CIT Orders Penalty for Nonpayment of AD/CV Duties, but Lowers Requested Penalty Amount

The Court of International Trade on Aug. 23 ordered a Texas company and its owner to pay a penalty for negligent misstatements on import documentation, though at a level far below what the government requested. Neither Deladiep or its owner and sole corporate officer John Delatorre appeared in court to defend themselves, but CIT nonetheless cut the penalty by 80 percent to $17,548.12, finding the violation of 19 USC 1592 did not warrant the $87,740.60 maximum.

Deladiep had allegedly failed to pay the required antidumping and countervailing duties on two entries of raw flexible magnets from China, declaring both entries as Type 01 on entry documentation. In response to CBP’s notice of action rate advancing the entries, Delatorre told the agency that he had imported the magnetic rubber sheets for a friend’s business, and that his new customs broker had not informed him that the magnets were subject to the AD/CVD orders. Another company also sent CBP a letter regarding the entry, disagreeing that the magnet sheets were exempt from the AD/CVD orders because they were printed. CBP determined that the magnets did not qualify for the exemption because they were only printed with stripes, a trade name or trade mark.

Deladiep and Delatorre did not respond to a subsequent informed compliance letter, and CBP assessed AD duties at 185.28% and CV duties at 109.95%. After the bills went unpaid, CBP sent pre-penalty and penalty notices, and eventually filed suit at CIT, all without a response. The court found Deladiep and Delatorre in “default,” taking as true the government’s allegations of the violation because the defendants failed to defend.

CIT ordered Deladiep and Delatorre to pay the remaining $32,931.53 not covered by their surety, as well as pre-judgment interest. But the government still had to justify its requested penalty amount, a point on which the trade court disagreed. “A negligent violation of the statute, without more, does not warrant entering a judgment for the maximum penalty requested by the Government,” CIT said. Deladiep and Delatorre had no history of customs violations, were inexperienced in importing magnets, and would probably “be unable to pay the antidumping and countervailing duties, let alone a penalty for negligent violations,” it said. They were also “apologetic and vowed not to import merchandise in the future without first consulting Customs,” CIT said.

A penalty in the amount of $17,548.12, which is 20 percent of the maximum penalty allowed, is appropriate “given the circumstances of the negligent violations of the statute in this case,” CIT said. Despite the mitigating circumstances, Deladiep and Delatorre “did not make a good faith effort to comply with the statute, relied on a new customs broker without taking steps to ensure the accuracy of the entry paperwork, provided an untimely response to Customs’ request for information, and were unresponsive to Customs’ notices of action, pre-penalty notice, and demands for payment,” it said.

(U.S. v. Deladiep, Slip Op. 17-108, CIT # 16-00241, dated 08/23/17, Judge Choe-Groves)

(Attorneys: Jason Kenner for plaintiff U.S. government; defendants Deladiep, Inc. and John Delatorre in default.)