                           Slip Op. 15-94

           UNITED STATES COURT OF INTERNATIONAL TRADE

________________________________
UNITED STATES,                   :
                                 :
          Plaintiff,             :   Before: Nicholas Tsoucalas,
                                 :           Senior Judge
     v.                          :
                                 :   Consol. Court No.: 10-00119
AMERICAN CASUALTY CO. OF         :
READING PENNSYLVANIA, and RUPARI:    PUBLIC VERSION
FOOD SERVICES, INC.              :
                                 :
          Defendants,            :
_____________________            :

                        OPINION AND ORDER

[Plaintiff’s request for leave to amend the Complaint is granted
in part and denied in part.    Defendant’s Motion to Dismiss is
denied.]
                                       Dated:August 24, 2015

Mikki Cottet, Senior Trial Counsel, Commercial Litigation Branch,
Civil Division, U.S. Department of Justice, of Washington, DC,
argued for Plaintiff.    With her on the brief were Benjamin C.
Mizer, Acting Assistant Attorney General, Jeanne E. Davidson,
Director, and Patricia M. McCarthy, Assistant Director, of
Washington, DC. Of counsel on the brief was Brian J. Redar, Office
of Associate Chief Counsel, U.S. Customs and Border Protection, of
Long Beach, CA.

Lawrence M. Friedman, Barnes Richardson & Colburn, of Chicago, IL,
argued for Defendant. With him on the brief were Shama K. Patari,
Barnes Richardson & Colburn, of Chicago, IL, and Peter A. Quinter,
Gray Robinson, P.A., of Miami, FL.

          Tsoucalas,   Senior   Judge:   Plaintiff,   United   States

Customs and Border Protection, (“Customs”) brought this action to

recover civil penalties against Defendant, Rupari Food Services
Consol. Court No. 10-00119                                           Page 2


Inc., (“Rupari” or “Defendant”) 1 for violations of Section 592 of

the Tariff Act of 1930, 19 U.S.C. § 1592(a)(2012) 2, and Defendant

American     Casualty   Co.   of    Reading   Pennsylvania,      (“American

Casualty”) to recover, under bonds, unpaid customs duties.           Rupari

moves for dismissal of this action, post-answer, on the grounds

that the Complaint fails to state a claim upon which relief can be

granted and Customs failed to plead fraud with particularity.

Customs    opposes   dismissal     and   requests   leave   to   amend   its

Complaint.    For the following reasons, Customs’ request for leave

to amend the Complaint is granted in part and denied in part, and

Defendant’s Motion to Dismiss is denied.

                 JURISDICTION AND STANDARD OF REVIEW

            The Court possesses jurisdiction to hear this action

under section 201 of the Customs Courts Act of 1980, 28 U.S.C. §

1582 (2012). 3

           A motion to dismiss for a failure to state a claim may

be raised by motion under USCIT R. 12(c) after the pleadings are




1   Plaintiff also filed an action against William Vincent “Rick”
Stilwell (“Stilwell”) individually, however, all parties agreed to
dismiss all claims as to him with prejudice and without costs,
fees, and expenses on July 17, 2015.       Stipulation of Partial
Dismissal, July 17, 2015, ECF No. 104.
2    Further citations to the Tariff Act of 1930 are to the
relevant portions of Title 19 of the U.S. Code, 2012 edition, and
all applicable amendments thereto, unless otherwise noted.
3    Further citations to the Customs Courts Act of 1980 are to
the relevant portions of Title 28 of the U.S. Code, 2012 edition,
and all applicable amendments thereto, unless otherwise noted.
Consol. Court No. 10-00119                                        Page 3


closed but early enough not to delay trial. USCIT R. 12 (h)(2)(B).

