United States v. Horizon Products International, Inc.
2017 CIT 68
| Ct. Intl. Trade | 2017Background
- Horizon imported 64 plywood entries (Apr 2006–Aug 2007) and declared them under duty‑free HTSUS classifications; Customs determined most should have been classified under subheadings carrying an 8% duty.
- Customs rate‑advanced 21 entries (Horizon paid $42,016) and liquidated 43 at duty‑free rates; Customs identified $162,270 total lost revenue ($42,016 potential + $120,254 actual) and sought duties plus a penalty equal to twice the lost revenue ($324,540).
- Customs mitigated the penalty administratively to $85,278 conditioned on full payment of duties; negotiations failed, Customs recovered $50,000 from a surety, and $70,254 in duties remained unpaid; the Government sued for unpaid duties and a § 1592 penalty.
- Horizon conceded misclassification and liability for unpaid duties; the court entered a partial judgment for $70,254 (unpaid duties) but reserved the negligence/penalty question for trial; Horizon later ceased defending and default was entered.
- The Government sought the statutory maximum penalty (two times duties = $324,540); the court found Horizon negligent as a matter of law because Horizon declined to present evidence of reasonable care, but exercised discretion in setting the penalty.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether default judgment should be entered | Horizon abandoned defense; default appropriate and Plaintiff prejudiced if denied | Horizon notified it would not proceed to trial and did not contest penalty calculation | Default judgment granted for Plaintiff; Horizon liable for negligence under § 1592 (court considered whole record) |
| Whether Horizon negligently violated 19 U.S.C. § 1592 | Misclassification was material and continued after Customs notice; Government met initial burden | Horizon argued it used an authorized customs broker and claimed reasonable care (but offered no evidentiary support) | Court held Horizon negligent as a matter of law because it failed to present evidence supporting reasonable care |
| Appropriate penalty amount under § 1592(c)(3) | Seeks statutory maximum (two times lost duties = $324,540) to deter and vindicate Customs authority | Horizon did not contest penalty amount but argued (implicitly via non‑participation) mitigation could apply | Court declined statutory maximum as partly aimed at remedying litigation misconduct; set penalty at $162,270 (equal to total lost revenue) plus post‑judgment interest |
| Whether further evidentiary hearing on damages was required | Not necessary because Horizon did not contest damages or request hearing | Horizon did not request a hearing or submit evidence to contest amount | No hearing required; court assessed penalty from record and chosen mitigations/aggravators |
Key Cases Cited
- Nishimatu Constr. Co. v. Houston Nat’l Bank, 515 F.2d 1200 (5th Cir. 1975) (default generally establishes liability)
- City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114 (2d Cir. 2011) (evaluate well‑pled facts when entering default judgment)
- United States v. Ford Motor Co., 463 F.3d 1267 (Fed. Cir. 2006) (burden shift and reasonable care framework under § 1592)
- United States v. Nat’l Semiconductor Corp., 547 F.3d 1364 (Fed. Cir. 2008) (court discretion in assessing § 1592 penalties)
- United States v. Complex Mach. Works Co., 83 F. Supp. 2d 1307 (D. Del. 1999) (fourteen‑factor test for setting customs penalties)
- Finkel v. Romanowicz, 577 F.3d 79 (2d Cir. 2009) (no hearing required where defaulting party does not dispute damages)