International Fidelity Insurance Co. v. United States

Slip Op. 

UNITED STATES COURT OF INTERNATIONAL TRADE

:
INTERNATIONAL FIDELITY :
INSURANCE CO., :
:
Plaintiff, : Before: Richard K. Eaton, Judge
v. :
: Court No. 12-00064
UNITED STATES, :
:
Defendant. :
:

OPINION

[Plaintiff’s motion for summary judgment is denied and defendant’s cross-motion for
summary judgment is granted.]

Dated: .BZ




Taylor Pillsbury, Meeks, Sheppard, Leo & Pillsbury, of Newport Beach, CA, for the
plaintiff. With him on the brief was Michael B. Jackson, Jr.

Amy M. Rubin, Assistant Director, International Trade Field Office, Commercial Litigation
Branch, Civil Division, U.S. Department of Justice, of New York, NY, for the defendant. With her
on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, and Jeanne E.
Davidson, Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of
Washington, DC. Of Counsel on the brief was Chi S. Choy, Office of the Assistant Chief Counsel,
International Trade Litigation, United States Customs and Border Protection, of New York, NY.

Eaton, Judge: Before the court is plaintiff International Fidelity Insurance Company’s

(“plaintiff” or “International Fidelity”) motion for summary judgment challenging United States

Customs and Border Protection’s (“Customs”) decision to extend the liquidation period for four
Court No. 12-00064 Page 2

entries of textiles imported by Family Warehouse, Inc. (“Family Warehouse”).1 See Pl.’s Mem.

Supp. Mot. Summ. J., ECF No. 24 (“Pl.’s Br.”); Pl.’s Mem. Resp. Opp’n Def.’s Cross-Mot. Summ.

J. (“Pl.’s Resp. Br.”). Specifically, International Fidelity argues that Customs unlawfully extended

the liquidation period for the entries by “unreasonably delay[ing] its investigation” by “long

periods of inaction . . . before [it] acted or requested further information.” See Pl.’s Br. 13.

Because, plaintiff insists, the extensions were unreasonable, the entries should be found to have

been deemed liquidated under 19 U.S.C. § 1504(d) (2006).2 Pl.’s Br. 1, 9.

The United States (“defendant” or “the Government”), on behalf of Customs, cross-moves

for summary judgment, claiming that the entries were not deemed liquidated and asserting that

Customs’ liquidation extensions did not abuse the agency’s discretion, in light of Customs’

responsibility to make accurate verifications of North American Free Trade Agreement

(“NAFTA”) claims. See Def.’s Mem. Supp. Cross-Mot. Summ. J., ECF No. 33 (“Def.’s Br.”) 8;

Def.’s Reply Pl.’s Resp., ECF No. 38 (“Def.’s Reply Br.”).

The court has jurisdiction under 28 U.S.C. § 1581(a) (2012), which provides that “[t]he

Court of International Trade shall have exclusive jurisdiction of any civil action commenced to

contest the denial of a protest, in whole or in part, under [19 U.S.C. § 1515].”

Because plaintiff points to no record evidence demonstrating that Customs abused its

discretion by extending any period for liquidation, and Customs has cited to record evidence

1
The entries consisted of two entries of poketin bleached woven fabric (entry
numbers 726-1307217-1 and 726-1307218-9) and two entries of poplin unbleached woven fabric
(entry numbers 726-1307052-2 and 726-1307053-0).
2
Further citations to the Tariff Act of 1930, as amended, are to the relevant
provisions of Title 19 of the U.S. Code, 2006 edition, and any applicable supplements.
Court No. 12-00064 Page 3

showing that the extensions were within its discretion, plaintiff’s motion for summary judgment

is denied, and defendant’s cross-motion for summary judgment is granted.

BACKGROUND

The facts described below have been taken from the parties’ statements of undisputed

material facts. See Pl.’s Revised USCIT R. 56.3(a) Statement of Undisputed Material Facts Supp.

Mot. Summ. J., ECF No. 35-1 (“Pl.’s Statement”); Def.’s USCIT R. 56.3(a) Statement of

Undisputed Material Facts Supp. Cross-Mot. Summ. J., ECF No. 33 (“Def.’s Statement”); Def.’s

Resp. Pl.’s Statement, ECF No. 38-1 (“Def.’s Resp. Statement”).3 Citation to the record is provided

where a fact, although not admitted in the parties’ papers, is uncontroverted by record evidence.

3
In its papers, defendant claims that plaintiff’s initial brief did not comply with
USCIT Rule 56.3(a), which now provides:

On any motion for summary judgment filed pursuant to Rule 56, the factual
positions described in Rule 56(c)(1)(A) must be annexed to the motion in a
separate, short and concise statement, in numbered paragraphs, of the material facts
as to which the moving party contends there is no genuine issue to be tried. Failure
to submit this statement may constitute grounds for denial of the motion.

USCIT R. 56.3(a). Defendant argues that plaintiff’s motion was not in compliance because it not
only included “argument and/or editorial characterizations of asserted facts,” but made no attempt
to provide evidentiary citations for some of its factual assertions and failed to identify any material
facts for which there is no genuine issue to be tried. See Def.’s Br. 1-2. Defendant also notes that
in plaintiff’s reply brief, plaintiff failed to comply with 56.3(b), which requires a party opposing
such motion to respond to the moving party’s 56.3(a) submission with “correspondingly numbered
paragraphs responding to the numbered paragraphs in the statement of the movant . . . .” USCIT
R. 56.3(b).

Plaintiff answers by noting that USCIT R. 56.3(a) was not in effect until July 1, 2015, a
date after plaintiff’s June 15, 2015 motion was filed. Pl.’s Resp. Br. 2. Defendant responds,
however, that because of the close proximity to the change in the rule and the court’s
announcement of the rule, plaintiff was on notice of the need to comply. Def.’s Reply Br. 1.
Because plaintiff (1) was in compliance with the rule at the time it submitted its papers; (2)
submitted a revised rule 56.3(a) statement of facts compliant with the amendment; and (3)
Court No. 12-00064 Page 4

Plaintiff served as the surety for the duties owed on entries made by U.S. importer Family

Warehouse of poketin bleached woven fabric and poplin unbleached woven fabric.4 Between July

30, 2007, and January 7, 2008, Family Warehouse imported thirty-three entries of various fabrics

through the Port of Laredo, Texas, claiming, on its entry summaries, that the goods qualified for

duty-free treatment under NAFTA as “originating goods” from Mexico.5 Decl. of John L. Amaya

(Nov. 12, 2015) ¶ 6, ECF No. 33-1 (“Amaya Decl.”); Def.’s Statement ¶ 5. Of the thirty-three total

entries made by Family Warehouse, four are at issue in this action: two entries of poketin bleached

woven fabric (entry numbers 726-1307217-1 and 726-1307218-9 (together, “the Poketin

Entries”)), which entered the United States on July 31, 2007, and two entries of poplin unbleached

woven fabric (entry numbers 726-1307052-2 and 726-1307053-0 (together, “the Poplin Entries”)),

defendant has not demonstrated any prejudice, the court looked to Pl.’s Statement and Def.’s
Statement for factual information.
4
The subject merchandise in dispute is “poketin bleached woven fabric (90 percent
polyester/10 percent cotton) imported in Entry Nos. 726-1307217-1 and 726-1307218-9” as well
as “unbleached poplin woven fabric (100 percent cotton) imported in Entry Nos. 726-1307052-2
and 726-1307053-0.” Decl. of John L. Amaya (Nov. 12, 2015) ¶ 9, ECF No. 33-1.
5
Provisions of NAFTA were enacted into law on December 8, 1993, through the
North American Free Trade Agreement Implementation Act, codified in 19 U.S.C. § 3312, for the
purpose of further promoting the free flow of goods between the United States, Canada, and
Mexico. See Corrpro Companies, Inc. v. United States, 433 F.3d 1360, 1362 (Fed. Cir. 2006). To
accomplish this goal, the agreement provides for the elimination of most tariffs collected on goods
traded between the three countries. Id. Preferential tariff treatment, however, is not automatic, and
an importer must make a written declaration that the goods qualify for NAFTA treatment based
on a “complete and properly executed original Certificate of Origin . . . .” 19 C.F.R. § 181.21(a)
(2007). To substantiate the written declaration, Customs may initiate a verification process to
determine whether a good is entitled to preferential tariff treatment based on its country of origin.
19 C.F.R. § 181.72. Following completion of the verification process, Customs will issue a written
determination to the exporter or producer making the NAFTA claim. 19 C.F.R. § 181.75(a).

