CIT Dismisses Gov't Penalty Claim, Finds Degree of Alleged Negligence Inconsistent

In a government action seeking recovery of lost duties and penalties based upon negligence from defendant Nitek Electronics, Inc., the Court of International Trade granted Nitek’s motion to dismiss the government’s penalty claim for negligence. CIT found that, with respect to the penalty claim, the government failed to exhaust its administrative remedies prior to this action.

CIT said that, because U.S. Customs and Border Protection alleged "gross negligence" rather than "negligence" at the administrative level, while the Government's CIT complaint alleged the lesser charge of "negligence", the Government has not exhausted its administrative remedies with respect to the new "negligence" claim.

The entries at issue were gas meter swivels and gas meter nuts from China, which the Government alleges were misclassified under the Harmonized Tariff Schedule (HTS), resulting in lost duties and lost antidumping duties (the merchandise was subject to the AD duty order on certain malleable iron pipe fittings from China (A-570-881))

(CIT denied Nitek’s motion to dismiss the claims for lost duties and lost antidumping duties, and denied Nitek’s motion to dismiss the action for lack of CIT subject matter jurisdiction.)

CIT Finds Gov’t Did Not Exhaust Admin Remedies in Penalty Claim, Dismisses

Nitek argued that the Government’s complaint constituted a newly raised, non-exhausted claim, as the degree of negligence in the complaint differs from that alleged at the administrative level (gross negligence). As such, CBP did not exhaust its administrative remedies in seeking to collect penalties for negligence, as is required by 19 USC 1592 (Penalties for Fraud, Gross Negligence, and Negligence).

The Government contended, among other things, that in giving notice of the claim for a penalty grounded in gross negligence through the administrative process, the Government also gave notice of the elements upon a claim grounded in negligence.

CIT agreed with Nitek, citing the clear language of the statute. CIT refused to grant a waiver for the government’s failure to exhaust its administrative remedies, and dismissed the Government’s claim for penalties for negligence.

Admin Remedies Requirement Does Not Apply to Lost Duties & AD Duties

However, CIT found that, contrary to Nitek’s arguments, the lost duty and lost AD duty claims were not subject to the exhaustion of administrative remedies, and therefore denied Nitek’s motion to dismiss the government’s claims on lost duties and lost AD duties.

CIT Dismisses Nitek’s Motion to Dismiss for Lack of Jurisdiction

Nitek also argued that, as 28 USC 2637(d) says the CIT requires the exhaustion of administrative remedies in 19 USC 1592 recovery claims, CIT does not have subject matter jurisdiction in this case and should dismiss the entire action. CIT disagreed, saying that the statute does not explicitly state that CIT has no subject matter jurisdiction prior to exhaustion. Therefore, CIT denied Nitek’s motion to dismiss for lack of subject matter jurisdiction.

(Slip Op. 12-50, dated 04/13/12, Judge Barzilay)