CIT Rules Importer is Subject to 1592 Penalties for Failing to Exercise Reasonable Care in Classifying its Merchandise
In U.S. v. Optrex America Inc., the Court of International Trade found that Optrex1 failed to exercise reasonable care in classifying certain Liquid Crystal Display products (LCDs) and is subject to 1592 penalties for such negligence.
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(From October 1997 to June 1999, Optrex imported certain LCD articles into the U.S. Subsequently, Customs claimed that Optrex had negligently misclassified the LCDs under HTS heading 8531, instead of under HTS heading 9013, in violation of the Court of Appeals for the Federal Circuit's (CAFC's) decision in Sharp Microelecs. Tech., Inc. v. U.S. (1997). The CIT has already ruled in favor of the government on the classification of the LCDs (CIT Slip Op. 06-26).)
Optrex Ignored Attorney's Advice to Seek Binding Customs Ruling
After the issuance of Sharp, which classified LCDs with similar characteristics under HTS heading 9013, counsel for Optrex sent an October 30, 1997 letter to the company advising them to seek a binding customs ruling concerning the classification of its LCDs.
Optrex never sought such a ruling from Customs and continued to classify their LCDs under HTS heading 8531, which carries a lower ad valorem duty rate.
Optrex Did Not Seek Classification Advice from Customs Broker
Optrex did not seek advice from its customs broker for the classification of the LCDs and the broker made no classification decisions. Instead, Optrex supplied its broker with the information needed for product classification, and updated this information as needed.
The CIT rejected Optrex's attempt to shift responsibility for classification to its customs broker, stating that it was well settled that the importer bears responsibility for classification of its merchandise.
Lost Revenues and Civil Penalties
For the reasons mentioned above, among others, the CIT ruled that Customs is entitled to $913,572.79 in lost revenues (based on the difference in duty rates of HTS 8531 and HTS 9013), with interest.
CIT also held that under 19 USC 1592(c), Optrex is liable for a civil penalty for negligence of "one and one-half times the lawful duties, taxes, and fees of which the United States [was] deprived" between November 13, 2007 (after Optrex received the counsel's letter) through June 29, 1999.
1 Optrex is a Michigan corporation and wholly owned subsidiary of its Japanese parent company Optrex Corporation, and is the importer of record of the subject merchandise.
(See ITT's Online Archives or 03/01/07 news, 07030125, for BP summary of earlier CIT rulings regarding Optrex (Slip Ops 06-73 and 06-26).)
U.S. v. Optrex America, Inc., Slip Op. 08-63 (dated 06/09/08) available at http://www.cit.uscourts.gov/slip_op/Slip_op08/08-63.pdf