Pursuant to 19 C.F.R. § 181.72, Customs may initiate the verification procedure by issuing
a questionnaire or verification letter requesting information from the exporter or producer. 19
C.F.R. § 181.72(a)(3). The response—or lack of response—to these verification letters provides
Customs with a basis for making a proper determination on whether NAFTA treatment is
appropriate.
Court No. 12-00064 Page 5

which entered the United States on July 30, 2007. Def.’s Statement ¶ 2; Pl.’s Br., Ex. A-D. Plaintiff

secured the duties owed on these entries by issuing four single transaction bonds to the importer,6

as principal, for amounts nearly equal to the value entered for each entry. See Compl. ¶¶ 7, 8, 19.

On February 2, 2008, shortly after the importation of the last of Family Warehouse’s thirty-

three entries of fabric claiming duty-free treatment, Customs issued its first notice of extension,

thereby giving it an additional year from the final date of the initial liquidation period to verify the

country of origin and ultimately liquidate the subject entries.7 See Def.’s Resp. Pl.’s Req. Admis.

No. 9; 19 U.S.C. § 1504(b)(1); 19 C.F.R. § 159.12(a). Thus, the first notice of extension gave

Customs until July 31, 2009, to liquidate the Poketin Entries and until July 30, 2009, to liquidate

the Poplin Entries.8 On April 11, 2009, Customs issued its second notice of extension for the

Poketin Entries, giving it until July 31, 2010, to liquidate those entries. On July 25, 2009, Customs

issued its second notice of extension for the Poplin Entries, giving it until July 30, 2010, to liquidate

6
Customs was the beneficiary of the bonds. See generally 19 C.F.R. § 113.62; see
also Sioux Honey Ass’n v. Hartford Fire Ins. Co., 34 CIT 294, 314, 700 F. Supp. 2d 1330, 1348
(2010), aff’d in relevant part, 672 F.3d 1041 (Fed. Cir. 2012) (“The principal and surety are jointly
liable to Customs . . . in the event of default of the obligation to deposit estimated duties.” (citing
19 C.F.R. § 113.62(l)(4) (2009)); Questions and Answers on CBP Bonds, U.S. CUSTOMS AND
BORDER PROTECTION, https://www.cbp.gov/sites/default/files/documents/q_and_a_bonds_3.doc
available at https://www.cbp.gov/document/faqs/questions-and-answers-cbp-bonds (last visited
this date); Mark K. Neville, Jr., INTERNATIONAL TRADE LAWS OF THE UNITED STATES, ch. 9,
¶ 9.06[3] (2015) (“The principal [under a customs bond] is the party who takes out the bond (e.g.,
the importer of record). The surety is typically the insurance company that underwrites the debt.
Finally, CBP is the third-party beneficiary of the principal/surety contract.”).
7
Under 19 U.S.C. § 1504(a), Customs initially had one year from the date of entry
to liquidate the subject merchandise. Thus, without lawful extensions, the last day to liquidate the
Poketin Entries would have been July 31, 2008, and the last day to liquidate the Poplin Entries
would have been July 30, 2008.
8
Because 19 C.F.R. § 159.12(a) allows Customs to extend the period by one-year
increments, the new liquidation dates fell on the second anniversary of the subject merchandise’s
entry into the United States.
Court No. 12-00064 Page 6

those entries. 9 See Def.’s Resp. Pl.’s Req. Admis. No. 9. The reason given for making these

extensions was that Customs needed more time to both “obtain information” and “await[]

delinquent responses to its requests for information.”10 Def.’s Resp. Pl.’s Req. Admis. Nos. 8, 14,

15. The Poplin Entries and one of the Poketin Entries (entry number 726-1307217-1) were

liquidated on June 18, 2010. One of the Poketin Entries (entry number 726-1307218-9) was

liquidated on July 16, 2010. Thus, all four entries were liquidated prior to the expiration of the

second extension period. See Def.’s Resp. Pl.’s Req. Admis. No. 9; Compl. ¶ 28. For clarity, the

details of the proceedings are discussed separately based on each entry’s fabric.

I. THE POKETIN ENTRIES

The Poketin Entries entered the United States on July 31, 2007. As will be discussed

hereafter, Customs did not immediately take action on the entries, but waited until all thirty-three

Family Warehouse entries were made.11 Thereafter, Customs sent a verification letter to Textiles

9
These dates represent the third anniversary of the subject merchandise’s entry into
the United States.
10
Under 19 C.F.R. § 159.12(a)(i), “[t]he port director may extend the 1–year statutory
period for liquidation for an additional period not to exceed 1 year if . . . [i]nformation needed by
Customs for the proper appraisement or classification of the merchandise is not available . . . .”
11
Between January 2008 and September 2008, Customs initiated eight NAFTA
verification procedures for the Family Warehouse entries. Amaya Decl. ¶ 10. While the specifics
of these initial verification procedures is absent from the record, Senior Import Specialist Amaya’s
testimony explains that a verification procedure for poketin bleached woven fabric was one of
these initial investigations. See Amaya Decl. ¶¶ 10-12 (“A majority of the NAFTA claims involved
in the 33 Family Warehouse entries were covered by eight NAFTA verifications initiated between
January 2008 and September 2008 which covered different fabrics claimed to have been produced
by different manufacturers . . . . For example, . . . [a] NAFTA verification was . . . initiated on
October 7, 2008 for poketin bleached woven fabric . . . . There was an earlier NAFTA verification
covering the same fabric claimed to have been produced by Textiles Raamsa. However, it was
discovered that several entries . . . involved a different claimed producer . . . .”).
Court No. 12-00064 Page 7

Raamsa S.A. de C.V. (“Textiles Raamsa”) seeking to confirm the poketin fabric’s country of

origin. Textiles Raamsa was the company claimed on some of Family Warehouse’s entry papers

to be the Mexican producer of that fabric. See Amaya Decl. ¶¶ 10-12. On February 2, 2008, as

Customs’ initial investigations were still underway, it extended the liquidation period for the first

time. The parties agree that the reason Customs extended the time for liquidation was to “await[]

delinquent responses to its requests for information.” Pl.’s Statement ¶ 11. It was subsequently

“discovered,” however, “that several entries of poketin bleached woven fabric . . . , including [the

entries at issue,] involved a different claimed producer, Textycom S.A. de C.V.” (“Textycom”).

Amaya Decl. ¶ 12. How the “discovery” was made is unclear. Nonetheless, on October 7, 2008,

Customs sent a CBP Form 28 Request for Information (“Request for Information”) to Family

Warehouse’s Mexican exporter Exportadora Deisy, S.A. de C.V. (“Exportadora Deisy”) in an

effort to determine the origin of the entries and to request further information regarding the entries’

producer. Amaya Decl. ¶ 12; Pl.’s Br., Ex. C, CBP Form 28 Request for Information, Oct. 7, 2008,

ECF No. 24-1 (“Oct. 7, 2008 Request for Information”). The Request for Information was

prompted by the lack of clarity in Family Warehouse and Exportadora Deisy’s entry papers

concerning the fabric’s country of origin:

[I]nvoices [of the Poketin Entries] shows [Textycom], [Exportadora Deisy’s]
NAFTA Certificate of Origin provided with the entry summary shows [Exportadora
Deisy] as exporter but not as producer in block 8. If [Textycom] is not the producer
of the fabric of [the Poketin Entries], then notify this office as to which firm is the
actual producer of the fabrics. What is the complete name and office title of the
individual with [Textycom] or the actual producer of the fabrics who can certify as
to the accuracy of the information provided to your firm for your NAFTA
Certificate of Origin? What is the complete fax number of [Textycom] or the actual
producer of the fabrics?

Oct. 7, 2008 Request for Information. The record contains nothing indicating that the

October 7, 2008 Request for Information received a response.
Court No. 12-00064 Page 8

On December 1, 2008, Customs sent a Request for Information to producer Textycom

regarding the fabric’s origin. Pl.’s Br., Ex. C, CBP Form 28 Request for Information, Dec. 1, 2008,

ECF No. 24-1 (“Dec. 1, 2008 Request for Information”). Textycom, however, failed to provide

any information. Pl.’s Br., Ex. C, CBP Form 29 Notice of Action, Sept. 23, 2009, ECF 24-1 (“Sept.

23, 2009 Notice of Action”).

Having received no response regarding origin information, on December 31, 2008,

Customs sent a CBP Form 29 Notice of Action (“Notice of Action”) to inform the exporter,

Exportadora Deisy, of Customs’ intent to deny duty-free treatment. A Notice of Action serves as

notice that a negative determination is being proposed, yet provides an additional opportunity for

an exporter or producer to submit information before being denied duty-free treatment. Amaya

Decl. ¶ 18. Specifically, the Notice of Action informed Exportadora Deisy that “[i]f the requested

[origin] information is not supplied within 30 days . . . preferential tariff treatment will be denied

without further notification . . . .” Pl.’s Br., Ex. C, CBP Form 29 Notice of Action, Dec. 31, 2008,

ECF No. 24-1 (“Dec. 31, 2008 Notice of Action”). Exportadora Deisy, however, did not respond

to the notice. See Sept. 23, 2009 Notice of Action. As a result, on February 2, 2009, Customs sent

the company a second Notice of Action informing Exportadora Deisy that “verification revealed

the good does not qualify for preferential tariff treatment” because “the producer . . . named did

not provide [Customs with] the requested corroborating evidence that they manufactured the fabric

in Mexico under NAFTA,” and the goods were denied duty-free treatment following thirty days

with no response from Exportadora Deisy. Pl.’s Br., Ex. C, CBP Form 29 Notice of Action, Feb.

