United States v. Rockwell Automation Inc.

Slip Op. 06-155

UNITED STATES COURT OF INTERNATIONAL TRADE

- - - - - - - - - - - - - - - -x

:

UNITED STATES, :

Plaintiff, :

:

v. : Before: Pogue, Judge

: Court No. 04-00549

ROCKWELL AUTOMATION INC., :

:

Defendant. :

- - - - - - - - - - - - - - - -x

[Plaintiff’s motion for partial summary judgment granted;

Defendant’s motions to dismiss and for summary judgment denied.]

Dated: October 18, 2006

Peter D. Keisler, Assistant Attorney General; David M. Cohen,

Director; Patricia M. McCarthy, Assistant Director, Commercial

Litigation Branch, Civil Division, U.S. Department of Justice

(Michael D. Panzera), Edward Greenwald, Bureau of Customs and

Border Protection, of counsel, for the Plaintiff.

Neville Peterson, LLP (John M. Peterson and Curtis W. Knauss)

for the Defendant.

OPINION

Pogue, Judge: In this action, the United States Bureau of

Customs and Border Protection (“Customs”) seeks civil penalties

from Rockwell Automation Incorporated (“Rockwell”) because of

Rockwell’s alleged improper entry of merchandise into the U.S.

Immediately before the court is Customs’ motion for partial summary

judgment; in response, Rockwell seeks dismissal, or, in the

alternative, summary judgment in its favor. The court has

jurisdiction over this matter pursuant to 28 U.S.C. § 1582 and 19

Court No. 04-00549 Page 2

U.S.C. § 1592. For the reasons explained below, the court grants

Customs’ motion for partial summary judgment and denies Rockwell’s

motion to dismiss and for summary judgment.

BACKGROUND

“For two centuries the standard liquidation and protest method

characterized Customs practice. Under that system goods were

evaluated by a Customs officer prior to release into the stream of

commerce. ” Brother Int’l Corp. v. United States, 27 CIT ___,___,

246 F.Supp.2d 1318, 1326 (2003) (citing United States v. G. Falk &

Brother, 204 U.S. 143 (1907)). Over the past twenty years, in

order to expedite and streamline the liquidation of entries,

“Customs has moved away from this labor intensive method towards

one of ‘automatic bypass’ where [qualifying] goods are liquidated

‘as entered’ by the importer.” Brother Int’l., 27 CIT at ___, 246

F. Supp. 2d at 1326. This system is designed to save both Customs,

and qualifying importers, time and money in the process of

liquidating entries. See G&R Produce Co. v. United States, 27

CIT___, ___, 281 F. Supp. 2d 1323, 1334 (2003).

To qualify for the automatic bypass system, importers must

first submit entry summaries to Customs. Upon review of these

summaries, import specialists at Customs designate the

classification of the merchandise and approve the merchandise for

immediate liquidation processing. Id. at 1333. Once the

Court No. 04-00549 Page 3

merchandise has been approved for the automatic bypass system,

“Customs port directors may liquidate the goods as declared,

without inspecting the goods or otherwise independently determining

the proper duty to be paid.” Motorola, Inc. v. United States, 436

F.3d 1357, 1362 (Fed. Cir. 2006). Nevertheless, to ensure the

integrity of this process, Customs conducts periodic audits of

importers’ entries. See Brother Int’l Corp., 27 CIT at ___, 246

F.Supp.2d at 1326.

Defendant, Rockwell Automation, Inc. (“Rockwell”) is a

manufacturer, importer and exporter of electrical equipment and

supplies who has utilized the automatic by-pass for numerous years.

In addition to other products, Rockwell imports short body electric

timing relays (“relays”). In 1991, in response to Rockwell’s

request, Customs issued a ruling classifying the relays. See

Customs Letter Ruling, PC 861139 (April 9, 1991), App. Pl.’s Resp.

Mot. Summ. J., Docs. 13 (“Pl.’s App. Docs.”). Upon examination of

Rockwell’s description of its merchandise (but never examining a

sample of the merchandise), Customs found that Rockwell’s 700 HR,

700 HS and 700 HT series of relays were properly classifiable under

subheading 8536.49.0075 of the Harmonized Tariff Schedule of the

United States (“HTSUS”). The following year, the Customs Area

Director at the New York Seaport issued an amended ruling

reclassifying the series 700 HR and 700 HT relays under subheading

Court No. 04-00549 Page 4

9107.00.8000, HTSUS. See NY 861139 (May 21, 1991), Pl.’s App.

