United States Court of International Trade

Motion to Dismiss Denied in Penalty Case

In United States v. Maverick Marketing, LLC et al., Court No. 17-174, Slip Op. 18-16 (March 7 2018), plaintiff claimed that Maverick and Good Times are liable for $3,339,011.08 worth of unpaid FET pursuant to 19 U.S.C. § 1592(d), stemming from the companies’ violations of 19 U.S.C. § 1592(a). Plaintiff, the United States (“Plaintiff”), on behalf of United States Customs and Border Protection (“CBP” or “Customs”), seeks to recover unpaid Federal Excise Tax (“FET”), in various amounts, and prejudgment interest from Defendants, Maverick, Good Times, and American Alternative Insurance Company (“AAIC”) (collectively, “Defendants”), pursuant to section 592 of the Tariff Act of 1930, as amended 19 U.S.C. § 1592 (2012). 

Plaintiff’s claim arose under 19 U.S.C. § 1592(a), (d), which allows the United States to recover any tax owed from any person who entered or introduced merchandise into United States commerce.  Plaintiff alleges that the contract between Maverick and Good Times allowed Maverick to act as a “pass-through” entity, while Good Times financed all the transactions underlying the importation of the subject merchandise. Plaintiff alleges that the Agreement allowed Maverick and Good Times to calculate the FET based on a “purported price,” i.e., the sales price from Rolida Investments, Inc. (“Rolida”), the exporter of the subject merchandise, to Maverick, plus one dollar per carton.  As a result, the sales prices were not based on the first sale of the subject merchandise domestically at an arm’s-length transaction, but instead was the result of a “special arrangement” or scheme between Maverick and Good Times.  As this special arrangement was not disclosed, such failed disclosures are “false statements and/or omissions” under 19 U.S.C 1592. Because these allegations are sufficient and not “naked assertions,” Defendants’ motion to dismiss was denied.

Toilet Paper Rack Holders are Classified under Harmonized Tariff Schedule Heading 8302

In Moen, Inc. v. United States, Court No. 15-145, Slip Op. 18-17 (March 7, 2018), Plaintiff contends that all of its toilet paper holders are entitled to duty-free treatment because the products are classifiable under Harmonized Tariff Schedule of the United States (HTSUS) subheading 8302.50.00, which encompasses “[b]ase metal mountings,” including “hat-racks, hat pegs, brackets and similar fixtures, and parts thereof.” See id. at 2. The United States (“Defendant” or “Government”) maintains that Customs properly classified the imported toilet paper holders under HTSUS subheading 7907.00.10, which covers “[o]ther articles of zinc” including “[t]oilet and sanitary wares.”

According to the Court, HTSUS heading 8302, encompasses objects made of base metal that are affixed to a wall and are used to hang, hold, or support other items. The subject entries should share these three features to be classifiable within the scope of this heading. Plaintiff argued that its toilet paper holders fall clearly within the scope of HTSUS heading 8302 because the products are made of base metal, are designed to be affixed to a wall, and are used to hold or hang an item.  However, the government argued because there are movable pieces “that pivots, swivels, or springs open and shut” to secure a roll of toilet paper, it is not as simple as a hat rack or bracket on which an item hangs. The Court found such distinction non-dispositive.

Because the subject toilet paper holders are made of base metal and are also designed to be mounted on a wall and are used to hold, hang, or support an object, such as toilet paper, according to plaintiff’s facts and defendant’s response to plaintiff’s facts, the Court found that the subject merchandise fall under the scope of HTSUS heading 8302, and thus are classifiable under HTSUS subheading 8302.50.00, and granted plaintiff’s motion for summary judgment denied defendant’s cross motion for summary judgment.