2, 2009, ECF No. 24-1 (“Feb. 2, 2009 Notice of Action”); Def.’s Resp. Pl.’s Req. Admis. No. 12.

Shortly thereafter, on April 11, 2009, Customs extended the liquidation period for a second time,
Court No. 12-00064 Page 9

pushing the liquidation date back from July 31, 2009, to July 31, 2010. See Def.’s Resp. Pl.’s Req.

Admis. No. 9; 19 C.F.R. § 159.12(a).

Because duty free treatment had not been shown, Customs, as was its practice, next

examined the importer’s proposed classification of the fabric under the Harmonized Tariff

Schedule of the United States (“HTSUS”). Amaya Decl. ¶¶ 22-23. Customs orders its inquiries in

this way since, if duty-free NAFTA treatment is shown, classification normally will not matter.

Amaya Decl. ¶ 26. On Family Warehouse’s entry summaries, the Poketin Entries were classified

under HTSUS subheading 5512.11.0090, which covers “unbleached or bleached woven fabrics of

synthetic staple fibers, containing 85 percent or more by weight of polyester staple fibers.” Amaya

Decl. ¶ 24. Customs’ review of the relevant invoice descriptions, however, did not indicate

classification under this subheading because “[t]he commercial invoice descriptions for the fabric

. . . did not confirm that the fabric was made of staple fibers.” Amaya Decl. ¶ 24. To determine the

proper classification, Customs sent a Request for Information to importer Family Warehouse on

June 17, 2009, asking for additional information regarding the fabric. Amaya Decl. ¶ 25; see also

Sept. 23, 2009 Notice of Action (“The importer . . . did not respond to this office’s Request for

Information . . . sent June 17, 2009 for the required additional invoice information for the fabric.”).

On September 23, 2009, having received no response to its inquiry seeking information for

use in properly classifying the fabric, Customs sent a Notice of Action to Family Warehouse

advising it that the entries were being denied duty-free treatment and that the classification would

be changed to HTSUS subheading 5407.51.0040, which covers woven fabrics of synthetic filament

yarn, with a duty rate of 14.9 percent. Sept. 23, 2009 Notice of Action. The Poketin Entries were

then liquidated on June 18, 2010, and July 16, 2010, and Family Warehouse was billed
Court No. 12-00064 Page 10

accordingly. After sixty days without payment from the importer, formal demands were made on

International Fidelity as Family Warehouse’s surety.

II. THE POPLIN ENTRIES

The Poplin Entries were made on July 30, 2007. Between January 2008 and September

2008, Customs initiated its first eight NAFTA verification procedures for the thirty-three Family

Warehouse entries claiming NAFTA treatment. Amaya Decl. ¶ 10. Following the initiation of the

original NAFTA verifications, Customs determined that other information was necessary and

initiated additional NAFTA verifications regarding the poketin bleached woven fabric produced

by Textycom discussed above as well as for the other fabrics found in the thirty-three entries.

Amaya Decl. ¶¶ 10-12. That is, because of the number of NAFTA verifications needed for the

Family Warehouse entries, Customs determined that “it was more practical to allow for the

conclusion of all the NAFTA verifications” before making final determinations for each individual

entry. Amaya Decl. ¶ 14. Therefore, because there were multiple entries of the same fabric entered

by Family Warehouse with the same claimed manufacturer, Customs decided to seek country of

origin information about them at the same time. See Amaya Decl. ¶¶ 8-10.

On February 2, 2008, Customs issued its first notice of extension for all four of the entries

involved in this action. In June 2009, after a majority of its country of origin investigations closed,

Customs conducted a reexamination of the importer’s entries. Amaya Decl. ¶ 15. According to

Customs, because a final NAFTA determination may affect the tariff treatment of multiple entries

involving the same manufacturer, importer, and fabric, at the closing of a NAFTA verification,

Customs generally reexamines all relevant entries to make sure each will receive the appropriate

treatment under NAFTA. Amaya Decl. ¶ 14 (“[A]t the closing of a NAFTA verification, the
Court No. 12-00064 Page 11

relevant entries are examined again to identify all applicable entries.”). Thus, once Customs has

finished all NAFTA verification proceedings for a particular entry—i.e., a “reporting” entry—it

will coordinate its findings with other entries involving the same HTSUS classification that were

imported during a “blanket” period (in this case, between January 1, 2007 and December 31, 2007).

See Amaya Decl. ¶¶ 8-10; Pl.’s Br., Ex. B, CBP Form 28 Request for Information, June 18, 2009,

ECF No. 24-1 (“June 18, 2009 Request for Information”).

In June 2009, Customs reexamined the Family Warehouse entries in order to confirm that

all similar entries were accorded the same NAFTA treatment. During this reexamination—owing

either to an error on the entry papers or to Customs’ own clerical error12—Customs found that no

NAFTA verification had been initiated for the Poplin Entries and two other entries of unbleached

poplin woven fabric which the entry papers indicated were produced by Textiles Raamsa.

Therefore, on June 18, 2009, Customs sent a Request for Information to Textiles Raamsa. Amaya

Decl. ¶ 15; June 18, 2009 Request for Information.

On July 21, 2009, after failing to receive origin information from producer Textiles

Raamsa, Customs sent a Notice of Action to Exportadora Deisy advising it that duty-free treatment

would be denied if information concerning the origin of the goods was not supplied within thirty

days. Pl.’s Br., Ex. B, CBP Form 29 Notice of Action, July 21, 2009, ECF No. 24-1 (“July 21,

2009 Notice of Action”). Shortly thereafter, on July 25, 2009, Customs issued its second notice of

extension for the Poplin Entries, making the new liquidation date July 30, 2010. See Def.’s Resp.

Pl.’s Req. Admis. No. 9; 19 C.F.R. § 159.12(a). On September 21, 2009, Exportadora Deisy

provided “additional information by fax to [Customs],” however, Customs replied that the

12
Neither International Fidelity nor the Government identifies who was responsible
for the clerical error.
Court No. 12-00064 Page 12

information sent “did not support the producer’s claim concerning the origin of the good.” Pl.’s

Br., Ex. B, CBP Form 28 Notice of Action, Oct. 20, 2009, ECF No. 24-1 (“Oct. 20, 2009 Notice

of Action”). Therefore, on October 20, 2009, because neither Textiles Raamsa nor Exportadora

Deisy “provide[d] . . . the requested corroborating evidence that [the producer] manufactured the

fabric in Mexico under NAFTA,” Customs sent a second Notice of Action to Exportadora Deisy

informing it that duty-free treatment for the Poplin Entries would be denied without further notice

if Exportadora Deisy did not supply the requested information. See Oct. 20, 2009 Notice of Action.

Exportadora Deisy, however, did not subsequently supply any origin information. See Pl.’s Br.,

Ex. B., CBP Form 29 Notice of Action, May 25, 2010, ECF No. 24-1 (“May 25, 2010 Notice of

Action”).

Following the denial of duty-free treatment on October 20, 2009, Customs investigated

whether the tariff classification, declared on the Poplin Entries’ entry summaries, matched the

invoice description or the tariff subheading identified on the Certificate of Origin. See Amaya

Decl. ¶¶ 22-23. On May 25, 2010, after its investigation resulted in no classification change,

Customs sent an additional Notice of Action to importer Family Warehouse, informing it again of

the denial of duty-free treatment and the resulting 10.5 percent duty rate. See May 25, 2010 Notice

of Action. In June 2010, Customs liquidated the Poplin Entries and billed Family Warehouse. As

with the Poketin Entries, after sixty days without payment from the importer, formal demands

were made on International Fidelity as Family Warehouse’s surety.
Court No. 12-00064 Page 13

III. THE PROTEST

Pursuant to 19 U.S.C. § 1514, on March 2, 2011, International Fidelity filed a protest13

covering the four entries at issue. In the protest, International Fidelity argued, among other things,

that “the liquidation of the entries occurred by operation of law under 19 U.S.C. § 1504.” Compl.