Docs. 14, 19 (“May ruling”).

Displeased with the May ruling, Rockwell contacted Customs to

discuss the classification rulings. Believing its May ruling to be

correct, Customs informed Rockwell via telephone in 1991 “that the

May ruling was final and binding.” Pl.’s Mot. Partial Summ. J. 4;

Record of Telephone Conversation, Pl.’s App. Docs. 21. Six years

later, in October 1997, Rockwell submitted a request for

reconsideration regarding the classification of the relays.

Finding its prior decision to be correct, Customs reaffirmed the

May ruling. See HQ 962138 (July 28, 1999)(available at

http://rulings.cbp.gov). In November 2000, Rockwell again repeated

its request for Customs to reconsider the classification of its

relays, and Customs again sustained its prior ruling. HQ 964656

(July 23, 2002)(available at http://rulings.cbp.gov). Despite its

displeasure with Customs classification of its 700 HR and 700 HT

relays, Rockwell did not protest (in accordance with 19 U.S.C. §

1514) the classification until 2001.

Meanwhile, following issuance of the May ruling, Rockwell

began importing 700 HR and 700 HT relays. During the years in

question in this proceeding, Rockwell maintained computerized

classification databases which it would submit to its Customhouse

broker. Rockwell’s Customshouse broker would, in turn, use the

information provided therein to complete entry procedures on

Court No. 04-00549 Page 5

Rockwell’s behalf. Although Rockwell claims that it successfully

implemented Customs’ pre-entry classification ruling (as amended by

the May ruling) for all other products (including 700 HS relays),

Rockwell did not implement the May ruling for its 700 HR and 700 HT

relays.

In 2000-2001, Customs performed a Customs Compliance Audit of

Rockwell. During that audit, Customs discovered that Rockwell had

designated that certain 700 HR and 700 HT series relays were

classifiable under subheadings 8536.49, 8536.41 and 8538.90, HTSUS

(rather than subheading 9107.00.80, HTSUS – the subheading set-

forth in Customs’ May ruling) in entry documents covering 166

entries between April 16, 1996 and January 13, 2000. In addition,

Customs discovered that Rockwell did not reference or include a

copy of the May ruling with all but two of these entries. During

the relevant time periods, the tariff rate of the subheading set

forth in the May ruling was higher than the subheadings Rockwell

indicated on its entry documents.

Believing that Rockwell’s actions violated its entry

procedures, Customs initiated administrative proceedings against

Rockwell for payment of withheld duties. On August 20, 2002,

finding its suspicions confirmed, Customs issued a Penalty Notice

to Rockwell. Subsequently, Customs filed a complaint in this court

alleging Rockwell violated § 592(a)(1) of the Tariff Act of 1930,

as codified 19 U.S.C. § 1592(a)(1). Customs claims that Rockwell

Court No. 04-00549 Page 6

was grossly negligent or, in the alternative, negligent in its

completion of Customs’ entry procedures.

Discussion

In order for Customs “to properly estimate customs duties and

otherwise enforce the customs law,” the Tariff Act of 1930 (“the

Statute”) requires importers to disclose certain information upon

importation of merchandise into the Commerce of the United States.

United States v. R.I.T.A. Organics Inc., 487 F. Supp. 75, 76 (N.D.

Ill. 1980); see, e.g., 19 U.S.C. §§ 1481, 1484-87, 1490 (2000); 19

C.F.R. pts. 141-42 (1996).1 “[T]o encourage the accurate

completion of the entry documents upon which Customs must rely to

assess duties and administer other customs laws,” United States v.

F.A.G. Bearings, Ltd., 8 CIT 294, 296, 598 F. Supp. 401, 403-04

(1984) (quoting S. Rep. No. 778, 95th Cong., 2d Sess. 17, as

reprinted in 1978 U.S.C.C.A.N. 2211, 2229), the Statute imposes a

duty on importers to present true and correct information at entry.

