United States v. Deladiep, Inc.
2017 CIT 108
| Ct. Intl. Trade | 2017Background
- Deladiep, Inc. (importer) and its owner/officer John Delatorre imported raw flexible magnet sheets from China in Nov. 2011 and Jan. 2012, declared them not subject to AD/CVD orders, and did not deposit AD/CVD duties.
- Commerce had AD and CVD orders on raw flexible magnets (AD 185.28% and CVD 109.95% for unassigned exporters) and identified the relevant HTSUS classifications; Customs later determined the entries were within the orders' scope.
- Customs requested a sample and information; Delatorre submitted a sample and correspondence but did not contest Customs’ proposed reclassification timely or pay duties or submit required non-reimbursement statements.
- Customs liquidated the entries, assessed AD/CVD duties, billed Defendants (total billed > $77k), and recovered $50,000 from the surety, leaving $32,931.53 unpaid; Customs also proposed a negligent-violation civil penalty based on domestic value ($87,740.60).
- The Government sued under 19 U.S.C. § 1592 to recover unpaid duties and a civil penalty; Defendants failed to appear, the court entered default, and Plaintiff moved for default judgment seeking unpaid duties plus prejudgment interest and the statutory maximum negligent penalty.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Liability under 19 U.S.C. § 1592(a) (negligence) | Defendants made material false statements (description, classification, entry type) used to enter merchandise, so are liable for negligent violations | No responsive defense (default) | Well-pled facts accepted; Defendants jointly and severally liable for negligent violations of §1592(a) |
| Burden of proof and reasonable care | US satisfied its burden to prove the false/material statements; Defendants must show they exercised reasonable care to rebut negligence | Defendants offered no evidence of reasonable care | Burden shifts to Defendants; no rebuttal presented; negligence established |
| Recovery of unpaid AD/CVD duties (and prejudgment interest) | Government seeks $32,931.53 (balance after surety recovery) plus prejudgment interest from Customs’ final demand | Defendants did not dispute amounts | Court entered judgment for $32,931.53 and awarded prejudgment interest under applicable statutes |
| Civil penalty amount under §1592(c) (negligent standard) | Seeks maximum penalty (domestic value $87,740.60) | No opposition; but court must exercise discretion and consider mitigating/aggravating factors | Court exercised discretion: awarded a penalty of $17,548.12 (20% of the statutory maximum), citing negligence, cooperation shortcomings, limited entries, inability to pay, and deterrence/public interest balance |
Key Cases Cited
- Au Bon Pain Corp. v. Artect, Inc., 653 F.2d 61 (2d Cir.) (default: well-pled facts accepted as true)
- Ford Motor Co. v. United States, 463 F.3d 1267 (Fed. Cir.) (burden shift; definition of reasonable care in §1592 context)
- Trek Leather, Inc. v. United States, 767 F.3d 1288 (Fed. Cir.) (individual corporate officer liability under §1592)
- Nat'l Semiconductor Corp. v. United States, 547 F.3d 1364 (Fed. Cir.) (court should not presume maximum penalty is warranted)
- Complex Machine Works Co. v. United States, 83 F. Supp. 2d 1307 (D. Or.) (fourteen-factor framework for §1592 penalty assessment)
- West Virginia v. United States, 479 U.S. 305 (U.S.) (purpose of prejudgment interest: full compensation)