CIT Dismisses Importer's Redelivery Challenge After Merchandise Destroyed; Judge Castigates Agency Failures
The Court of International Trade dismissed on Nov. 8 an importer’s challenge to CBP’s order to redeliver 300 stereo headsets from China for intellectual property violations. The court had found out that plaintiff Evertek’s headsets had been subsequently seized and destroyed by CBP, rendering the case moot. That revelation came nearly a year after the merchandise had been destroyed, and over 18 months after Evertek had filed suit. At the June 2013 hearing where CIT Judge Timothy Stanceu learned that the merchandise had been destroyed a year earlier, the court excoriated CBP for its handling of the case, criticizing the agency for destroying goods under the court’s jurisdiction and then allowing the court to waste resources on a non-existent claim.
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CBP Destroyed Shipment for Allegedly Counterfeit UL Mark
Evertek imported its headsets in October 2011 from Hong Kong-based Cyber-Blue. The packages contained a headset and a USB cable, the latter of which had been purchased by Cyber-Blue from a different manufacturer, Shanghai Alliance. According to Evertek’s complaint, Shanghai Alliance was authorized to put the Underwriters Laboratories (UL) mark on its products until Dec. 31, 2010, so the company was authorized to put the UL mark on the USB cables at the time they were purchased in July 2010. Nonetheless, CBP demanded redelivery of the merchandise, alleging that the UL marks on the USB cables were unauthorized. Evertek filed a protest in December 2011. and CBP denied the protest in January 2012. The fact that the USB cable was sold by Shanghai Alliance during the UL authorization period wasn’t enough for the agency -- CBP wanted to confirm the date of manufacture, and said it couldn’t do so based on the information provided. Evertek subsequently filed suit at CBP in February 2012.
In the meantime, CBP had seized the goods -- although the agency had taken possession in December 2011, the seizure notice associated with the entry was dated Feb. 1, 2012. Despite the ongoing CIT case involving the merchandise, CBP sent two notices of forfeiture to Evertek in May 2012. George Tuttle, who represented Evertek, said he never saw the forfeiture notices -- Evertek was in the process of moving offices, and put the notices in filing cabinets without realizing their importance and providing Tuttle with a copy -- so no response was filed. The shipment of both headsets and USB cables was destroyed by CBP on Aug. 13, 2012.
Agency Failed to Communicate Destruction of Merchandise
Although the merchandise had been destroyed, making the CIT lawsuit moot, none of the attorneys -- including the CBP attorney on the case -- were notified. It took nearly a year, until mid-2013, for attorneys Justin Kenner of the Justice Department and Michael Heydrich of CBP to find out the merchandise no longer existed. Then, they waited two weeks to inform the court at a June 13 hearing. Judge Stanceu was less than pleased. “A lot of time, effort, and legal fees have been wasted due to your failure to inform the Court and your opposing counsel that the case was essentially over,” the judge told Kenner. He reserved harsher criticism for CBP. “The problem was that Mr. Kenner’s client didn’t tell him what was going on,” said Judge Stanceu. “The real fault here appears to be in the Bureau of Customs and Border Protection.”
CBP’s delay in informing the court wasn’t the only problem Judge Stanceu had with the agency. CBP may not have had probable cause to seize the merchandise in the first place, he said -- it essentially admitted as much when it denied the protest for lack of information. Then, rather than only destroying the allegedly infringing USB cables, CBP destroyed the headsets as well. And CBP unilaterally removed the court’s jurisdiction when it destroyed the merchandise even though a case was pending. “I’ve got a serious problem here,” said Judge Stanceu at the June 13 hearing. “Customs seemed eager to destroy this merchandise knowing that this case was pending.”
Seizure One of Many That Drove Evertek ‘Into the Ground’
The case was not an isolated incident, said George Tuttle. “Customs was targeting this company,” he told us. Evertek traded in overstocked and discontinued goods, importing merchandise from downstream wholesalers and selling it online. “This was a major employer in the San Diego area,” Tuttle said. “Customs for a long time never paid any attention to them,” he said. “Then all the sudden they stopped a shipment and decided there was a trademark violation.” Because Evertek bought from downstream wholesalers, it couldn’t prove the original manufacture was licensed to use the trademarks, said Tuttle. “If you can’t prove it to Customs you lose.”
The trouble with CBP took its toll on Evertek’s business. “Once CBP finds one violation they assume that everything else you’re importing you can’t prove either, so they start detaining more merchandise,” Tuttle told us. Soon, CBP was seizing one or two shipments per month. CBP eventually drove Evertek “into the ground,” said Tuttle. “It virtually closed its doors. They went from employing over 800 people in the San Diego area to maybe now employing 10.” CBP did not return a request for comment.
Email ITTNews@warren-news.com for a copy of the transcript of the June 13 hearing.