See United States v. Ford Motor Co., 29 CIT __, __, 387 F.Supp.2d

1305, 1321 (2005) (citing 19 U.S.C. § 1484(a) & 1485 (1988)). In

the event that Customs believes an importer failed to meet its

obligations under the Statute, Customs may seek civil penalties

under Section 592 of the Statute, as codified at 19 U.S.C. § 1592

(2000) (“Section 592”).

1

All references to the Code of Federal Regulations are to the

1996 edition.

Court No. 04-00549 Page 7

Specifically, Section 592 entitles Customs to commence a civil

penalty action against any importer who, by “fraud, gross

negligence, or negligence,”

[e]nter[s], introduce[s], or attempt[s] to enter or introduce

any merchandise into the commerce of the United States by

means of -

(i) any document or electronically transmitted data or

information, written or oral statement, or act which is

material and false, or

(ii) any omission which is material...

19 U.S.C. § 1592(a)(1) - (a)(1)(A); see also United States v.

Pentax Corp., 23 CIT 668, 670 n.6, 69 F. Supp. 2d 1361, 1364 n.6

(1999). If an importer is found to violate the Statute, Customs

may recoup the difference between the duties paid and the “lawful

duties, taxes, and fees.” 19 U.S.C. § 1592(d). In addition, the

court may award additional penalties depending on the level of

scienter (fraud, gross negligence or negligence) proved, but not to

exceed the domestic value of the merchandise, the amount Customs

seeks in its initial pleadings, or the amount the court deems

proper and just. See 19 U.S.C. § 1592(c); 28 U.S.C. 2643(e).

Here, the government alleges that Rockwell (a) made false

statements in its entry papers and (b) omitted the pre-entry

classification ruling it was required to attach on its entry

papers. To establish the former count, the government must prove

five elements: (1) that Rockwell is among the class of persons

subject to liability under section 592; (2) that Rockwell entered,

introduced or attempted to introduce merchandise into the commerce

Court No. 04-00549 Page 8

of the United States; (3) that Rockwell made a “false” statement

when entering, introducing or attempting to introduce such

merchandise into the commerce of the United States; (4) this

statement was “material”; and (5) some level of scienter.2 To

prove the latter count, the government must prove: (i) that

Rockwell is among the class of persons subject to liability under

section 592; (ii) that Rockwell entered, introduced or attempted to

introduce merchandise into the commerce of the United States; (iii)

that Rockwell omitted information when entering, introducing or

attempting to introduce such merchandise into the commerce of the

United States; (iv) that the omission was “material”; and (v) some

level of scienter. See United States v. Pan Pac. Textile Group,

Inc., 29 CIT __, __, 395 F.Supp.2d 1244, 1250 (2005).

In its motion for partial summary judgment, Customs requests

the court to find that (1) Rockwell made “false” statements on its

entry documents, (2) omitted required information on its entry

documents, and (3) these statements and omissions were “material.”

Def.’s Mot. Partial Summ. J. 1. As noted above, Rockwell responds

to Customs’ motion, asking that this matter be dismissed;

alternatively, Rockwell seeks summary judgment averring that its

2

Section 592(e)(2)-(4) of the Statute assigns the burden on

proving scienter depending on the type of scienter being alleged.

The government has the burden for all counts alleging fraud or

gross negligence; in contrast, for counts alleging negligence,

once the government has established the first four elements, the

Defendant has “the burden of proof that the act or omission did

not occur as a result of negligence.” 19 U.S.C. § 1592(e)(4).

Court No. 04-00549 Page 9

errors were clerical in nature and, therefore, exempted from civil

penalty actions. The court will address each in turn.

(A) Has the Government Proven as a Matter of Law that

Rockwell Introduced Merchandise into the Commerce of the

United States By Means of False Statements or Acts?

Section 592 does not define the term “false” and this court

has not specifically addressed the meaning of the term “false” in

the Statute. Therefore, “false” must be defined according to its

common and ordinary meaning. See Perrin v. United States, 444 U.S.

37, 42 (1979). Black’s Law Dictionary defines “false” as something

“untrue” or “[n]ot genuine; inauthentic.” Black’s Law Dictionary

635 (8th ed. 2004); cf. Koyo Seiko Co. v. United States, 36 F.3d

1565, 1571 n.9 (Fed. Cir. 1994) (using dictionaries to determine

the common meaning of a term). This definition is necessarily

contextual, i.e., the inquiry necessarily depends on the facts and

circumstances under which a statement is made.

