United States Court of International Trade

Motion for Summary Judgment Granted in Part

In penalty case, United States v. Horizon Products International, Inc., Court No. 14-104, Slip Op. 15-80 (July 24, 2015), the Government seeks $394,794 in unpaid duties and penalties from Defendant Horizon Products International, Inc. (“Horizon”) under Section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592 (2012), plus equitable prejudgment interest on the unpaid duties.  Between 2006 and 2007, Horizon entered or attempted to enter various types of plywood into the United States under inapplicable duty-free provisions of the Harmonized Tariff Schedule of the United States (“HTSUS”). The majority of Horizon’s plywood contained at least one outer ply of non-coniferous wood other than birch, Spanish cedar, or walnut. As a consequence, the correct classification for the plywood was either HTSUS 4412.14.31 or HTSUS 4412.32.31 (the latter becoming effective on February 3, 2007 after the reorganization of HTSUS heading 4412). The original and renumbered provisions are identical in substance, and both carry an 8% duty rate. Defendant’s remaining plywood contained an outer ply of sapele, a tropical wood. The correct classification for that plywood was either HTSUS 4412.13.40 (2006) or 4412.31.40 (2007). Again, the substance of those provisions and the applicable 8% duty rate did not change between the 2006 and 2007 versions of the HTSUS.  Horizon conceded that it misclassified the entries at issue in this action and that it was, according to the court, therefore liable to the Government for $70,254 in unpaid duties.  Therefore the court ordered that these duties be paid.  As for the outstanding interest, the court awarded interest because there had been no undue delay in the bringing of the action and Customs has demanded payment numerous times.

As for negligence, Horizon argued that there was genuine factual issue about reasonable care even though Horizon concedes that it misclassified the entries at issues.  The court agreed. Horizon offered the declaration of Kelsey Quintana, Horizon’s co-owner and manager, in which Ms. Quintana states that the “64 entries were filed by an authorized custom[s] broker using the best possible tariff classification to his knowledge.” See Decl. of Kelsey Quintana ¶ 1, 4. Horizon also offered documents from the underlying administrative proceeding in which Horizon’s counsel noted that Horizon had used a customs broker. Furthermore, the court is looking to discover whether the broker shouldered some of the blame in the incorrect classifications.  For this reason, there still remained a genuine issue of material fact regarding reasonable care.

Moreover, the court agreed with Horizon that there was a genuine question of material fact as to the amount of the penalty under the Complex Machine factors. Specifically, Horizon offered a statement from Ms. Quintana indicating that Horizon “has carried almost no profit for these past years” and that imposition of the full penalty amount will require it “to cease operations and file for bankruptcy.” Decl. ¶¶ 9, 12. Horizon also provided financial exhibits it submitted to Customs to corroborate these statements. See Def.’s App’x at Hor. 14-84.Additionally, Customs itself cited Horizon’s lack of prior violations as a mitigating factor in assessing Horizon’s initial request for a reduced penalty. See id. at Hor.88-89. This evidence, as Horizon argues, raises a genuine issue as to whether a lower penalty is appropriate. The court therefore denied summary judgment as to these issues.