¶ 33. In other words, the surety claimed that the four entries should be liquidated at the rate

“asserted by the importer of record” at the time of entry. 19 U.S.C. § 1504(b). In this case, because

NAFTA treatment was claimed on the entry documents, that rate would be zero. The protest was

denied on September 15, 2011. Compl. ¶ 34. Plaintiff then commenced this action on March 13,

2012. Plaintiff later filed its motion for summary judgment claiming that the entries should be

deemed liquidated at the duty-free rate asserted at the time of entry pursuant to 19 U.S.C.

§ 1504(d).14 Pl.’s Br. 9. On November 16, 2015, following the close of discovery, defendant cross-

moved for summary judgment. Def.’s Br. 1.

STANDARD OF REVIEW

Summary judgment shall be granted “if the movant shows that there is no genuine dispute

as to any material fact and the movant is entitled to judgment as a matter of law.” USCIT R. 56(a);

see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). “When both parties move for

13
Protest number 2304-11-100023.
14
The court notes that while plaintiff’s brief refers to 19 U.S.C. § 1504(d), the
substance of its argument is that the entries should be found to have been deemed liquidated under
19 U.S.C. § 1504(a). Section 1504(d) governs the deemed liquidation of entries whose liquidation
was previously suspended. See 19 U.S.C. § 1504(d). Section 1504(a), on the other hand, governs
the deemed liquidation of entries not liquidated within one year from the date of entry. See 19
U.S.C. § 1504(a). As shall be seen, because neither party argues that the liquidation of plaintiff’s
entries had been suspended, the court views the question of deemed liquidation as falling under 19
U.S.C. § 1504(a).
Court No. 12-00064 Page 14

summary judgment, the court must evaluate each motion on its own merits, resolving all

reasonable inferences against the party whose motion is under consideration.” JVC Co. of Am. v.

United States, 234 F.3d 1348, 1351 (Fed. Cir. 2000). Here, because there are no genuine issues as

to any material facts, summary judgment is appropriate.

This Court reviews the validity of Customs’ liquidation extensions to determine whether

they are “proper under the statute, and [are] not arbitrary, capricious, an abuse of discretion, or

otherwise not in accordance with law.” Int’l Cargo & Sur. Ins. Co. v. United States, 15 CIT 541,

542, 779 F. Supp. 174, 176 (1991); see 5 U.S.C. § 706(2)(A) (2012); Fabil Mfg. Co. v. United

States, 237 F.3d 1335, 1340 (Fed. Cir. 2001).

DISCUSSION

I. LEGAL CONSIDERATIONS

Liquidation refers to “the final computation or ascertainment of the duties . . . on an entry.”

19 C.F.R. § 159.1. If an entry of merchandise is not actually liquidated within one year from its

date of entry, however, it is “deemed liquidated” by operation of law at the duty rate asserted by

the importer upon entry.15 19 U.S.C. § 1504(a)(1); see Chemsol, LLC v. United States, 755 F.3d

15
Title 19 U.S.C § 1504(a)(1) provides:

Unless an entry of merchandise for consumption is extended under subsection (b)
of this section or suspended as required by statute or court order, except as provided
in section 1675(a)(3) of this title, an entry of merchandise for consumption not
liquidated within 1 year from—

(A) the date of entry of such merchandise, . . .

shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties
asserted by the importer of record. Notwithstanding section 1500(e) of this title,
notice of liquidation need not be given of an entry deemed liquidated.
Court No. 12-00064 Page 15

1345, 1349 (Fed. Cir. 2014). Customs may extend the time in which it must liquidate for an

additional one-year period if information is needed for the “proper appraisement or classification”

of the merchandise. 19 U.S.C. § 1504(b)(1). For extensions to be lawful, Customs must give

appropriate notice to both the importer of record and its surety, as well as articulate a statutory

reason for the extension.16 See 19 U.S.C. § 1504(b); St. Paul Fire & Marine Ins. Co. v. United

States, 6 F.3d 763, 767 (Fed. Cir. 1993). Additionally, Customs may not extend the liquidation

period more than three times (i.e., three years) per entry. See 19 U.S.C. § 1504(b); 19 C.F.R.

§ 159.12(e); Chemsol, 755 F.3d at 1349.

Thus, at most, Customs has four years to obtain information for appraisement or

classification, provided any time extension granted is “for a reasonable period of time relative to

the situation.” Detroit Zoological Soc. v. United States, 10 CIT 133, 138, 630 F. Supp. 1350, 1357

(1986); see St. Paul, 6 F.3d at 769-70. Also, Customs may not extend the time for liquidation

unless it has reason to believe that information useful to properly appraising or classifying the

goods will result. See 19 U.S.C. § 1504(b)(1); see also Detroit Zoological, 10 CIT at 138, 630 F.

Supp. at 1356 (“The term ‘information,’ as it is used in the statute, 19 U.S.C. § 1504(b)(1) (1982),

however, should be construed to include whatever is reasonably necessary for proper appraisement

or classification of the merchandise involved.”).

While Customs is entitled to deference and a presumption of correctness in the collection

of duties and in its official acts, see 19 U.S.C. § 3; 28 U.S.C. § 2639(a)(1) (2012), the court is

16
The court notes that International Fidelity’s complaint alleges in Count 2 that “[i]f
the liquidation period was extended by Customs for [the four entries], the extension was invalid
due to Customs[’] failure to provide written notice of extension to the surety.” See Compl. ¶ 43.
In its papers, however, International Fidelity makes no argument regarding lack of notice. This
claim is thus waived. Indeed, the only issue discussed in plaintiff’s papers is “[w]hether the entries
involved in this case were deemed liquidated by operation of law due to Customs’ unreasonable
delay in conducting its NAFTA investigation.” Pl.’s Br. 1.
Court No. 12-00064 Page 16

mindful that the deemed liquidation provisions in 19 U.S.C. § 1504(b) serve the important purpose

of “‘increas[ing] certainty in the customs process for importers, surety companies, and other third

parties with a potential liability relating to a customs transaction.’” St. Paul, 6 F.3d at 767 (quoting

S. Rep. No. 95-778, at 32 (1978), reprinted in 1978 U.S.C.C.A.N. 2211, 2243).

The courts have, therefore, provided for a “narrow limitation” on Customs’ discretion to

extend liquidation:

We thus conclude that Customs may, for statutory purposes and with the requisite
notice, employ up to four years to effect liquidation so long as the extensions it
grants are not abusive of its discretionary authority. Such an abuse of discretionary
authority may arise only when an extension is granted even following elimination
of all possible grounds for such an extension. There is, in sum, a narrow limitation
on Customs’ discretion to extend the period of liquidation.

St. Paul, 6 F.3d at 768 (emphasis added); Ford Motor Co. v. United States, 286 F.3d 1335, 1344

(Fed. Cir. 2002) (“Ford IV”). Thus, the limitation is sufficiently narrow that a court may only find

an abuse of discretion when Customs has granted an extension where “all reasonable bases” for

making a decision to extend the liquidation period have been eliminated. For example, where

Customs has actual knowledge that there is no basis for an extension, then Customs may not grant

an extension. St. Paul, 6 F.3d at 768 (“Extending a period of liquidation with actual knowledge

that no basis exists for so doing would be an abuse of Customs’ discretion.”); Intercargo Ins. Co.

v. United States, 83 F.3d 391, 393 (Fed. Cir. 1996); Stemcor USA Inc. v. United States, 26 CIT

1373, 1379, Slip. Op. 02-149 at 6 (Dec. 17, 2002). Based on the case law, however, it is apparent

that the limitation on Customs’ discretion is very narrow indeed.

The review of this protest, as with all protests, is conducted based on the record developed

before this Court. 28 U.S.C. § 2640(a) (2012). In this case, the examination of that record involves

looking at the facts with which Customs was presented when it issued each liquidation extension,

in order to determine whether these decisions were reasonable at the time they were made. See
Court No. 12-00064 Page 17

Ford Motor Co. v. U.S., 157 F.3d 849, 855 (Fed. Cir. 1998) (“Ford II”); Ford IV, 286 F.3d at 1343.

In other words, facts that developed subsequent to each notice of extension cannot be used to judge

whether or not each extension was reasonable at the time that the notice of extension was issued.

The burden of demonstrating that Customs acted unlawfully in extending the liquidation

period falls on plaintiff, who must satisfy this burden by a preponderance of the evidence. See St.

Paul, 6 F.3d at 769 (“[W]e conclude . . . that [28 U.S.C. § 2639(a)(1)] requires [plaintiff] to

overcome the presumption of correctness accorded to Customs’ decisions to extend by a

preponderance of the evidence.”); Ford IV, 286 F.3d at 1340.