In this case, Customs alleges that Rockwell made “false”

statements on entry documents. The entry of merchandise into the

United States is, of course, extensively regulated under U.S. law.

As is relevant here, Congress has explicitly delegated to Customs

the authority to appraise merchandise, fix the final

classification, and determine the amount of duty owed. 19 U.S.C.

§ 1500 (2000). In carrying out its responsibilities, “the

Secretary of the Treasury is authorized to make such rules and

regulations as may be necessary to carry out the provisions of [the

Court No. 04-00549 Page 10

Act].” 19 U.S.C. § 1624 (2000); see also 19 U.S.C. § 1484(a)(2)(A)

(“The documentation or information required . . . with respect to

any imported merchandise shall be filed or transmitted in such

manner and within such time periods as the Secretary shall by

regulation prescribe.”); 19 U.S.C. § 1502 (“The Secretary of the

Treasury shall establish and promulgate such rules and regulations

. . . as may be necessary to secure a just, impartial, and uniform

appraisement of imported merchandise and the classification and

assessment of duties thereon. . . .”).

Under the force of this authority, Customs requires importers

to specify the appropriate classification for their merchandise on

entry documents. When, as here, an importer receives a

classification ruling including a pre-entry classification ruling,

Customs’ regulations further require the importer to “set forth

such classification[s] in the documents or information filed in

connection with any subsequent entry of that merchandise. . . .”

19 C.F.R. § 177.8(a)(2). Therefore, in circumstances where Customs

has issued a pre-entry classification ruling, the question that

importers are answering on entry documents is: “What has Customs

told you the classification of the merchandise is?” In light of

the question posed by Customs, any answer other than that specified

in a pre-entry classification ruling must by consequence be

“false”.3

3

When so framed, on the question of liability under section 592,

(continued...)

Court No. 04-00549 Page 11

In this case, Rockwell received a pre-entry classification

ruling specifying that all 700 HR and HT relays must be classified

under subheading 9107.00.80, HTSUS. However, Rockwell stated in

its entry documents that the relays were classified under

subheading 8536.41, 8536.49 or 8538.69 HTSUS. This response, when

read in light of Customs’ regulation, essentially asserted that

Customs had approved use of subheadings 8536.49, 8536.41 and

8538.90, HTSUS to classify the merchandise – a patently “false”

statement. Accordingly, these statements are assuredly “false”

within the plain meaning of that term.

Faced with the plain language of section 592 and Customs’

regulation, Rockwell nevertheless maintains (1) that importers

are not bound to make entry of goods in accordance with Customs’

rulings (either regular rulings or pre-entry classification

(...continued)

there can be no debate concerning the “correct” classification of

the goods. Therefore, even if Customs were to have specified

that the relays should be classified under subheading 9801.00.50,

HTSUS (covering an “[e]xhibition in connection with any circus or

menagerie”), specifying anything other on the entry documents

would assuredly be “false.” See, e.g., United States v. Golden

Ship Trading Co., 25 CIT 40, 45-46 (2001) (finding defendant’s

reasons for mismarking the country of origin of merchandise on

Customs entry papers irrelevant to the false statement inquiry

under § 1592). That is not to say, however, that the question of

the appropriateness of Customs’ classification cannot be

considered by the court on the question of the level of the

penalty to be imposed. See United States v. Complex Mach. Works

Co., 23 CIT 942, 949-50, 83 F.Supp.2d 1307, 1315 (1999) (listing

fourteen factors relevant to the imposition of civil penalties,

including “the gravity of the violation...”).

Court No. 04-00549 Page 12

rulings); (2) the letter in this case is not a valid pre-entry

classification ruling letter; and (3) that even if the ruling is

valid, it does not cover the merchandise at issue here. None of

these defenses is persuasive.

First, Rockwell asserts that under Customs law, only Customs

officials are bound by pre-entry classification decisions.

Therefore, it asserts, it was not required to set forth such

classification in its entry documents. However, as earlier

mentioned, Customs’ regulations require:

Any person engaging in a Customs transaction with respect

to which a binding tariff classification ruling letter

(including pre-entry classification decisions) has been

issued under this part shall ascertain that a copy of the

ruling letter is attached to the documents filed with the

appropriate Customs Service office in connection with

that transaction, or shall otherwise indicate with the

information filed for that transaction that a ruling has

been received. Any person receiving a ruling setting

forth the tariff classification of merchandise shall set

forth such classification in the documents or information

filed in connection with any subsequent entry of that

merchandise; the failure to do so may result in a

rejection of the entry and the imposition of such

penalties as may be appropriate.

