United States v. Canex International Lumber Sales Ltd.

SLIP OP. 08-46
UNITED STATES COURT OF INTERNATIONAL TRADE
:
UNITED STATES, :
:
Plaintiff, :
:
v. :
:
CANEX INTERNATIONAL LUMBER SALES : Before: Jane A. Restani, Chief Judge
LTD., AND XL SPECIALTY INSURANCE :
COMPANY, : Court No. 06-00141
:
Defendants. :
:
XL SPECIALTY INSURANCE COMPANY, :
:
Cross-Claimant, :
:
v. :
:
CANEX INTERNATIONAL LUMBER SALES :
LTD., :
:
Cross-Defendant. :
OPINION
[Defendant’s motion to dismiss denied.]
Dated: May 1, 2008
Jeffrey S. Bucholtz, Acting Assistant Attorney General; Barbara S. Williams,
Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice (Aimee Lee); Christopher Shaw, Office of Assistant Chief
Counsel, Department of Homeland Security, U.S. Customs and Border Protection, of counsel, for
the plaintiff.
Joel R. Junker & Associates (Joel R. Junker) for the defendant and
cross-defendant Canex International Lumber Sales Ltd.
Sandler Travis Rosenberg Glad & Ferguson, PC (Thomas R. Ferguson), for the
COURT NO. 06-00141 PAGE 2
defendant and cross-claimant XL Specialty Insurance Company.
Restani, Chief Judge: Between April 12, 2000, and October 23, 2000, defendant
Canex International Lumber Sales Ltd. (“Canex”) entered 151 entries of angle-cut lumber under
Harmonized Tariff Schedule of the United States (“HTSUS”) heading 4418.1 (Compl. ¶¶ 11,
23.) After entry, U.S. Customs and Border Patrol (“Customs”) classified the merchandise under
HTSUS heading 4407.2 (Id. at ¶¶ 13, 25.) Because Canex did not provide proof of the export
permits required for imports under heading 4407, Customs issued notice assessing liquidated
damages against Canex.3 (Id. at ¶¶ 17, 29.) Canex protested Customs’ classification of the
subject merchandise, and subsequently filed an action in this Court challenging Customs’
classification decision. See Canex Int’l Lumber Sales Ltd. v. United States, No. 02-00596.
While the classification case was still pending, plaintiff United States (“Government”) initiated
the current proceedings to recover liquidated damages.4 Canex moves to dismiss on the grounds
that the Government failed to exhaust administrative remedies prior to the commencement of this
1
Heading 4418 covers “[b]uilders’ joinery and carpentry of wood,” and is not covered by
the permitting requirements of the United States-Canada Softwood Lumber Agreement (“SLA”).
HTSUS 4418; (Compl. ¶¶ 12, 14, 24.)
2
Heading 4407 covers “[w]ood sawn or chipped lengthwise, sliced or peeled,” and is
subject to the SLA’s export permit requirements. HTSUS 4407; (Compl. ¶¶ 13–15, 25–27.)
3
The entries were secured by two separate bonds issued by cross-claimant XL Specialty
Insurance Company (“XL”). (Compl. ¶¶ 7–8.)
4
Although Customs indicated in a letter dated August 24, 2001, that it would withhold
further action on the liquidated damages claims until “resolution of the filed protest(s),” (Def.
Canex Int’l Lumber Sales Ltd.’s Mot. to Dismiss for Failure to State a Cl. (“Motion to Dismiss”)
at Ex. 1), the Government initiated the current proceedings to recover liquidated damages
following Canex and XL’s refusal to execute statute of limitations waivers as requested by the
Government in 2005. (See Compl. at ¶¶ 19, 31, Confidential Ex. 7.)
COURT NO. 06-00141 PAGE 3
action.5
The court has jurisdiction pursuant to 28 U.S.C. § 1582(2). Dismissal will be
denied unless the factual allegations are “‘enough to raise a right to relief above the speculative
level on the assumption that all the allegations in the complaint are true even if doubtful in
fact.’” Corus Staal BV v. United States, 515 F. Supp. 2d 1337, 1345 (CIT 2007) (quoting Bell
Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1959 (2007)).
Canex argues that the Government failed to exhaust administrative remedies by
commencing this action for liquidated damages without engaging in mitigation proceedings.
Under 19 C.F.R. § 172.1(b) and 19 U.S.C. § 1623(c), a principal or surety can petition Customs
for relief from payment of liquidated damages through such proceedings. See United States v.
