Slip Op. 19- UNITED STATES COURT OF INTERNATIONAL TRADETHE UNITED STATES,Plaintiff,Before: Gary S. Katzmann, JudgeCourt No. 13-00398v.TITAN METALS CORPORATION,Defendant.OPINION[Plaintiff’s motion for summary judgment is granted.]Dated: SULO P. Davis Oliver, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Departmentof Justice, of Washington, DC, for plaintiff. With him on the brief were Chad A. Readler, ActingAssistant Attorney General, Jeanne E. Davidson, Director and Franklin E. White, Jr., AssistantDirector. With them on the supplemental brief dated December 17, 2018, was Joseph H. Hunt,Assistant Attorney General.Peter J. Koenig, Squire Patton Boggs, of Washington, DC, for defendant.Katzmann, Judge: This case presents a “tangled web” 1 of changing stories and disputedconsequences: an importer claims that duties are not owed because the goods fall outside the scopeof an antidumping order; then five years after the importation of the merchandise, the importerabandons that argument and newly contends that duties are not owed because the merchandise was“American Goods Returned” and not subject to the order. Could it be said that the importer actedwith reasonable care in declining to indicate why merchandise plainly covered by an AD Order1In the words of Sir Walter Scott in his poem, “Marmion”: “Oh! What a tangled web we weavewhen first we practice to deceive!”
Court No. 13-00398Page 2was duty-free? Was the importer’s dishonesty so egregious that the Government was entitled tothe maximum penalty permitted by the statute authorizing penalties for false statements, acts andomissions in connection with the importation of merchandise into the United States? Or was theimporter only deserving of a lesser penalty, if any? These questions are now before the court, ina case arising from an action by plaintiff, the United States (“the Government”), against defendant,Titan Metals Corporation (“Titan Metals”), to collect unpaid antidumping duties and a civil penaltyunder 19 U.S.C. § 1592 for negligent tariff misclassification. Titan Metals is a small businessbased in Houston, Texas, engaged primarily in buying domestic origin forging scrap and selling itto India. Titan Metals does not typically import goods into the United States. At issue is its onetime importation of stainless steel flanges from India, which Titan Metals declared as free fromantidumping duties on its entry summary. The Government alleges that the merchandise wassubject to antidumping duties and that Titan Metals violated 19 U.S.C. § 1592 by makingmaterially false statements and omissions in its entry documentation. The Government filed amotion for summary judgment in this court. Finding no genuine issue of material fact, the courtgrants the Government’s motion for summary judgment and orders Titan Metals to pay 146,368.64 in antidumping duties and a penalty of 141,984.98, 50% of the statutory maximumof 283,969.97.BACKGROUNDOn February 2, 1994, the Department of Commerce (“Commerce”) published its AmendedFinal Determination and Antidumping Duty Order on Certain Forged Stainless Steel Flanges fromIndia (“AD Order”). 59 Fed. Reg. 5994 (Dep’t Commerce Feb. 2, 1994), Pl.’s App. 1; Pl.’sStatement of Undisputed Facts, ¶¶ 1 (Jan. 7, 2017), ECF No. 30 (“PSUF”). The AD Order imposedduties on certain types of stainless steel flanges from India. AD Order; PSUF, ¶ 2. On October
Court No. 13-00398Page 325, 2004, Titan Metals filed an entry summary with U.S. Customs and Border Protection (“CBP”),entry number ANA/006500, for its importation of stainless steel flanges from India and indicatedthat its merchandise was exempt from antidumping duties. Pl.’s First Set of Interrogatories andRequests for Admission (Aug. 4, 2015), Pl.’s App. 95 (“Pl.’s First Request”). Specifically, TitanMetals identified the entry type as “01” (consumption entry) rather than “03” (antidumping entry)and did not deposit any antidumping duties at the time of entry. Id. at Ex. A; Decl. of Laura Webb,¶ 7 (Nov. 6, 2017), Pl.’s App. 137 (“Laura Webb Decl.”). Titan Metals included in its entrydocuments a Generalized System of Preferences Certificate of Origin containing a declaration bythe Indian exporter Rollwell Forge that the imported merchandise was produced in India, as wellas a stamp from India’s Export Inspection Council attesting to the same. Pl.’s First Request at Ex.D.On August 26, 2005, CBP liquidated Titan Metals’ entry of the stainless steel flanges asfree of duty, but, on November 26, 2005, CBP determined that the imported merchandise wassubject to the AD Order. Laura Webb Decl., ¶¶ 6–7. CBP issued a pre-penalty notice to TitanMetals in January 2006 and a notice of penalty and duty demand on May 8, 2006 for a penalty of 292,737.28 and a demand of 146,368.64 for actual loss of revenue. Letter from John Sandersto Titan Metals Corporation (Jan. 12, 2006), Pl.’s App. 5; Letter from John Sanders to LawrenceHanson (May 8, 2006), Pl.’s App. 8. On July 31, 2006, Titan Metals’ counsel responded that theimported items were unfinished and therefore not subject to the AD Order. Letter from LawrenceHanson to John Sanders (July 31, 2006), Pl.’s App. 10. He did not claim that the items were