19 C.F.R. § 177.8(a)(2) (emphasis added). Generally, a “person”

includes “corporations, companies, associations, firms,

partnerships, societies, and joint stock companies, as well as

individuals.” 1 U.S.C. § 1. Rockwell is most certainly a

“person” within the meaning of the regulation. Therefore, 19

C.F.R. § 177.8(a)(2) clearly extends to Rockwell’s conduct at issue

here. As such, even if it were a general principle of Customs law

Court No. 04-00549 Page 13

that only Customs officials are “bound” by a pre-entry

classification decision, that principle does not absolve Rockwell

from complying with section 177.8(a)(2) when setting forth the

classification of its imports on entry documents.4

Next, Rockwell argues that Customs has not issued a “pre-entry

classification ruling” for its relays. As noted above, section

177.8(a)(2) requires importers subject to certain rulings to set

forth those classifications in their entry documents; among the

list of rulings are “pre-entry classification rulings.” A pre-

entry classification ruling letter “is a letter from Customs to an

importer advising the importer of the tariff classifications for

certain of the importer’s goods before the importer brings them

into the country.” Motorola, 436 F.3d at 1362; see 19 C.F.R. §§

4

At oral argument, Rockwell claimed that the opportunity

provided by Customs’ regulations, at 19 C.F.R. § 143.36(c),

limits Rockwell’s obligation under section 177.8(a)(2). Section

143.36(c), in relevant part, however, merely permits importers to

use the ruling number to limit their presentation of invoice

data. It does not limit their obligation under section

177.8(a)(2). Rockwell further argued that because section

177.8(a)(2) was promulgated in 1980, the term “pre-entry

classification ruling” was not meant to apply to

preclassification rulings, such as the one Rockwell received,

that were issued pursuant to the program which went into effect

on January 1, 1989. A brief review of section 177.8(a)(2), as

promulgated in 1980, however, shows that the term “pre-entry

classification ruling” was not included in the regulation at that

time. 19 C.F.R. § 177.8(a)(2) (1980) (“Any person engaging in a

Customs transaction with respect to which a ruling letter has

been issued by the Headquarters Office shall ascertain that a

copy of the ruling letter is attached to the documents filed in

connection with that transaction with the appropriate Customs

Service field office.”). Consequently, the court finds

Rockwell’s argument disingenuous at best.

Court No. 04-00549 Page 14

177.1, 177.2(a), 177.2(b)(2)(ii). Customs defines a “ruling” as a

written statement "that interprets and applies the provisions of

the Customs and related laws to a specific set of facts." 19

C.F.R. § 177.1(d)(1) (emphasis added). Rockwell claims that the

pre-entry classification ruling at issue here was not “specific”

enough to constitute a “pre-entry classification decision”; in

particular, Rockwell avers that the pre-entry classification ruling

described only a family of merchandise, i.e., “700 HR” and “700

HT,” and that there are factual variations within this family of

relays. Rockwell further contends that Customs issued the May

ruling without ever viewing an actual sample of the merchandise.

Therefore, Rockwell concludes the ruling letter is not “specific”

enough to constitute a ruling letter as identified by section

177.8(a)(2). Def.’s Resp. Pl.’s Mot. Summ. J. 15-16 (citing Pac

Fung Feather Co. v. United States, 19 CIT 1451, 1456 n.6 (1995) and

Pagoda Trading Co. v. United States, 6 CIT 296, 297-98, 577 F.

Supp. 2d. 22, 23-24 (1983)). This argument is unavailing.