Cocoa Berkau, Inc., 990 F.2d 610, 615 (Fed. Cir. 1993). Mitigation proceedings are voluntary
and informal, and relief is granted at the discretion of Customs. United States v. Ataka Am.,
Inc., 826 F. Supp. 495, 502 (CIT 1993) (holding that a “mitigation proceeding for liquidated
damages under 19 U.S.C. § 1623(c) . . . is voluntary”); Cocoa Berkau, 990 F.2d at 615 (“[T]he
determination whether to authorize cancellation of a bond under section 1623(c) falls within the
discretion of [Customs].”). Although exhaustion of mandatory administrative remedies is
generally required prior to action before the court, see 28 U.S.C. § 2637(d),6 mitigation
5
Canex mistakenly filed its motion to dismiss pursuant to USCIT R. 12(b)(6).
(See Motion to Dismiss at 1.) The court will treat the motion as filed pursuant to the proper
provision, USCIT R. 12(b)(5). See United States v. Ford Motor Co., Slip Op. 05-24, 2005 WL
400399, at *1 n.3 (CIT Feb. 18, 2005).
6
“[T]he Court of International Trade shall, where appropriate, require the exhaustion of
administrative remedies.” 28 U.S.C. § 2637(d).
COURT NO. 06-00141 PAGE 4
proceedings are permissive and need not be resolved prior to the commencement of a suit to
recover liquidated damages. Ataka, 826 F. Supp. at 502 (“These discretionary and informal
proceedings need not be resolved in order for the government to recover liquidated damages
under a bond through court action.”); Cocoa Berkau, 990 F.2d at 615 (“[N]othing in either the
express language or the legislative history of section 1623(c) indicates that Congress intended
that a bond surety be required to file a petition for mitigation or that such a petition must be filed
before the government can bring suit to recover liquidated damages.”). Accordingly, the
Government was not required to postpone its filing of the instant action until Canex exercised its
right to request mitigation proceedings.
Canex’s reliance upon Warner-Lambert Co. v. United States, 24 CIT 205 (2000),
and United States v. Bavarian Motors, Inc., 4 CIT 83 (1982), is misplaced. Warner-Lambert
dismissed a complaint alleging threat of sanctions by Customs where sanctions proceedings had
not yet been initiated and Customs had denied its intent to seek sanctions for claims still under
active agency consideration. Warner-Lambert, 24 CIT at 205–10. Such is not the case here. As
discussed above, mitigation proceedings are not required prior to the commencement of an
action before the court, and the instant case is ripe for action. In addition, Ataka noted that
Bavarian Motors, which dismissed a suit for failure to exhaust administrative remedies, was
decided prior to the effective date of 19 U.S.C. § 1505(c), which gave the Government an
immediate right to sue for liquidated damages. Ataka, 826 F. Supp. at 503 (“[S]ince the
effective date of 19 U.S.C. § 1505(c), completion of protest proceedings has not been a
requirement for suit to collect.”). Even if Canex had protested the assessment of liquidated
damages, “the payment obligation runs independently of the protest proceedings.” Id.COURT NO. 06-00141 PAGE 5
Finally, Canex asserts that it had not yet petitioned for mitigation proceedings
because the letter from Customs dated August 24, 2001, indicated that Customs would “continue
to update [the liquidated damages] cases with a holding status until resolution of the filed
[classification] protest(s).” (Motion to Dismiss at Ex. 1.) In subsequent correspondence dated
May 23, 2005, however, Customs noted that the six-year statute of limitations on its liquidated
damages claims was approaching,7 and requested a waiver of the statute of limitations from
Canex and XL. (Compl., Confidential Ex. 7 at 2.) Customs indicated its intent to pursue legal
action to protect its interests if the waiver was not executed. (Id.) Canex was therefore notified
of the possibility of further proceedings with regard to liquidated damages and had ample
opportunity to execute the statute of limitations waiver or petition for mitigation proceedings as
necessary. Canex’s argument that it was deprived of the opportunity to do so is therefore
without merit.
Accordingly, defendant Canex International Lumber Sales Ltd.’s Motion to
Dismiss is DENIED.
/s/ Jane A. Restani
Jane A. Restani
Chief Judge
Dated this 1st day of May, 2008.
New York, New York.
7
Under 28 U.S.C. § 2415(a), a complaint to recover liquidated damages must be filed
“within six years after the right of action accrues or within one year after final decisions have
been rendered in applicable administrative proceedings required by contract or by law,
whichever is later.” 28 U.S.C. § 2415(a); see also Ataka, 826 F. Supp. at 500.