II. CUSTOMS DETERMINATIONS TO MAKE LIQUIDATION EXTENSIONS WERE NOT AN
ABUSE OF DISCRETION

International Fidelity argues that “long periods of inaction” rendered Customs’ liquidation

extensions unreasonable. Pl.’s Br. 13; Pl.’s Resp. Br. 11 (“For all four (4) entries, Plaintiff has met

or exceeded the burden of proof . . . [by] showing significant time periods in which the agency

took no action regarding its investigation.” (emphasis added)). In particular, plaintiff contends that

it has documented a nearly twenty-three month period of claimed inactivity for the Poketin Entries

(between their entry on July 31, 2007, the issuance of the first Request for Information on October

7, 2008, the first Request for Information regarding classification on June 17, 2009, and liquidation

on June 18 and July 16, 2010) and a thirty-month period of claimed inactivity for the Poplin Entries

(between entry on July 30, 2007, the issuance of the first Request for Information on June 18,

2009, the issuance of a negative NAFTA determination on October 20, 2009, a final determination

on May 25, 2010, and liquidation on June 18, 2010), which led to unreasonable and unnecessary

extensions. Pl.’s Resp. Br. 7-10. According to plaintiff, “the NAFTA investigation should have
Court No. 12-00064 Page 18

been conducted quickly and diligently due to the temporary nature of many of the records used to

substantiate claims for NAFTA-originating treatment.” Pl.’s Br. 14.17

The thrust of plaintiff’s argument, then, is that once Customs had authority to take action,

it should have done so with greater dispatch. See Pl.’s Br. 14 (“Customs had it within its power to

issue [] Notices of Action promptly following the expiration of the [Request for Information]

response deadline, but it neglected to do so. Customs should not have delayed issuing [Requests

for Information], nor have waited almost a year before issuing . . . Notices of Action.”).

Plaintiff endeavors to draw support for its position from Ford Motor Co. v. United States.

In Ford, the Federal Circuit held that Customs improperly extended the liquidation period under

19 U.S.C. § 1504(b) because “Customs’ delay in pursuing the fraud investigation and its resulting

delay in liquidating the entries were not reasonable.” Ford IV, 286 F.3d at 1341.

The Government maintains that “[g]iven the role of and the discretion afforded to Customs

to verify claims and collect duties, the Court should defer to the agency regarding both the

methodology employed and the time involved to resolve the NAFTA claims . . . .” Def.’s Br. 9.

For defendant, plaintiff presents no evidence that Customs “did nothing to further the verification

of the NAFTA claims,” nor does it refute the statements of Senior Import Specialist Amaya

regarding Customs’ customary NAFTA verification procedures. Def.’s Br. 5. Therefore, defendant

contends that, because plaintiff has cited no record evidence showing what Customs was doing, or

not doing, during the time periods, it has not met its burden of proof. Moreover, the defendant

asserts that it has presented sworn testimony demonstrating that the length and the manner of

Customs’ investigation was reasonable. Def.’s Br. 5.

17
Notably, plaintiff offers no proof, or even argument, that the required records in
this case were particularly temporary in nature.
Court No. 12-00064 Page 19

A. First Extension

Plaintiff argues that the first notice of extension issued on February 2, 2008, was

unreasonable because “[n]o action was taken by Customs with respect to all four (4) entries prior

to [that time].” Pl.’s Resp. Br. 7.

The Government responds that Senior Import Specialist Amaya’s sworn testimony

demonstrates that the conduct of the investigation was reasonable and customary. See Def.’s Reply

Br. 3 (“[In his testimony,] SIS Amaya provided an explanation not only of how NAFTA

verifications are conducted in general but of how and why the NAFTA verifications for numerous

entries by importer Family Warehouse were conducted as they were.”). As for plaintiff’s

arguments, defendant insists that “[i]nstead of demonstrating any error in our legal analysis or

providing any reason for the Court to disregard the testimony of SIS Amaya , [plaintiff] consumes

the bulk of its response reiterating its belief that Customs’ verification . . . took too long.

[Plaintiff’s] support for this belief consist primarily of . . . a recitation of time periods between

select agency activities in bolded text to make them appear significant.” Def.’s Reply Br. 4.

The court finds that the conduct of Customs’ procedures through February 2, 2008 were

reasonable and that Customs’ decision to extend the liquidation period on that date so that it could

continue its investigation and await information regarding the importer’s NAFTA claims was

lawful. See Ford IV, 286 F.3d at 1343; see also Ford II, 157 F.3d at 857; Int’l Cargo, 15 CIT at

546-47, 779 F. Supp. at 179.

Here, Family Warehouse made a formal declaration that the imported merchandise in all

four of the entries secured by plaintiff were originating goods from Mexico by adding “MX” as a

prefix to the HTSUS classification subheading on its entry summaries. Amaya Decl. ¶ 6; Pl.’s Br.,
Court No. 12-00064 Page 20

Ex. A-D. These summaries were received by Customs on August 10, 2007 (for the Poketin Entries)

and August 9, 2007 (for the Poplin Entries). Once the importer had made this claim for NAFTA

treatment, Customs was charged with the duty to either accept this claimed country of origin or

deny it. Customs, however, could deny preferential NAFTA tariff treatment “only after initiation

of an origin verification under § 181.72(a) . . . which results in a determination that the imported

good does not qualify as an originating good . . . .” 19 C.F.R. § 181.71. Therefore, Customs could

not immediately liquidate the entries because it lacked information necessary to properly evaluate

the entries’ claimed NAFTA status. Thus, Customs sought information regarding the origin of the

fabric.

As to Customs’ verification process, the record evidence demonstrates, and sensible

business practice directs, that rather than proceeding piecemeal, Customs cumulates several entries

under one verification procedure when they share the same importer, producer, and tariff

subheading. See Amaya Decl. ¶ 8 (“NAFTA verifications are not conducted on an entry-by-entry

basis as doing so would be duplicative and inefficient. Instead, a NAFTA verification is issued

based on the importer, the producer of the merchandise, and the tariff subheading under which the

merchandise is classified. One NAFTA verification may be sufficient to cover several entries that

involve the same importer and the same merchandise made by the same producer.”).

Thus, although the Poketin Entries were made on July 31, 2007, and the Poplin Entries on

July 30, 2007, the last of the Family Warehouse entries with which the various fabrics were

combined was not made until January 2008. See Amaya Decl. ¶ 6. Accordingly, Customs did not

send its first verification letter for the thirty-three entries until January 2008. Even at the start of

its verification, however, it became clear to Customs (due to the quantity and variety of fabrics)

that it would require more time to obtain “information needed for the proper appraisement or
Court No. 12-00064 Page 21

classification of the imported . . . merchandise.” 19 U.S.C. § 1504(b)(1); see Amaya Decl. ¶¶ 10-

13. In other words, Customs issued its first notice of extension so that it would have time to obtain

information necessary to properly address the NAFTA claims. See Amaya Decl. ¶¶ 10, 14

(“[E]ight NAFTA verifications [were] initiated between January 2008 and September 2008 . . . .

Due to the variety of fabrics and the large number of entries, subsequent corrections and additions

were required to the verifications. . . . In light of the multiple NAFTA verifications initiated for

the Family Warehouse entries, it was more practical to allow for the conclusion of all the NAFTA

verifications before making final NAFTA determinations for each individual Family Warehouse

entry.”). Therefore, knowing that it was embarking on a process involving numerous entries, on

February 2, 2008, Customs decided to extend the liquidation period. See Amaya Decl. ¶¶ 10, 12;

Def.’s Resp. Pl.’s Req. Admis. No. 9. Shortly thereafter, as discussed above, Customs initiated

additional verification procedures, including, among others, the verification of poketin bleached

woven fabric and razo bleached woven fabric. See Amaya Decl. ¶¶ 10-13.

As Senior Import Specialist Amaya’s testimony specifies, “the NAFTA verification

process is designed to give the exporter and/or producer as much time and opportunity as possible

to provide information to substantiate the NAFTA claim.” Amaya Decl. ¶ 21. This is because if an

importation’s NAFTA claim is verified, it generally receives duty-free treatment. See Amaya Decl.

¶ 26. Indeed, as defendant points out, “a verified claim . . . benefits the importer.” Def.’s Reply Br.

7. Accordingly, the regulations regarding NAFTA verification allow “several opportunities [for

the exporter or producer] to provide the requested information.” Amaya Decl. ¶ 17; see, e.g., 19

C.F.R. §§ 181.71-.76.

The court finds that because of the number of Family Warehouse entries constituting a

variety of fabrics and Customs’ knowledge of the manner and duration of its own procedure that
Court No. 12-00064 Page 22

its decision, on February 2, 2008, to extend liquidation was reasonable. Family Warehouse made

thirty-three entries of fabric claiming Mexico as their country of origin, thus seeking NAFTA

treatment. Customs’ reasonable practice was to cumulate entries and to send verification letters for

the accumulated number of entries rather than for each entry. Customs, of course, had knowledge

of the time it would ordinarily take to complete its verifications and that the time could be lengthy

because the procedures provide “several opportunities” for a NAFTA claim to be supported.