Court No. 13-00398Page 4American Goods Returned. 2 Id.; Laura Webb Decl., ¶ 25. Later, CBP asked Titan Metals’ counselon numerous occasions to compare the imported merchandise to the scope of the AD Order, buthe did not respond. Laura Webb Decl., ¶ 26. Titan Metals’ new counsel became involved afterthe deadline for post-entry amendment had passed. Def.’s Reply to PSUF, ¶ 69 (Mar. 15, 2018),ECF No. 37.On April 24, 2007, CBP’s Fines, Penalties, and Forfeitures’ Division (“FP&F”) referredTitan Metals’ petition against the penalty and duty demand to CBP’s Office of Regulations andRulings (“OR&R”). Memorandum from FP&F to Director (April 24, 2007), Pl.’s App. 12. OnMay 29, 2007, OR&R issued a decision finding that Titan Metals failed to exercise reasonablecare. Letter from Charles Ressin to John Sanders (May 29, 2007), Pl.’s App. 15.On September 11, 2009, Titan Metals asserted for the first time in a response to CBP’samended penalty notice that the imported merchandise was American goods exported andreturned. Letter from Peter Koenig to Commissioner (Sept. 11, 2009), Pl.’s App. 26. After a few219 C.F.R. § 10.13 defines “American Goods Returned” under the Harmonized Tariff Scheduleof the United States (“HTSUS”):Subheading 9802.00.80, Harmonized Tariff Schedule of the United States(HTSUS), (19 U.S.C. 1202), provides that articles assembled abroad in whole or inpart of fabricated components, the product of the United States, which (a) wereexported in condition ready for assembly without further fabrication, (b) have notlost their physical identity in such articles by change in form, shape, or otherwise,and (c) have not been advanced in value or improved in condition abroad except bybeing assembled and except by operations incidental to the assembly process suchas cleaning, lubricating, and painting, are subject to a duty upon the full value ofthe imported article, less the cost or, if no charge is made, the value of such productsof the United States. The rate of duty which is assessed upon the dutiable portionof the imported article is that which is applicable to the imported article as a wholeunder the appropriate provision of the HTSUS (19 U.S.C. 1202) for such article. Ifthat provision requires a specific or compound rate of duty, the total duties assessedon the imported article are reduced in such proportion as the cost or value of thereturned United States components which qualify for the exemption bears to thefull value of the assembled article.
Court No. 13-00398Page 5rescissions due to miscalculation, CBP issued its fourth and final pre-penalty notice and dutydemand on November 1, 2011, demanding 146,368.64 in antidumping duties and 283,969.97 inpenalties. Letter from Celia Grau to Titan Metals (Nov. 1, 2011), Pl.’s App. 35. In a January 6,2012 letter to CBP in response to CBP’s November 1, 2011 letter, Titan Metals reasserted that theimported merchandise was U.S. origin product mistakenly shipped to India and returned and thuswas not subject to antidumping duties. Letter from Peter Koenig to Celia Grau (Jan. 6, 2012), Pl.’sApp. 41. Titan Metals provided documentation of its purchase of forging scrap from BeaumontIron & Metal Corp. (“Beaumont”), a Texas-based company, and its shipment of the forging scrapto Kanungo Ferromet Ltd. (“Kanungo”) in India. Letter from Peter Koenig to Celia Grau (Jan. 6,2012).CBP then compared the documentation of the imports into the United States and thedocumentation of Titan Metals’ return of the erroneous shipment to Beaumont. CBP found thatthe weight of the imported merchandise (35,837 lbs.) did not match the weight of the merchandisereturned to Beaumont (37,346 lbs.) and that the value of the imported merchandise ( 91,749) didnot match the value of the merchandise returned to Beaumont ( 24,275). Letter from Peter Koenigto Celia Grau (Jan. 6, 2012), at Ex.10, Pl’s App. 74; Pl.’s First Request at Ex. A. On March 21,2012, CBP issued another letter to Titan Metals’ counsel in response to the January 6, 2012 letter,in which it stated that Titan Metals had not demonstrated that the imported merchandise was“returned exactly as is” as claimed by Titan Metals, and therefore determined that a violationoccurred and that Titan Metals was culpable as alleged in the pre-penalty notice dated November1, 2011. Letter from Celia Grau to Peter Koenig, (Mar. 21, 2012), Pl.’s App. 89.On April 20, 2012, Titan Metals’ counsel explained in an email to Commerce that thediscrepancy in value was due to the fact that Titan Metals’ export to India was believed to be scrap