The specificity requirement of 19 C.F.R. § 177.1(d)(1), and of

the cases Rockwell cites, is meant to distinguish rulings letters,

on one hand, from regulations and guidelines on the other. Cf. 19

C.F.R. § 177.8(b) (defining other rulings”). Customs’ regulations

make clear that “rulings” “appl[y] . . . with respect to

transactions involving [i] articles identical to the sample

submitted with the ruling request or [ii] to articles whose

Court No. 04-00549 Page 15

description is identical to the description set forth in the ruling

letter.” 19 C.F.R. § 177.9(b)(2) (emphasis added). Clearly then,

a “description,” is plainly sufficient to satisfy the “specificity”

requirement. Moreover, when Customs sets forth a “description” of

the merchandise, imported articles need not be identical to a

“sample”, but rather, to a “description.”5

Applying these principles, and the definition of “ruling,”

here, Customs (a) issued PC 861139 upon Rockwell’s request; (b)

addressed particular merchandise imported by a specific importer;

(c) reviewed (if even just in a cursory manner) the facts and

descriptions concerning that merchandise; (d) did not purport to

extend the ruling beyond either those products or to other

importers; and (e) clearly set forth the classification of all 700

HR and HT relays. Cf. Pagoda Trading, 6 CIT at 297, 577 F. Supp.

at 23 (“The administrative decision complained of did not rule

specifically on the merchandise which plaintiff intends to

import.”); see generally 19 C.F.R. § 177.9(b)(1) (“Each ruling

5

Because there will invariably be some factual differences

between various articles an importer imports, whenever Customs

issues a pre-entry classification ruling, it must necessarily

paint at some level of generality. In determining the proper

level of generality, Customs must judge what distinctions between

merchandise are material, i.e., what distinctions are relevant to

determining the proper classification of the merchandise. This

inquiry will necessarily depend on how Customs interprets the

competing tariff provisions. To the extent an importer disagrees

with Customs’ assessment, it may challenge Customs’ decision

either pre- or post-importation, see 19 U.S.C. § 1514, and seek

judicial review of that decision. See 19 U.S.C. § 1515; 28

U.S.C. § 1581(a) & (h).

Court No. 04-00549 Page 16

letter is issued on the assumption that all of the information

furnished in connection with the ruling request and incorporated in

the ruling letter, either directly, by reference, or by

implication, is accurate and complete in every material respect.”).

These factors clearly demonstrate that Customs had issued Rockwell

a pre-entry classification ruling.

Nor can Rockwell maintain that it was not put on notice that

it had received a pre-entry classification ruling. The pre-entry

classification decision is clearly labeled a “Pre-entry

Classification,” refers to itself as a “ruling,” and advises

Rockwell that “[a]s the importer, you agree to enter [merchandise]

according to this advice.” See Pl.’s App. Docs. 13, PC 861139

(referring to itself as “Pre-entry Classification,” and advising

the importer of its agreement “to enter according to this

advice.”); see also Pl.’s App. Docs. 14, NY 861139 (referring to PC

861139 as a “preclassification ruling letter.”). Customs issued

this letter in response to Rockwell’s request for a “pre-entry

classification” ruling. Furthermore, Rockwell admits to having

received the ruling.

Last, Rockwell claims that Customs has not offered samples of

the merchandise to prove that they are “identical to the

description” set forth in PC 861139. It is certainly true that the

ruling letter applies to 700 HR and 700 HT relays as opposed to 800

HR and 800 HT relays (if such relays exist), and therefore, such

Court No. 04-00549 Page 17

proof is an element of the government’s case. Here, Customs points

to entry documents in which Rockwell identifies the merchandise at

entry as 700 HR and 700 HT relays. See Pl.’s Reply Def.’s Resp.

Pl.’s Mot. Partial Summ. J. & Pl.’s Resp. Def.’s Mot. Dismiss

10(Pl.’s Reply & Resp.); Attach. A to Pl.’s Reply & Resp. This

uncontested evidence, essentially an admission by a party opponent,

more than carries Customs’ burden. Because Rockwell has failed to

offer a scintilla of evidence challenging the identity of the

merchandise, summary judgment on this question is appropriate. Cf.

Saab Cars USA, Inc. v. United States, 434 F.3d 1359, 1368-69 (Fed.

Cir. 2006).

Accordingly, for the foregoing reasons, the court finds that,

as a matter of law, Rockwell made false statements, and, therefore,

Customs is entitled to summary judgment on this question.

(B) Did Rockwell “omit” information?

As noted above, 19 C.F.R. § 177.8(a)(2) requires that an

importer either (a) attach a ruling letter or otherwise (b)

indicate that a ruling letter has been received regarding the

transaction.

