Slip Op. 06 - 164
UNITED STATES COURT OF INTERNATIONAL TRADE
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UNITED STATES, :
Plaintiff, :
v. : Court No. 06-00131
:
XL SPECIALTY INSURANCE COMPANY,
:
Defendant.
:
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Opinion & Order
[Defendant’s motion for a stay pending
outcome of related proceedings denied.]
Dated: November 9, 2006
Peter D. Keisler, Assistant Attorney General; David M.
Cohen, Director, Patricia M. McCarthy, Assistant Director,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Sean B. McNamara); and Office of Assistant Chief
Counsel, U.S. Customs and Border Protection (Kevin M. Green), of
counsel, for the plaintiff.
Sandler, Travis & Rosenberg and Glad & Ferguson, P.C. (T.
Randolph Ferguson) for the defendant.
AQUILINO, Senior Judge: Plaintiff’s complaint, filed
pursuant to 19 U.S.C. §1592(d) and 28 U.S.C. §1582, prays for
recovery of duties upon a continuous entry bond executed by
Intercargo Insurance Company, n/k/a XL Specialty Insurance
Court No. 06-00131 Page 2
Company, per Customs Form 301 on behalf of Dell Products LP and
Dell Computer Corporation. It prays for $1,558,049.79 alleged
to have not been paid due to entries
. . . 13. . . . into the commerce of the United States
by means of materially false documents, markings,
written or oral statements, acts and/or omissions by
Dell. Specifically, the entry documents misdescribed
the merchandise and provided an incorrect tariff
classification.
* * *
15. The false statements, acts, and/or
omissions referred to . . . were material because they
prevented and/or had the potential to prevent []
Customs . . . from applying the correct dutiable rate
to the shipments, thereby causing the United S[t]ates
to suffer an actual loss of revenue . . ..
16. The material false statements, acts and/or
omissions . . . were the result of fraud, and/or gross
negligence, and/or negligence on the part of XL’s
insured, Dell, in violation of 19 U.S.C. '1592(a)(1),
which deprived the United States of lawful duties . . ..
17. Pursuant to 19 U.S.C. '1592(d), XL, as
surety, is liable for the duties owed the United
States on the entries identified . . ..
I
The defendant has responded by filing a Motion to Stay
Pending Outcome of Administrative Proceedings. It describes
Dell’s merchandise as “notebook computers from Malaysia . . .
[that] contain[] one battery encased in the notebook housing . . ..”
Court No. 06-00131 Page 3
. . . After entry for consumption, the notebooks are
admitted into a foreign trade zone (“FTZ”) in domestic
status. Within the FTZ, the notebook is unpacked, and
placed into a larger box with other items ordered by
the purchaser for use with the notebook. These other
items could include operational manuals, a power
adapter, and any additional items the customer has
purchased. Some customers purchase an additional
battery for the notebook. In some cases the
advertised price of a notebook includes the additional
battery. Even in those cases, where the listed price
includes an additional battery, if the customer does
not want to purchase the additional battery, it can be
deleted from the order and the price is adjusted
accordingly, and the customer can choose other
features of the advertised laptop. In order to fill a
customer order, the ordered items are pulled and
placed in a box. . . . There are no prepackaged goods
ready to be shipped without subsequent repacking. The
boxed merchandise is then withdrawn from the FTZ and
shipped to the customer. . . .
The additional batteries are imported and are not
entered for consumption in the U.S. and are admitted
into the FTZ in non privileged foreign status.
According to the importer, the additional battery is
used as an additional power source by customers that
need longer battery life than that supplied by the
primary battery encased in the notebook. The
additional battery is designed to fit into the same
battery slot as the primary battery, and cannot be
used with other types of Dell laptops, with other
brands of laptops, or with any other equipment. The
importer also sells the batteries admitted into the
FTZ individually.