Amaya Decl. ¶ 17. Therefore, because the last of the thirty-three entries was made on January 7,

2008, and because Customs clearly needed time to complete its work, it was not an abuse of

discretion for Customs, even at the early date of February 2, 2008, to extend the period in which

to liquidate in order to make sure proper verification proceedings were commenced and completed.

B. Second Extension

i. The Length and Manner of Customs’ Investigation Were Reasonable

Following the February 2, 2008 extension, Customs discovered errors in some of the

merchandise’s entry papers. See, e.g., Amaya Decl. ¶¶ 11-12 (“[Exportadora Deisy] advised on

August 27, 2008, in response to the initial NAFTA verification, that due to a clerical error, the

producer of the [razo bleached] fabric was not Vizuette, but Textiles Raamsa. . . . It was [also]

discovered that several entries of poketin bleached woven fabric . . . involved a different claimed

producer, [Textycom].”). Accordingly, on October 7, 2008, Customs issued three Requests for

Information to determine who actually produced the affected entries. One of these requests, sent

to Exportadora Deisy, involved the Poketin Entries at issue here. Amaya Decl. ¶¶ 12-13.
Court No. 12-00064 Page 23

On December 1, 2008, Customs issued an additional Request for Information to Textycom,

the Poketin Entries’ producer, to determine the fabric’s origin.18 After receiving no response from

Textycom, on December 31, 2008, Customs issued a Notice of Action to Exportadora Deisy,

informing it of Customs’ attempted verification. On February 2, 2008, having received no origin

information from either Textycom or Exportadora Deisy, Customs sent a second Notice of Action

to Exportadora Deisy, informing it that the fabric did not qualify for NAFTA treatment.

On April 4, 2009, nearly four months before the time period for liquidation would have run

following the first notice of extension, Customs issued its second one-year extension for the

Poketin Entries in order to “await[] delinquent responses to its request for information” and “obtain

the information to determine how to properly classify the merchandise.” Pl.’s Statement ¶ 11;

Def.’s Resp. Pl.’s Req. Admis. No. 8. Pursuant to this extension, the Poketin Entries would have

to be liquidated by July 31, 2010.

By June 2009, most of the verification procedures were drawing to a close, and Customs

determined that, due to the variety of fabrics involved, it should, in accordance with its usual

practice, reexamine all of the entries. Amaya Decl. ¶¶ 14-15. During this reexamination, it was

learned that no verification procedure had been initiated for, among other entries, the Poplin

Entries at issue here. Amaya Decl. ¶ 15. Accordingly, on June 18, 2009, Customs sent a Request

for Information to producer Textiles Raamsa. Amaya Decl. ¶ 15. Because it received no response

from the producer, on July 21, 2009, Customs issued a Notice of Action to Exportadora Deisy,

informing it that Customs had attempted verification and that the producer failed to respond. July

21, 2009 Notice of Action. Accordingly, unless Exportadora Deisy or Textiles Raamsa provided

18
There appeared to be some confusion about the producer of the fabric because the
invoices on Family Warehouse’s entry summaries listed Textycom as producer, but the Certificate
of Origin did not.
Court No. 12-00064 Page 24

the requested origin information, Customs would deny NAFTA treatment. Shortly thereafter, on

July 25, 2009, while awaiting a response, Customs issued its second one-year liquidation

extension. See Def.’s Resp. Pl.’s Req. Admis. No. 9. Pursuant to this extension, the Poplin Entries

would have to be liquidated by July 30, 2010.

Plaintiff takes issue with Customs’ verification procedure leading up to this second

liquidation extension and the investigation that followed. 19 In particular, plaintiff argues that

“Customs’ 23 month delay in issuing the [Request for Information] on June 18, 2009 [for the

Poplin Entries] necessitated the need, in light of the various 30-day time restraints for NAFTA

verification under the Customs Regulations, for Customs to extend the liquidations of [the Poplin

Entries].” Pl.’s Resp. Br. 7. Plaintiff also seems to argue that events that took place, or did not take

place, after the second extension demonstrated that the decision to extend liquidation was

unreasonable. Pl.’s Resp. Br. 8.

The Government responds that, as with the first extension, plaintiff has failed to satisfy its

burden of proof because it has not “introduce[d] evidence . . . showing very significant periods in

which the agency took no action regarding its investigation.” Def.’s Br. 13 (emphasis added). For

the Government, this claimed failure of proof defeats plaintiff’s case. Moreover, the defendant

again asserts that plaintiff, by presenting no evidence, is impermissibly trying to shift the burden

of proof onto the Government. Defendant argues that “[n]othing in International Fidelity’s

submission refutes either the facts provided by [Special Import Specialist Amaya] or the legal

determination that the court should find necessarily follow[s] from those facts.” Def.’s Br. 7. In

19
Plaintiff maintains that there were three extensions. According to the Defendant’s
Responses to Plaintiff’s Requests for Admission, however, although Customs issued three
extension notices to plaintiff, the liquidation period was only extended twice, as the goods were
liquidated during the second extension period. See Def.’s Resp. Pl.’s Req. Admis. No. 9; Compl.
¶ 28.
Court No. 12-00064 Page 25

other words, according to defendant, International Fidelity “fails to provide a basis for the Court

to find, as a matter of law, that the timing of the NAFTA verifications relating to any of the entries

at issue here” was “unreasonable” and that the Government has offered sworn testimony that it

behaved reasonably. Def.’s Reply Br. 9, 10 (“[W]hile [plaintiff] ‘submits’ that it has shown ‘very

significant time periods in which Customs took no action regarding its investigations,’ all that

[plaintiff] has actually done is compile a bunch of dates, without context.”).

The Government points to record evidence that, it claims, establishes that, because of the

extensive variety and quantity of the fabrics involved, the verification and liquidation process

required additional time to ensure accuracy. See Def.’s Br. 7. As with the first extension, the

Government argues that because Customs does not initiate verification procedures on an entry-by-

entry basis, it is reasonable that some Family Warehouse entries were not acted on immediately,

since they would presumably receive the same NAFTA treatment as other entries involving the

same fabric, producer, and importer which were already undergoing a NAFTA verification. See

Def.’s Br. 7; Amaya Decl. ¶¶ 8, 14-15.

In making its case, the Government points out that the first verification letters for the thirty-

three entries were mailed in January 2008, just before the first notice of extension. The

Government also notes that because the responses to Customs’ letters answered some questions

but prompted others, more inquiries were sent and the last response on the record was received on

September 21, 2009. See Amaya Decl. ¶ 10 (“[S]ubsequent corrections and additions were

required to the [January 2008-September 2008] verifications.”); Oct. 20, 2009 Notice of Action.

As with the first extension, it cannot be said that Customs abused its discretion by issuing

the second notice of extension. Following February 2, 2008, when Customs extended the

liquidation period for the first time, substantial activity took place. The first verification letter was
Court No. 12-00064 Page 26

sent in January 2008, and following its first extension, Customs commenced several subsequent

verifications of the importer’s claims for NAFTA treatment. See Amaya Decl. ¶¶ 10-13, 15-16.

During this time, Customs sent Requests for Information and Notices of Action between the

months of January 2008 and September 2008, on October 7, 2008, December 1, 2008, December

31, 2008, and February 2, 2009—all before Customs’ decision to grant the second extension for

the Poketin Entries on April 11, 2009.

Moreover, on April 11, 2009, and July 25, 2009, when it extended liquidation a second

time, Customs was aware that it had not yet commenced its procedures leading to the proper

classification of the fabrics. As defendant points out, once NAFTA determinations were sent to

Exportadora Deisy on February 2, 2009 (for the Poketin Entries) and October 20, 2009 (for the

Poplin Entries), efforts to decide classification issues were commenced. Def.’s Reply Br. 8 n.3;

Amaya Decl. ¶¶ 22-23 (“While the completion of a NAFTA verification will resolve the question

of preferential treatment under NAFTA, additional information may still be required before an

entry can be liquidated. . . . Several of the Family Warehouse entries involved tariff subheadings

. . . that were not consistent with the invoice descriptions of the imported goods.”).