Court No. 13-00398Page 6metal, whereas its import from India was believed to be good products (i.e., forgings). EmailCorrespondence between Peter Koenig and Fletcher Benton (May 30, 2012), Pl.’s App. 90.However, the letter provided no explanation as to the discrepancy in weight. Id.On May 30, 2012, FP&F referred this matter to the Associate Chief Counsel in Houstonfor collection. PSUF, ¶ 95. On December 12, 2013, the Government brought an action againstTitan Metals in this court, alleging that Titan Metals committed a negligent violation of 19 U.S.C.§ 1592 and owed the Government 283,969.97 in penalties and 146,368.64 in antidumpingduties. Pl.’s Br. at 9.In its September 2015 response to the Government’s discovery request, Titan Metalsexplained the timeline of events that led it to export and import what it argued was AmericanGoods Returned. Def.’s Resp. to Pl.’s First Request (Sept. 2, 2015), Pl.’s App. 118. Titan Metalscontended that Beaumont erroneously shipped on May 24, 2004 what it believed to be scrap metal,which turned out to be good product (i.e., actual forgings as opposed to scrap metal from makingforgings), to Titan Metals; that Beaumont asked Titan Metals to return the merchandise afterrealizing the mistake; and that Titan Metals subsequently asked Kanungo to return the productsfrom India to the United States, which were the imported merchandise at issue. Id.On October 1, 2015, in response to Government questioning during a deposition taken forthe purposes of this litigation, Titan Metals’ president Mukesh Turakhia (“Turakhia”) admittedthat Titan Metals’ statement on its entry forms indicating that the steel flanges were produced inIndia was false and that he knew that the statement was false at the time of forwarding the entryforms to CBP. Deposition Transcript of Mukesh Turakhia, 177–78 (Oct. 1, 2015), Def.’s App. 1(“Turakhia Dep. Tr.”). Turakhia further testified that Titan Metals did not review the entry formsor discuss them with its customs broker Potts, McCanless & McCanless before submitting them to
Court No. 13-00398Page 7CBP. Id. at 69–70. Turakhia noted that Titan Metals was in the business of buying forging scrapmetal from American companies and exporting it to India and was not a repeat importer. TurakhiaDep. Tr. at 13. Turakhia also acknowledged that Titan Metals did not file with CBP a declarationby its foreign shipper, Kanungo, attesting that the articles were exported from the United States“and returned without having been advanced in value or improved in condition by any process ofmanufacture or other means,” which is required for American Goods Returned to receive tax-freetreatment. 19 C.F.R. § 10.1(a)(1) (2017); Turakhia Dep. Tr. at 192. Hitesh Kanungo, the head ofKanungo, subsequently testified that the imported merchandise was American Goods Returned.Deposition of Hitesh Kanungo, Kanungo Ferromet Ltd., p. 11, 18, 23–33, 38, 40, 46–47, 62–65,67, 79–85, 99–100, 105 (Aug. 1, 2016), Def.’s App. 68 (“Kanungo Dep.”).The Government filed a motion for summary judgment on November 7, 2017, and TitanMetals filed its response on March 15, 2018. ECF No. 30, 37. Oral argument was held onNovember 20, 2018. ECF No. 42. On December 6, 2018, the court ordered supplemental briefing.ECF No. 44. The Government filed its supplemental brief on December 17, 2018. ECF No. 45.Titan Metals did not file a response. On December 18, 2018 the court then ordered additionalsupplemental briefing from both parties and for Titan Metals to include in its brief its response tothe questions issued by the court in the December 6, 2018 order. ECF No. 46. After a stay due toa lapse in appropriations, the Government and Titan Metals filed their supplemental briefs onFebruary 6, 2019. ECF Nos. 51–52.
Court No. 13-00398Page 8APPLICABLE LAWI.Jurisdiction and Standard of ReviewThe court has jurisdiction over the underlying action pursuant to 28 U.S.C. § 1582(1).3The court decides all issues de novo in actions under section 1592. 19 U.S.C. § 1592(1).II.Summary Judgment StandardThe court will grant summary judgment if the movant shows that there is no genuinedispute as to any material fact and the movant is entitl