A Rule 12(c) motion is reviewed under the same standard as a motion

to dismiss under Rule 12(b)(6).     Koyo Corp. of U.S.A. v. United

States, 37 CIT ____, 899 F.Supp.2d 1367, 1370 (2013).               When

reviewing a motion to dismiss for failure to state a claim, the

court must accept as true the complaint’s undisputed factual

allegations and should construe them in the light most favorable

to the plaintiff. Bank of Guam v. United States, 578 F.3d 1318,

1326 (Fed. Cir. 2009) (quoting Cambridge v. United States, 558

F.3d 1331, 1335 (Fed. Cir. 2009).   To survive a motion to dismiss,

a complaint must contain sufficient factual matter, accepted as

true, to state a claim to relief that is plausible on its face.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955,

1974, 167 L. Ed. 2d 929, 949 (2007). To be plausible, the complaint

need not show a probability of plaintiff’s success, but it must

evidence more than a mere possibility of a right to relief. Id. at

556-59, 127 S.Ct at 1965-66, 167 L.Ed.2d at 940-41.

                              BACKGROUND

            Rupari is a Florida corporation that purchased crawfish

from abroad and sold it to restaurants in the United States. Compl.

¶¶ 3, 12, June 20, 2011, ECF No. 2; Pl.’s Opp’n to Mot. to Dismiss

(“Pl.’s Br.”) Purchase Agreement Ex. 10, at 13, Mar. 7, 1997, ECF

No. 94-6.      Rupari’s seafood sales team consisted of Mr. Larry

Floyd   (“Floyd”),   Vice   President   of   Rupari’s   Seafood   Sales
Consol. Court No. 10-00119                                        Page 4


Division, and Stilwell, a commissioned seafood salesman. Pl.’s Br.

Tr. of Dep. of William Vincent Stilwell (“Stilwell Dep.”) Ex. 1,

at 13-14, Apr. 3, 2013, ECF No. 94-1;        Pl.’s Br. Tr. of Dep. of

Rupari Food Services Inc. (“Rupari Dep.”) Ex. 2, at 15-16, 17,

Apr. 4, 2013, ECF No. 94-2.

           In 1997 and 1998, Rupari sold crawfish to members of the

Popeye’s Operator’s Purchasing Cooperative Association (“POPCA”).

Mr. Richard Porter (“Porter”), the POPCA director of purchasing

and distribution, communicated with Rupari through Floyd regarding

the sale of crawfish. Pl.’s Br. Decl. of Richard L. Porter (“Porter

Decl.”) Ex. 10, at ¶¶ 6, 7, Mar. 16, 2014, ECF No. 94-6.

           On March 7, 1997, Porter and Floyd signed a Purchase

Agreement wherein Rupari would sell POPCA 148,000 lbs. of “Chinese

[c]rawfish [t]ail [m]eat.”     Pl.’s Br. Purchase Agreement Ex. 10,

at 13, Mar. 7, 1997.   The agreement also stated that a formal POPCA

supply agreement would be sent shortly thereafter. Id. Floyd and

Porter consummated the formal POPCA supply agreement on June 8,

1997.   Id. at 14.

           In August 1997, the United States Department of Commerce

(“Commerce”) conducted an antidumping investigation concerning

crawfish tail meat from China.           Commerce published the final

determination   of   its   antidumping   investigation   of   freshwater

crawfish tail meat from China on August 1, 1997. Notice of Final

Determination of Sales at Less than Fair Value: Freshwater Crawfish
Consol. Court No. 10-00119                                           Page 5


Tail Meat From the People’s Republic of China, 62 Fed. Reg. 41,347

(Aug. 1, 1997) (subsequently amended to correct ministerial errors

at 62 Fed. Reg. 48,218 (Dep’t of Commerce Sept. 15, 1997) (“Final

Determination”).

           Yupeng Fisheries Ltd., (“Yupeng”) a Chinese producer and

importer of crawfish tail meat, was among the firms investigated

by Commerce.     Id.   Yupeng did not receive a separate rate, and its

crawfish tail meat exports were subject to the China-wide rate of

201.63 percent.        Id. at 41,358.     Whole crawfish, however, were

excluded from the scope of the antidumping duty investigation.

