
v. : Court No. 96-02-00608
YUCHIUS MORALITY COMPANY, LTD. and :
INTERCARGO INSURANCE CO.,
:
Defendants.
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Memorandum & Order
[On cross-motions, partial summary
judgment for the plaintiff.]
Dated: August 11, 1999
David W. Ogden, Acting Assistant Attorney General; David M.
Cohen, Director, and Velta A. Melnbrencis, Assistant Director,
Commercial Litigation Branch, Civil Division, U.S. Department
of Justice (A. David Lafer and Saul Jay Singer); and Office of
Associate Chief Counsel, U.S. Customs Service (Annmarie R. High-
smith), of counsel, for the plaintiff.
Law Offices Sharma & Bhandari (Onkar N. Sharma); and S.J.
Christine Yang, of counsel, for defendant Yuchius Morality Com-
pany, Ltd.
Sandler, Travis & Rosenberg and Glad & Ferguson, P.C.
(T. Randolph Ferguson); and John M. Daley, of counsel, for
defendant Intercargo Insurance Co.
AQUILINO, Judge: This action brought pursuant to 19
U.S.C. §1592 and 28 U.S.C. §1582 consolidates plaintiff's com-
plaint against Yuchius Morality Company, Ltd. for unpaid duties
and for penalties in connection therewith and its complaint
against Intercargo Insurance Co., as surety for such duties.
Court No. 96-02-00608 Page 2
I
The first complaint avers that defendant Yuchius en-
tered certain household furnishings into the United States from
various suppliers in Hong Kong, China, Taiwan and Indonesia under
cover of 1,395 entries at various ports; that their entry docu-
ments falsely understated the value of those goods in violation
of section 1592 of the Tariff Act; and that such understatement
led to underpayment of applicable duties. The other complaint
prays that the defendant surety be held indebted to the govern-
ment for the unpaid duties to the extent covered by its contin-
uous bond, Customs Form 301, on behalf of its principal, the
above-named importer.
A
Subsequent to its joinder of issue, defendant Yuchius
interposed a motion for summary judgment on the stated grounds:
1. There is no genuine dispute of material fact.
2. Defendant is entitled to judgement as a matter of
law because Plaintiff's claim for the allegedly
underpaid customs duties is barred by statute of
limitations. In addition, the penalty claim based
upon the alleged negligence in undervaluation of
certain Import entries is not in compliance with
the statutory requirements.
Emphasis in original. This has brought forth a cross-motion by
the plaintiff for partial, summary judgment on its claim for the
unpaid duties1 and also a motion by defendant Intercargo for
1
The plaintiff asserts that "[t]he penalty question, which
is wholly inappropriate for summary judgment, is an issue to be
adjudicated at trial." Memorandum of United States, pp. 2-3.
The court concurs.
Court No. 96-02-00608 Page 3
summary judgment on its cross-claim "for exoneration and reim-
bursement against defendant Yuchius"2.
The motion of defendant Yuchius is not in conformity
with the dictate of CIT Rule 56(i), to wit:
Upon any motion for summary judgment, there shall
be annexed to the motion a separate, short and concise
statement of the material facts as to which the moving
party contends there is no genuine issue to be tried.
The papers opposing a motion for summary judgment shall
include a separate, short and concise statement of the
material facts as to which it is contended . . . there
exists a genuine issue to be tried. All material facts
set forth in the statement required to be served by the
moving party will be deemed to be admitted unless con-
troverted by the statement required to be served by the
opposing party.
On its part, the plaintiff has filed such a mandated statement
as follows:
1. During the five year period encompassing fiscal
years 1988 through 1992, Yuchius made approximately
1,600 entries with an estimated entered value of $50
million. . . .
2. Yuchius failed to maintain adequate or sufficient
records to determine the actual price paid or payable
for the merchandise it imported into the United States
during fiscal years 1988-1992. . . .
3. For fiscal year February 1, 1991 through January
31, 1992, Yuchius . . . undervalued its importations
by $4,228,896. . . .
4. Yuchius' $4,228,896 undervaluation for [that] fiscal
year . . . resulted in a loss of revenue to the Govern-
ment of approximately $248,125, which Yuchius has since
remitted to the Government. . . .
