CIT Awards $1.8 Million in Liquidated Damages Against Millenium; Did not Obtain Softwood Lumber Export Permits
The Court of International Trade granted the government’s motion for $1,826,531.80 in liquidated damages from lumber importer Millenium Lumber Distribution and its surety XL Specialty Insurance Co. The award was the result of a failure to obtain export permits from the Canadian government, as required by the Softwood Lumber Agreement. Millenium contended that the permits were only required because of CBP’s improper reclassification of the imported lumber through a Notice of Action, without the notice and comment period required by 19 USC 1625(c)(1). The court, however, found the ruling letters relied upon by Millenium did not apply because its merchandise was not identical, and so no notice and comment period was necessary to revoke or modify them.
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In 2000 and 2001, Millenium imported 168 entries of softwood lumber products from Canada. The entries were secured by bonds that required compliance with all customs laws and regulations. Millenium entered the lumber under Harmonized Tariff Schedule heading 4418, to which the U.S.-Canada Softwood Lumber Agreement does not apply. In making this determination, Millenium said it relied upon CBP classification rulings NY B81359 (here) and NY B88564 (here). Following entry, however, CBP through a Notice of Action classified the merchandise under heading 4407. Lumber in HTS heading 4407 is subject to the Softwood Lumber Agreement, and so requires export permits from Canada for entry into the U.S. After CBP requested proof that the export permits had been obtained, and Millenium provided none, CBP issued Liquidated Damages Notices covering all 168 entries.
Millenium argued that CBP’s Notice of Action improperly revoked the two classification rulings without the notice and comment period required by 19 USC 1625(c)(1). Therefore, it said, the merchandise should be classified under HTS heading 4407, not subject to the Softwood Lumber Agreement, and the company should not be liable for liquidated damages.
The government responded that this penalty action was not the proper arena to raise an argument over tariff classification of the merchandise, which had been earlier sustained by a 2002 CIT ruling and affirmed by a 2007 ruling of the appeals court. In the event that CIT would decide that it could hear the notice and comment challenge, the government said, the rulings did not in any case require notice and comment because Millenium’s merchandise was not identical to the merchandise subject to the rulings. Finally, in an argument that recalled the recent International Custom Products v. U.S. case, the government said Notices of Action are not “interpretive rulings or decisions” that require notice and comment periods.
CIT agreed with the government on the non-applicability of the ruling letters to Millenium’s merchandise. While the ruling letters detailed lumber that was angle-cut on both sides and used for roof trusses, Millenium’s product was only angle cut on one side, and was not definitively for use only in roof trusses. Therefore, CIT said, the rulings did not apply to Millennium’s merchandise, and could not have been revoked by CBP’s Notice of Action.
Finding that the ruling letters did not apply, CIT declined to rule on the government’s other two arguments that: (1) Millennium was barred from raising the classification issue during this penalty action; and (2) Notices of Action are not “interpretive rulings or decisions” requiring notice and comment.
The government also awarded pre-judgment interest to the government, finding no merit in XL Specialty Insurance Company’s arguments that it should only be liable for the amount of the bond.
(See ITT’s Online Archives 12121902 for summary of CIT’s December decision not to dismiss this action. See also ITT’s Online Archives 12121239 for summary of the International Custom Products case, where the defendants successfully raised a similar notice and comment argument against the government.)
(United States v. Millenium Lumber Distribution Co. Ltd., Slip Op. 13-01, dated 01/02/12, Judge Ridgway)
(Attorneys: Aimee Lee for plaintiff U.S. government; Joel Junker of Joel R. Junker & Associates for defendant Millenium; Randolph Furguson of Sandler Travis and Glad & Ferguson for defendant XL Specialty Insurance Company)