For the Poketin Entries, this process began with a Request for Information sent to Family

Warehouse on June 17, 2009, asking for additional invoice information for the fabric. The

investigation ended when Customs received no response and sent its September 23, 2009 Notice

of Action informing Family Warehouse of the classification change. For the Poplin Entries,

although the record is unclear about Customs’ investigation, Customs ultimately determined—

following its October 20, 2009 denial of NAFTA treatment—that the fabric would be classified as

poplin unbleached woven fabric 100 percent cotton, as evidenced by its May 25, 2010 Notice of

Action. Finally, the Poketin Entries were liquidated on June 18 and July 16, 2010, and the Poplin
Court No. 12-00064 Page 27

entries were both liquidated on June 18, 2010. In each case, liquidation occurred before the

expiration of the second extension.20

According to plaintiff, the seven-month delay between Customs’ first negative NAFTA

determination for the Poplin Entries on October 20, 2009, and its final denial of NAFTA treatment

on May 25, 2010, was unreasonable. Pl.’s Br. 12. Additionally, plaintiff maintains that Customs

should not have waited four months after the final denial of NAFTA treatment for the Poketin

Entries to issue a Request for Information concerning classification. Pl.’s Resp. Br. 8. Finally,

plaintiff argues that the additional nine months (from September 23, 2009 to June 18 and July 16,

2010) Customs took to liquidate the Poketin Entries after determining classification was

unreasonable. See Pl.’s Resp. Br. 8. Any events subsequent to the issuance of the second notice of

extension on April 11 and July 25, 2009, are, of course, irrelevant to the question of whether

Customs’ decision was reasonable when made. Even if they could be said to be relevant, however,

these facts would not help plaintiff’s case.

Following the closing of the NAFTA verifications, as was Customs’ practice, a

reexamination was conducted to insure that nothing had fallen through the cracks. Senior Import

Specialist Amaya’s testimony shows that it was after this reexamination of the Family Warehouse

entries in June 2009 that Customs commenced verification procedures for the subject Poplin

Entries. This late beginning for the verification of the Poplin Entries resulted from the entries

having been overlooked in Customs’ earlier procedures. In other words, the entries were not

“covered” by any of the earlier NAFTA verifications. See Amaya Decl. ¶¶ 14-15.

20
The period of time between the final decision on classification and liquidation does
appear to be quite long; however, the reasonableness of the delay has no bearing on whether the
decision to extend liquidations for a second time on April 11, 2009, was an abuse of discretion at
the time it was made. See St. Paul, 6 F.3d at 770.
Court No. 12-00064 Page 28

Once Customs realized in June 2009 that no verification procedure had been initiated for

entries of unbleached poplin woven fabric produced by Textiles Raamsa (including the Poplin

Entries), it promptly sent a Request for Information on June 18, 2009, and a follow-up Notice of

Action on July 21, 2009. Customs apparently decided that it would need more than nine days to

await any response from the exporter, and therefore, on July 25, 2009, reasonably determined that

it should extend the Poplin Entries’ liquidation period for a second time.

In fact, following these notices of extension, an additional Notice of Action was sent on

October 20, 2009, for the Poplin Entries. Indeed, Customs received a response from the exporter

as late as September 21, 2009, two months after the liquidation period for the Poplin Entries was

extended a second time. See Oct. 20, 2009 Notice of Action. Moreover, after denying NAFTA

treatment on February 2, 2009 for the Poketin Entries and October 20, 2009 for the Poplin Entries,

because it now mattered that the fabrics be correctly classified, Customs began to collect

information to properly classify the entries. Therefore, it is evident that Customs was not idle after

the second extension was made. That is, while it might be argued that Customs should have

realized that the Poplin entries had not been the subject of verification, the delay in commencing

the verification did not result from inaction.

Here, the facts are different from those found in Ford. Ford involved an ongoing fraud

investigation arising from eleven entries of foreign engines and transmissions. Ford IV, 286 F.3d

at 1337. In Ford, the investigation spanned from August 1986 to March 1990, during which time

the liquidation period was extended for thirty-six months following the lapse of the initial one-

year deadline. Id. at 1341-42. The goods were liquidated in December 1989. Id. at 1342. As to the

investigation, the Federal Circuit noted that “the first 30 months of the 44-month investigation . . .

saw almost no substantive work and two periods of inactivity totaling 22 months . . . .” Id. at 1343.
Court No. 12-00064 Page 29

Moreover, in Ford, the record established that Customs agents were aware that they needed

information to properly appraise and classify the merchandise, and yet waited years before

requesting it. Ford II, 157 F.3d at 856 (“Although [the] evidence shows that [the Customs agent]

felt he needed more information, it also raises the question of why three years had passed without

even a request to Ford for that information. Indeed, the record does not show that [the agent] ever

requested more documents . . . .”). Here, the facts are distinguishable from Ford as the

Government has demonstrated there was continual, if not consistent, activity relating to NAFTA

treatment for the entries and their classification. The facts also show that Customs tried to obtain

information from new sources after previous requests went unanswered.

The defendant, then, has presented record evidence that, at the time the decision was made

to issue each of the notices of extension, Customs was reasonable in its conclusion that more time

would be needed to obtain information “for the proper appraisement or classification of the

imported . . . merchandise” contained in the four entries. 19 U.S.C. § 1504(b)(1). Plaintiff, on the

other hand, has produced evidence tending to prove just two things: (1) that Customs extended the

time for liquidation twice;21 and (2) that the time between entry and liquidation was 1,054 days for

the Poplin Entries; 1,053 days for Poketin Entry ‘17-1; and 1,081 days for Poketin Entry ‘18-9.

What plaintiff has not pointed to is any evidence that Customs abused its discretion not acting with

reasonable dispatch to complete the many tasks it had before it during the periods between the

21
As discussed briefly above, while plaintiff maintains the liquidation period was
extended three times—on (1) February 2, 2008; (2) April 11 and July 25, 2009; and (3) April 10,
2010—defendant notes that these were the dates on which Customs issued notices of extension
and because the entries at issue here were all liquidated within the second liquidation extension
period, the third notice of extension is irrelevant. See Def.’s Reply Br. 3 n.2 (“Notice and extension
dates are not the same—notice always precedes extension. Here, although three extension notices
were issued for each entry, those notices turned out to be unnecessary as all of the entries were
liquidated before the end of the extension period heralded by the second notices.”); Def.’s Resp.
Pl.’s Req. for Admis. No. 9.
Court No. 12-00064 Page 30

fabrics’ entry and the issuance of Requests for Information and Notices of Action to further its

investigation. See Ford II, 157 F.3d at 855 (“[I]n the face of evidence by Customs of its customary

practices, the burden of persuasion require[s] the importer to introduce affirmative evidence that

Customs had not followed the customary practice . . . .” (citing St. Paul, 6 F.3d 769-70)).

Therefore, the court cannot find that the periods between should be characterized as “inactive,”

and therefore, it cannot be said that Customs’ NAFTA verification and classification procedure

timeframe was unreasonable.

Plaintiff attempts to bolster its claim by suggesting that the regulations pertaining to

NAFTA verifications demand a shorter timeframe than those for the submission of cost data (as

Customs required in St. Paul). Pl.’s Resp. Br. 6 (“In this case rather, there are short consecutive

thirty (30) day procedural deadlines proscribed by the Customs Regulations pertaining to NAFTA

verifications. Unlike the lengthy six (6) month actual cost data requirement in St. Paul Fire or the

delays associated with other agencies (e.g. antidumping investigation conducted by the

Department of Commerce) the Customs Regulations pertaining to NAFTA verifications allow for

Customs to solely control the NAFTA verification within the bounds of a tight timeframe.”).

Plaintiff, however, mischaracterizes the thirty-day periods cited in the NAFTA regulations as

“deadlines” instead of the minimum amount of time that must expire before action may be taken.

For example, 19 C.F.R. § 181.72(d)(1) provides “[i]f the exporter or producer . . . fails to respond

to a verification letter or questionnaire . . . within 30 calendar days from the date on which the

letter or questionnaire was sent, or such longer period as may be specified in the letter or

questionnaire, Customs shall send a follow-up verification letter or questionnaire to that exporter

or producer.” As defendant points out, while the regulations relating to NAFTA verifications

describe how Customs must act following the expiration of the thirty-day period, they do not
Court No. 12-00064 Page 31

prescribe a period during which Customs must act—only the verification letter’s recipient. Indeed,

it is to the importer’s benefit for Customs to await NAFTA responses, and hence, the regulations

specifically allow multiple opportunities for exporters or producers to respond. Amaya Decl. ¶ 17.

Accordingly, although Customs may act after the thirty-day period has passed, it is not mandated

to do so. See, e.g., 19 C.F.R. §§ 181.71-.76.

Accordingly, plaintiff’s argument that the length of time that expired between entry and

liquidation proved that defendant abused its discretion when extending the time for liquidation is

without merit.

ii. Customs Did Not Have Actual Knowledge That It Would Receive No Response

International Fidelity also contends that it has satisfied its burden of demonstrating that

Customs acted unlawfully, at least with regard to the Poplin Entries, by citing evidence that

Customs “knew that [Textiles Raamsa] would not substantiate that its goods qualified for NAFTA

treatment . . . .” Pl.’s Br. 12 (emphasis added). Therefore, plaintiff maintains that Customs abused

its discretion by extending the liquidation period a second time. Pl.’s Br. 11-12. To support this

claim, International Fidelity points to a 2008 NAFTA determination involving Family Warehouse

that it maintains should have alerted Customs that “it would not receive a response to its NAFTA

verification inquiries from Textiles Raamsa.” Pl.’s Resp. Br. 4.

