CIT Denies Dismissal of $1.8 Million Liquidated Damages Claim; Mitigation Not Required for Exhaustion
The Court of International Trade denied Millenium Lumber’s motion to dismiss a penalty action seeking $1.8 million in liquidated damages for the failure to get the necessary licenses to import softwood lumber from Canada. Millenium argued the government failed to exhaust its administrative remedies because CBP didn’t complete administrative proceedings to mitigate the penalty before bringing suit to collect the penalties. Relying on its past precedent, CIT said CBP mitigation proceedings are voluntary and discretionary, and so are not a prerequisite for liquidated damages actions.
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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. The lumber was entered under Harmonized Tariff Schedule heading 4418, but following entry CBP classified the merchandise under heading 4407. Lumber in HTS heading 4407 is subject to the U.S.-Canada Softwood Lumber Agreement, and so requires export permits from Canada for entry into the U.S. After CBP requested, and Millenium provided no proof it had obtained the export permits, CBP issued Liquidated Damages Notices covering all 168 entries, CIT said. The notices also said Millenium had the right to petition CBP for mitigation of the assessments (or pay) within 60 days. Although Millenium argued otherwise, CIT said the company filed no petition for mitigation proceedings.
Meanwhile, Millenium filed protests of CBP’s HTS classification of the lumber. Because it only sought liquidated damages based on the disputed classification, CBP agreed to defer action on the damages claims until the protests were resolved. After CBP denied the protests, Millenium filed suit at CIT. While the case was still pending, CBP in 2005 told Millenium and its surety that it would seek payment of the liquidated damages unless the company waived the six-year statute of limitations on liquidated damages that was set to expire. Millenium did not execute the waivers, and the government commenced this action one year later. CBP’s classification of the lumber in HTS heading 4407 was later affirmed by CIT in 2007, and upheld by the appeals court in 2009.
Millenium argued that it had the right to seek mitigation of the liquidated damages, and that the mitigation proceedings were pending at the administrative level, so therefore the government’s suit to seek the damages was premature. But relying on CIT decisions of several cases, including Cocoa Burkau (1993), Ataka (1993), and the “strikingly similar” Canex (2008), CIT found that CBP was not bound by any requirement to allow mitigation proceedings. Instead, CIT said, CBP mitigation is “permissive, voluntary, and discretionary” in nature, and the government does not have to wait for their completion in order to file an action to recover liquidated damages.
Furthermore, said CIT, Millenium was given the option to waive the six-year statute of limitations on the liquidated damages claim prior to the government’s action. If the government would have waited to file the suit, the statute of limitations would have barred any liquidated damages claim. CBP could no longer afford to wait, CIT said. Requiring the government to wait to file suit, despite pending expiry of the statute of limitations, “would be patently unworkable,” CIT concluded.
(United States v. Millenium Lumber Distribution Co. Ltd., Slip Op. 12-153, dated 12/18/12, Judge Ridgway)
(Attorneys: Aimee Lee for plaintiff U.S. government; Joel Junker of Joel R. Junker & Associates for defendant Millenium)