Affidavit of David M. Murphy in Support of Defendant’s Motion to
Stay, Exhibit A, pp. 1-2 (HQ 967364 (Dec. 23, 2004)). Pursuant
to request for an “internal advice” from the headquarters of the
Court No. 06-00131 Page 4
Bureau of Customs and Border Protection (“CBP”), the additional
lithium-ion batteries were held separately dutiable under HTSUS
subheading 8507.80.80. See generally id. And CBP began
thereafter liquidating such entries pursuant thereto. It also
commenced this action to collect those duties that had not been
tendered on those entries, which were liquidated prior to the
headquarters ruling. Cf. Complaint, Exhibit B.
Defendant’s motion points to the importer’s protests
of the CBP liquidations under subheading 8504.80.80, which, at
the time of its filing, apparently had not been acted upon by
the agency. Whereupon it states:
. . . Until the correctness of the importer’s
classification at the time of entry is determined,
either by Customs in its administrative resolution of
the protest in favor of the importer, or by this Court
in a separate action maintained by the importer
contesting denial of the importer’s protest, the
importer in this case cannot be shown to have engaged
in any conduct that violates 19 U.S.C. §1592(a).
A
Defendant’s motion cites Pentax Corp. v. Robison, 125
F.3d 1457 (Fed.Cir. 1997), and United States v. Blum, 858 F.2d
1566 (Fed.Cir. 1988), for the proposition that, if there has
been no violation of 19 U.S.C. §1592(a), there can be no
Court No. 06-00131 Page 5
collection of duties under 19 U.S.C. §1592(d). Of course, such
violation must be established for there to be any such
collection, but it does not necessarily follow that that
predicate be established in an action between the government and
the importer. That is, Blum held there to be a direct cause of
action against a surety for recovery of lost duties due to
violation of section 1592(a), which is this matter at bar. The
government is not foreclosed from commencing this kind of action
first. To be sure, when it does so, it bears the burden of
proving such violation of the statute, just as it does in any
action brought by it against an importer pursuant to 19 U.S.C.
§1592.
B
As indicated, the crux of defendant’s instant motion
is that its importer, Dell, has taken and will take steps to
defend itself. At the time of filing, they were administrative.
Now, the CIT docket reflects the commencement of an action, No.
06-00306, against the government sub nom. Dell Products LP v.
United States. The complaint contests in four counts CBP’s
“improper classification, under subheading 8507.80.80, HTSUS, of
batteries that are components of Dell computers”, albeit
covering separate entries from those at issue here. That this
Court No. 06-00131 Page 6
new action and the one against the surety are interrelated is
obvious. But, their postures and responsibilities differ. In
the more recent matter, Dell has the burden of prosecution and
persuasion. In the former, that burden is on the plaintiff
government.
Be their array and concomitant burdens as they may,
the suppliant for a stay must make out a clear case of
hardship or inequity in being required to go forward,
if there is even a fair possibility that the stay for
which he prays will work damage to some one else.
Landis v. North American Co., 299 U.S. 248, 255 (1936). In
other words, a movant must “make a strong showing” that a stay
is necessary and that “the disadvantageous effect on others
would be clearly outweighed.” Commodity Futures Trading Comm’n
v. Chilcott Portfolio Mgmt., Inc., 713 F.2d 1477, 1484 (10th
Cir. 1983). This the movant surety has not done herein,
presumably because it is not able to do so.
II
In thus hereby necessarily denying* defendant’s Motion
to Stay Pending Outcome of Administrative Proceedings, the court
* Cf. United States v. Aegis Security Ins. Co., 29 CIT ___,
398 F.Supp.2d 1354 (2005). Given the quality of the written
submissions on both sides, defendant’s motion for oral argument
can be, and it hereby is, also denied.
Court No. 06-00131 Page 7
can confirm its confidence that this and its related action can
and will nonetheless proceed to final resolution without
needless, duplicative litigation.
So ordered.
Dated: New York, New York
November 9, 2006
/s/ Thomas J. Aquilino, Jr.
Senior Judge