The determination plaintiff refers to concerned an entry of razo bleached woven fabric not

involved in this action 22 (the “Razo Bleached Entry”). During the course of the verification

proceedings for that entry, Customs sent a Request for Information to Mexican exporter,

Exportadora Deisy, seeking to establish the origin of the fabric. Amaya Decl. ¶ 11. On August 27,

22
Entry number 726-1320047-5.
Court No. 12-00064 Page 32

2008, Exportadora Deisy informed Customs that it had inaccurately identified the producer of the

Razo Bleached Entry and the actual producer was Textiles Raamsa (the producer of the Poplin

Entries at issue here). As a result, on October 7, 2008, Customs sent a Request for Information to

producer Textiles Raamsa concerning the Razo Bleached Entry. Amaya Decl. ¶ 11. Textiles

Raamsa, however, failed to respond to that request. Ultimately, after receiving nothing from

Textiles Raamsa concerning the origin of the Razo Bleached Entry, Customs denied duty-free

treatment and liquidated the entry on July 17, 2009. Def.’s Resp. Statement ¶ 7.

International Fidelity argues that, because the Poplin Entries shared the same manufacturer,

exporter, and importer as the Razo Bleached Entry, Customs knew that no information would be

forthcoming regarding the origin of the Poplin Entries. Pl.’s Br. 12. In other words, plaintiff argues

once Customs denied duty-free treatment for the Razo Bleached Entry based on Textiles Raamsa’s

failure to respond, it knew that these same parties would not respond to verification requests in

relation to the Poplin Entries at issue here. For plaintiff, because Customs “knew or should have

known” that producer Textiles Raamsa’s behavior in the Razo Bleached Entry investigation would

be replicated in other verification requests Customs had no “reasonable basis” to extend the

liquidation period a second time, and should have initiated a verification proceeding for the Poplin

Entries sooner. Pl.’s Resp. Br. 5 (“Had Customs initiated its NAFTA verification review for [the

Poplin Entries] on or about December 1, 2008, the time it knew or should have known that

information from Textiles Raamsa would not be forthcoming, Customs would not have needed to

extend the liquidations of these two (2) entries a second time.”); Pl.’s Resp. Br. 11 (“Customs had

prior actual knowledge involving another entry . . . that the information it requested with respect

to [the Poplin Entries] would not be provided.”).
Court No. 12-00064 Page 33

The Government maintains that there is a “high bar against challenges to extensions of

liquidations under Section 1504(b),” which “cannot be overcome by merely asserting that there

were no response[s] to requests for information” in an unrelated proceeding. Def.’s Br. 9, 11.

According to defendant, in order for it to be found to have actual knowledge, plaintiff “would have

to demonstrate that Customs was notified that the information requested in the NAFTA

verifications would not be submitted” in order to prevail. Def.’s Br. 11. In other words, for the

Government, International Fidelity would have to show that Customs had actual knowledge that

the requested origin information would not be submitted.

The Government further contends that its negative NAFTA determination in this case was

“based on a lack of verifying information, not on ‘actual knowledge’ that no response would ever

arrive.” Def.’s Reply Br. 6. That is, the government insists that Customs’ decision to deny duty-

free treatment did not result from it being “‘actually’ advised that Textiles Raamsa would not be

responding to the agency’s inquiries regarding [the Razo Bleached Entry,]” but rather, because

Textiles Raamsa’s failure to respond resulted in the claims not being substantiated within the

required timeframe. Def.’s Reply Br. 6. Accordingly, for the Government, “[g]iven that Customs

did not even possess ‘actual knowledge’ that its request for information would never have been

answered regarding [the Razo Bleached Entry], it would be impossible for Customs to have ‘actual

knowledge’ that similar information would not be provided for other entries.” Def.’s Reply Br. 6.

In addition, the Government emphasizes that under plaintiff’s knowledge theory, Customs

would be forced to speculate about whether verifying information would be forthcoming. Def.’s

Br. 11-12 (“Although the lack of a response with regard to inquiries made for one entry may

increase the possibility of no responses for inquiries made for other entries, it does not rise to the

level of actual knowledge by Customs that no information would be forthcoming for the four
Court No. 12-00064 Page 34

entries in this case.”). For defendant, if plaintiff’s argument were to be credited, it would create “a

new obligation for Customs,” one not considered by the Federal Circuit in St. Paul, that would

“require the agency to speculate as to a party’s intent to respond to a Customs request for

information.” Def.’s Br. 12. Therefore, the Government maintains that, absent specific facts

establishing Customs knew the information would not be provided—which defendant maintains

are lacking here— Customs cannot be found to have abused its discretion in issuing a second notice

of extension to await the requested information. Def.’s Br. 11-12.

The court finds that plaintiff has not shown that the second extension was an abuse of

discretion based on Customs’ knowledge that Exportadora Deisy and Family Warehouse would

not respond to its inquiries. First, International Fidelity offers no record evidence that Customs

had actual knowledge that Textiles Raamsa would not submit the requested origin information

prior to granting the extension. See St. Paul, 6 F.3d at 769 (“[Plaintiff has] to prove that [the

importer] or someone else, notified Customs that the required [information] would not be

submitted.” (emphasis in original)). Rather, International Fidelity simply claims that Customs

could be found to have actual knowledge, based on the Razo Bleached Entry investigation, that

Textiles Raamsa would not submit any information. An exporter or producer’s failure to respond

to one verification request, however, simply does not provide actual knowledge that it will not

respond to another.

Nor could it be said that the failure to respond to a verification request established a pattern

from which Customs could be charged with knowledge that it would not receive responses to its

inquiries. Although the Razo Bleached Entry and the Poplin Entries shared the same importer,

exporter, and manufacturer, the entries did not involve the same fabric. Textiles Raamsa’s failure

to produce substantiating evidence regarding the origin of the Razo Bleached Entry in no way
Court No. 12-00064 Page 35

confirmed that it would similarly fail to substantiate a NAFTA claim for the Poplin Entries.

Importantly, Customs has “no duty to inquire whether the required information will be

forthcoming, and Customs may employ the full four-year period unless it has actual knowledge

that the required information will not be submitted.” St. Paul, 6 F.3d at 770 (emphasis added).

Without knowing why Textiles Raamsa failed to respond in the one instance, it is not

possible to charge Customs with knowledge of what the producer might do in another case.

Therefore, although Customs could have speculated that Textiles Raamsa would not submit the

requested information based on prior behavior, plaintiff has not shown that Customs had actual

knowledge that its inquiries would not gain a response. See St. Paul, 6 F.3d at 770. Even if

plaintiff’s proposed “should have known” standard were the law (and plaintiff has cited no case

indicating that it is), International Fidelity’s arguments would fail under these facts. That is,

plaintiff has simply not shown, by the one instance cited, that Customs could be charged with

knowledge that its queries would be met with silence.

CONCLUSION

The court finds that Customs did not abuse its discretion by issuing either the first or second

notice of extension because, even six months after the subject merchandise’s entry, Customs was

aware that it would not be able to make proper NAFTA verifications and classification

determinations and liquidate the subject merchandise before the expiration of the initial one-year

liquidation period. See 19 U.S.C. § 1504(a)(1). It is apparent that Customs was seeking

“information needed for the proper appraisement or classification of the imported . . .

merchandise” and did not abuse its discretion in doing so. 19 U.S.C. § 1504(b)(1). In addition, the

court finds that Customs’ second liquidation extension was not an abuse of discretion because
Court No. 12-00064 Page 36

Customs determined it was more efficient to accumulate Family Warehouse’s entries for purposes

of NAFTA verification and to resolve any questions regarding NAFTA treatment prior to settling

classification issues. Importantly, plaintiff has not shown that Customs issued these extensions

following the “elimination of all possible grounds” for their issuance. St. Paul, 6 F.3d at 768. Thus,

plaintiff has not met its burden to bring this case within the “narrow limitation” imposed on

Customs’ discretion to extend the liquidation period. See id.

Finally, as to the time it took Customs to liquidate following the second extension, the court

notes that liquidation occurred after Customs’ decision to extend the liquidation period, and

therefore, is not relevant to the question of whether Customs abused its discretion in deciding to

extend the liquidation period for the subject merchandise.

Thus, for the reasons stated above, plaintiff’s motion for summary judgment is denied, and

the defendant’s cross-motion for summary judgment is granted. Judgment will be entered

accordingly.

Dated: .BZ



New York, New York

/s/ Richard K. Eaton
Richard K. Eaton, Judge