2
The court's jurisdiction over this claim is pursuant to
28 U.S.C. §1583.
Court No. 96-02-00608 Page 4
5. For fiscal years 1988-1992, Yuchius' own records
show that the value of the imported purchases total-
ed $59,944,282 and that Yuchius declared to Customs
that the value of that same merchandise was only
$49,691,820. . . .
* * *
7. Yuchius' undervaluation for the four fiscal years
beginning February 1, 1989 resulted in a loss of rev-
enue to the Government of $576,790, including a
loss of duties to the United States in the amount of
$549,642; harbor maintenance fees of $10,224; and mer-
chandise processing fees of $16,923. . . .
8. Yuchius has stipulated that the Government lost
$539,202 as the result of Yuchius' undervaluations
of imports. . . .
9. Yuchius owes the Government $328,665 in outstanding
duties and fees, representing the difference between
the total owing from Yuchius' undervaluation of its
imports during the four fiscal years beginning Febru-
ary 1, 1989 and the payments already made by Yuchius
to the Government. . . .
10. Yuchius has refused to pay the $328,665 in outstand-
ing revenue rightfully due to the Government.
11. None of the Government's claim against Yuchius for
. . . lost revenue is time-barred. . . .
12. The Government complied with all statutory require-
ments in this matter, has provided Yuchius with an ef-
fective administrative review and has afforded Yuchius
all the due process to which it is entitled. . . .
Citations omitted.
Defendant Yuchius does not controvert this statement in
accordance with Rule 56(i), supra, which means that all material
facts set forth therein are deemed admitted. Cf. Anderson v. Lib-
erty Lobby, Inc., 477 U.S. 242, 249-50 (1986); Sweats Fashions,
Inc. v. Pannill Knitting Co., 833 F.2d 1560, 1562 (Fed.Cir. 1987);
Court No. 96-02-00608 Page 5
United States v. Continental Seafoods, Inc., 11 CIT 768, 773-74,
672 F.Supp. 1481, 1486-87 (1987). Indeed, as shown above, de-
fendant's own motion for summary judgment is predicated upon the
representation that there is no genuine dispute of material fact.
Rather, the position of Yuchius with regard to the unpaid duties
is that plaintiff's claim is barred by the statute of limitation.
This action was commenced on February 28, 1996, by
which time Congress had amended the Tariff Act of 1930, 19 U.S.C.
§1621, to encompass specifically "an action to recover any duty
under section 1592(d) . . . within 5 years after the date of the
alleged violation". North American Free Trade Agreement Implemen-
tation Act, Pub. L. No. 103-182, Title VI, §668, 107 Stat. 2057,
2216 (1993). Prior to the amendment, 19 U.S.C. §1621 only pro-
vided that, in the case of an alleged violation of section 1592
arising out of negligence, an action not be commenced more than
five years after the date the alleged violation was committed.
That formulation caused courts to consider argument to the ef-
fect that claims to recover unpaid duties were not subject to
any statutory period of limitation. See, e.g., United States v.
Blum, 11 CIT 316, 322-24, 660 F.Supp. 975, 980-82 (1987), rev'd,
858 F.2d 1566 (Fed.Cir. 1988), and cases cited therein. Be those
cases as they were, the plaintiff in this action is of the view
that the governing period for Yuchius entries even before adop-
tion of the NAFTA Implementation Act on December 8, 1993 was five
Court No. 96-02-00608 Page 6
years. See Memorandum of United States, p. 17. But it argues
that, "as a matter of law, none of [it]s claims are time-barred."
Id. It does so by conceding that, by the
time the Customs audit was completed, the statute of
limitations had already expired as to entries made
during the fiscal year beginning February 1, 1988.
The auditors only reported loss of revenue findings
for the four fiscal years beginning February 1, 1989.3
As for those year(s) April 18, 1989 to February 27,
1991, the plaintiff claims protection in the form of waivers
requested by Customs and provided by Yuchius to the Service on
or about April 18, 1994 and January 23, 1995. The first4 covers
entries between February 1, 1989 and January 31, 1990 for a peri-
od of two years, commencing April 18, 1994. The second5 encom-
passes entries between February 1, 1990 and January 31, 1991,
also for a two-year period, commencing January 23, 1995.