Customs contends that Rockwell did not attach or otherwise

indicate that a pre-entry classification decision had issued with

respect to the imports at issue. This omission, Customs claims, is

made more glaring by the fact that “the ruling number appear[ed] on

two entries, but not on the other 164 entries at issue.” Attach A

Court No. 04-00549 Page 18

to Plt.’s Reply & Resp. 16 (citing Attach A to Plt.’s Reply &

Resp.). Rockwell challenges Customs’ claims averring that it did

“attach” the pre-entry classification ruling by loading the ruling

into its database – a database to which Customs officials had

access. This, it avers, satisfies its obligations under section

177.8(a)(2).

For summary judgment to be appropriate, Customs – which is not

only the moving party but the party who has the burden of proof,

see 19 U.S.C. § 1592(e)(3)-(4) - “must . . . satisfy its burden by

showing that it is entitled to judgment as a matter of law even in

the absence of an adequate response by the nonmovant.” Saab Cars

USA, 434 F.3d at 1368 (quoting 11 James Wm. Moore et. al., Moore’s

Federal Practice ¶ 56.13[1] (3d ed. 2005). Here, Customs has met

its burden by providing entry documents in which Rockwell did not

reference the pre-entry classification ruling. Therefore, as the

non-movant, Rockwell is required to provide opposing evidence under

Rule 56(e). See Saab Cars; see also USCIT R. 56(e), which states

in relevant part that,

[w]hen a motion for summary judgment is made and

supported as provided in this rule, an adverse party

may not rest upon the mere allegations or denials of

the adverse party's pleading, but the adverse party's

response, by affidavits or as otherwise provided in

this rule, must set forth specific facts showing that

there is a genuine issue for trial. If the adverse

party does not so respond, summary judgment, if

appropriate, shall be entered against the adverse

party.

Court No. 04-00549 Page 19

USCIT R. 56(e). Despite its burden, Rockwell has failed to offer

any evidence that, for these entries, it loaded the ruling into its

database or otherwise made the ruling letter accessible to Customs

officials. Having failed to provide any evidence to support its

alternative theory, Rockwell has failed to demonstrate a genuine

issue of material fact. Accordingly, summary judgment on this

question is appropriate.

(C) Were the “statements” and “omissions” “material”?

An act, statement, or omission is “material,” within meaning

of section 592, “if it has the natural tendency to influence or is

capable of influencing agency action.” Pan Pac. Textile Group, 29

CIT at __, 395 F.Supp.2d at 1250 (quoting 19 C.F.R. pt. 171, App.

B(B)); United States v. Rockwell Int’l. Corp., 10 CIT 38, 42, 628

F. Supp. 206, 210 (1986) (citations omitted); see generally Kungys

v. United States, 485 U.S. 759, 770 (1988). As an objective test,

materiality is determined without regard to whether the importer’s

false statement, false act, or omission actually misled Customs, or

whether Customs actually relied on the false statement, false act,

or omission. See United States v. Nippon Miniature Bearing Corp.,

25 CIT 638, 641, 155 F. Supp. 2d 701, 705 (2001); see also TSC

Indus., Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976).

Furthermore, materiality is a mixed question of law and fact.

Consequently, only when an act, statement or omission is “‘so

obviously important to [Customs], that reasonable minds cannot

Court No. 04-00549 Page 20

differ on the question of materiality’ [is the] ultimate issue of

materiality appropriately resolved ‘as a matter of law’ by summary

judgment.” Id. (quoting Johns Hopkins Univ. v. Hutton, 422 F. 2d

1124, 1129 (4th Cir. 1970)); see also United States v. Tri-State

Hosp. Supply Corp., 23 CIT 736, 74 F. Supp. 2d 1311 (1999). See

generally Burlington N. & Santa Fe Ry. v. White, 548 U.S. ___, ___,

126 S. Ct. 2405, 2416-18 (2006); United States v. Gaudin, 515 U.S.

506 (1995); M’Lanahan v. Universal Ins. Co., 26 U.S. (1 Pet.) 170,

188-189, 191 (1828).

The relevant facts are undisputed. Rockwell does not contest

that it specified subheadings 8536.49, 8536.41 and 8538.90, HTSUS

(and not subheading 9107.00.80, HTSUS) on its entry documents. It

is also uncontroverted that Customs liquidated the relays under the

automatic bypass method. Under this system, Customs liquidated the

merchandise “as entered” by Rockwell in their entry documents.