3
Memorandum of United States, p. 17, n. 49. Hence, counsel
point out that the
Government has recalculated the final figures to take
into account the portion of the penalty and revenue
lost on entries filed during the period February 1,
1988 through April 17, 1989.
Id. at 16, referring to Exhibit A to the complaint. See also id.
at 11, n. 34:
[T]he statute of limitations arguably barred recovery
on entries made between February 1, 1991 and February
27, 1991. As such, the Government has not included
these time-barred entries in this action or in its
instant Motion for Summary Judgment.
4
See id., Exhibit 16.
5
See id., Exhibit 19.
Court No. 96-02-00608 Page 7
Each represents, among other things, that the waiver
was being given
knowingly and voluntarily by Yuchius Morality Co., Ltd.
in order that [the company] might obtain the benefits
of the orderly continuation and conclusion[] of an ad-
ministrative proceeding currently being conducted by
. . . Customs . . . , in which the . . . Service is
reviewing all of the formal customs entries of Yuchius
Morality Co., Ltd. for the five year period February 1,
1988, through January 31, 1993[,]
and each was seemingly signed by John Yeh, President. Memoran-
dum of United States, Exhibits 16, 19. The first was followed
by written confirmation to Customs by Mr. Yeh, as Chairman of
the Board of Yuchius Morality Co., Ltd., of his corporate author-
ity to execute a waiver.6 There was no such follow-up for the
second writing. And counsel for that defendant now contend that
that waiver was thus deficient.7 This court cannot concur. Noth-
ing in the voluminous papers produced herein show either lack --
or loss-- of authority on Mr. Yeh's part on the dates of execu-
tion of the waivers.8 Hence, the court holds the parties now
bound by them.9
6
See id., Exhibit 17.
7
See, e.g., Defendant Yuchius Morality Co. Ltd.'s Reply
Memorandum, para. 1, p. 2.
8
In fact, the plaintiff contends that Mr. Yeh was the sole
Yuchius stockholder on those occasions. See Memorandum of United
States, pp. 3, 19, 20.
9
Cf. United States v. Thorson Chemical Corp., 16 CIT 441,
444-47, 795 F.Supp. 1190, 1192-95 (1992). Indeed, in its own
motion for summary judgment, defendant Yuchius attempts to rely
affirmatively on its two waivers. See Memorandum in Support of
Defendant Yuchius Morality Co., pp. 3-4, para. iv.
Court No. 96-02-00608 Page 8
B
Of course, the parties are also bound by the contents
of the bond executed by defendant Intercargo. It is the basis
of the government's complaint consolidated herein and of the
surety's cross-claim against its principal, defendant Yuchius.
Intercargo's motion for summary judgment on that cross-claim,
which is specifically contingent upon lack of recovery against
defendant Yuchius by the plaintiff and which was duly served and
filed, has not brought forth any response from Yuchius. Ergo,
the motion is subject to grant by default.
II
In view of the foregoing, the motion of defendant
Yuchius Morality Co., Ltd. for summary judgment must be, and
it hereby is, denied. Plaintiff's cross motion for partial,
summary judgment on its claim for unpaid duties can be, and it
hereby is, granted. Defendant Intercargo's motion for summary
judgment on its cross-motion "for exoneration and reimbursement
against defendant Yuchius" should be denied at this time, with-
out prejudice to grant upon entry of judgment herein against the
surety and recovery thereon by the plaintiff. Cf. United States
v. Almany, 22 CIT , , Slip Op. 98-72, at 10-12 (June 23,
1998).
Trial of the issues remaining in this consolidated
action has been scheduled to commence on January 19, 2000.
Court No. 96-02-00608 Page 9
Counsel are to confer and present to the court a proposed pre-
trial order, along with any recommendation as to venue therefor,
on or before November 19, 1999.
So ordered.
Dated: New York, New York
August 11, 1999
Judge