Finally, it is also uncontroverted that the liquidation value

depends, in part, on the tariff rate corresponding to the proper

classification of the merchandise. Because Customs may not review

the entries, or conduct a search of its databases to determine the

veracity of statements made on entry documents, Rockwell’s

submissions may have been determinative of the liquidation of its

entries. By consequence, the tariff classifications Rockwell

submitted would have a natural tendency to (improperly) influence

the classification, tariff assessment, of its merchandise (even if,

Court No. 04-00549 Page 21

in rare occasions, Customs affirmatively scrutinized the entry of

those imports), with a resulting in a reduction in duty. For the

same reason, Rockwell’s failure to attach the ruling letter was

likewise material. With this analysis in mind, the court finds

that reasonable minds cannot differ on the question of materiality

and, accordingly, grants Customs summary judgment on this question.

(D) Is Rockwell Entitled to Summary Judgment that its

Errors were Clerical in Nature and Therefore Exempt from

Civil Penalty Actions?

Under section 592(a)(2), “[c]lerical errors or mistakes of

fact are not violations of paragraph (1) unless they are part of a

pattern of negligent conduct. The mere nonintentional repetition

by an electronic system of an initial clerical error does not

constitute a pattern of negligent conduct.” 19 U.S.C. §

1592(a)(2). Thus, if the entry Rockwell made in its database was

a clerical error which was unintentionally propagated by its

computers, Rockwell would not be liable under section 592(a)(1) for

the false statements and omissions of material fact alleged by

Customs.

On this issue, the parties differ most significantly over the

inference to be drawn from circumstantial evidence in the record.

Rockwell, conceding that its evidence is entirely circumstantial,

nonetheless argues that uncontested facts support the conclusion

that the incorrect classification in their database is the result

of a clerical error. Rockwell admits that “[a]t all times relevant

Court No. 04-00549 Page 22

to this case, the Rockwell parts database showed the classification

of ‘700 HR’, ‘700 HS’ and ‘700HT’ series short body timing relays

as being HTS subheading 8536.41, and its Customhouse broker entered

these products accordingly.” Def.’s Rule 56(I) [sic] Statement

Supp. Cross-Mot. Summ. J. ¶ 18. However, Rockwell claims that

“[w]ith the exception of the 700 HR and 700 HT series short body

timing relays, the tariff classifications shown in the IPM database

matched the classifications assigned by Customs in the

Preclassification Ruling and Supplement.” Id. at ¶ 28.

To further support its argument, Rockwell points to deposition

testimony and company policy as circumstantial evidence that a

clerical error is the only explanation for the incorrect

classification. Id. at ¶ 25 (citing Sarauer Dep. & Reuter Dep.)

Customs cites the same deposition testimony as evidence that Ms.

Sarauer was not responsible for loading results into the database,

and argues that the evidence supports a conclusion that no attempt

was made to load the correct data into the system. Pl.’s Resp.

Def.’s Mot. Summ. J. 11-12. Customs’ brief rightly points out that

there are various conclusions that can be drawn from the evidence

proffered by Rockwell.

For purposes of summary judgment, the court draws all

inferences against Rockwell, the moving party. United States v.

Diebold, Inc., 369 U.S. 654, 655 (1962). Consequently, the

evidence submitted does not support a finding that, as a matter of

Court No. 04-00549 Page 23

law, the mis-classification of entries was a clerical error. The

absence of the correct classification from Rockwell’s database

permits two diametrically opposite inferences; on the one hand, a

responsible person could have ordered the correct information

omitted; on the other hand, the omission could have been the result

of a clerical error. Accordingly, the court concludes that the

circumstantial evidence upon which Rockwell relies does not entitle

it to summary judgment on this issue.

CONCLUSION

For the foregoing reasons, the court grants Plaintiff’s motion

for partial summary judgment and denies Defendant’s motions to

dismiss and for summary judgment. IT IS SO ORDERED.

The parties shall consult with each other and shall, by

November 15, 2006, file a proposed order governing preparation for

trial.

Dated: October 18, 2006

New York, New York

/s/ Donald C. Pogue

Donald C. Pogue, Judge