Id. at 41,347.     From 1996 to 1998, Yupeng sold Rupari whole cooked

frozen crawfish and cooked frozen crawfish tail meat. Pl.’s Br.

Stilwell Dep. Ex. 1, at 17-18.

           Floyd and Stilwell mainly communicated with Mr. Tian

Wei, a Yupeng salesman, but also communicated with Mr. Wang Yon

Min, Yupeng’s owner, (“Wang”), regarding the sale of crawfish to

Rupari. Id. at 17, 21.

           On October 17, 1997, POPCA sent Floyd and Rupari a letter

confirming that Popeye’s would purchase 1,500 cases of crawfish.

Pl.’s   Br.     Crawfish   Confirmation   Letter   from   James    Brailey,

Purchasing Manager, POPCA, to Floyd Ex. 10, at 30, Oct. 17, 1997.

           In     November   1997,   Wang,    Yupeng’s    owner,    created

Seamaster Trading Company Ltd. (“Seamaster”) which was located in

Thailand. Compl. at ¶13. Yupeng shipped crawfish tail meat from
Consol. Court No. 10-00119                                            Page 6


China to Seamaster in Thailand. Pl.’s Br. Packing List, Bill of

Lading, Invoice, Manifest or Freight List Ex. 6, at 1-12, ECF No.

94-5.    Rupari was aware that Wang created Seamaster and was the

principal owner of both Yupeng and Seamaster. Pl.’s Br. Rupari

Dep. Ex. 2, at 5.

            Wang approached Mr. Somchai Sriviroj, (“Sriviroj”) the

owner and managing director of Sea Bonanza Foods Company, Ltd.,

(“Sea Bonanza”) a fish processing company in Thailand, and asked

if Sea Bonanza could repackage frozen crawfish tail meat. Pl.’s

Br. Tr. of Dep. of Sea Bonanza Foods Company, Ltd. Ex. 4, at 8,

July 8-9, 2013, ECF No. 94-3.

            On November 8, 1997, Seamaster entered into a contract

with Sea Bonanza wherein Seamaster would ship crawfish tail meat

from    China   to   Thailand,   and   Sea   Bonanza   would   repackage the

crawfish tail meat in exchange for a processing fee. Pl.’s Br.

Contract between Sea Master and Sea Bonanza Ex. 5, at 2, Nov. 8,

1997, ECF No. 94-4.

            In January and April 1998, Yupeng shipped from China to

Seamaster, in Thailand, product invoiced as “frozen crawfish.”

Pl.’s Br. Invoice Ex. 6, at 1, 3, Jan. 8, 1998, ECF No. 94-5.

            Sea Bonanza repacked the frozen crawfish tail meat for

Seamaster and labelled the meat a “product of Thailand.” Pl.’s Br.

Tr. of Dep. of Sea Bonanza Foods Company, Ltd.             Ex. 4, at 8, 22.

According to the Agricultural Affairs Office at the American
Consol. Court No. 10-00119                                               Page 7


Embassy   in    Bangkok,    crawfish   is   not   harvested   in   Thailand;

moreover, Sea Bonanza never processed live crawfish.               Id. at 7,

12; see also Pl.’s Br. Packing List Ex. 6, at 1, Apr. 18, 1998;

Pl.’s Br. Facsimile from the Agricultural Affairs Office at the

American Embassy in Bangkok, Thailand to Roy Johnson, Louisiana

Dept. of Agriculture Ex. 8, at 1, Aug. 5, 1998, ECF No. 94-5.

            Rupari   assisted    Seamaster    with   obtaining     a   customs

broker and Seamaster became a non-resident importer of crawfish to

the United States. Pl.’s Br. Rupari Dep. Ex. 2, at 4; Pl.’s Br.

Entry Summary Ex. 11A, at 1-42, Mar. 13, 1998, ECF No. 94-7.

Rupari stopped purchasing crawfish tail meat directly from Yupeng

and began purchasing crawfish tail meat from Seamaster.            See Pl.’s

Br. Stilwell Dep. Ex. 1, at 18, 20.           Rupari had never purchased

crawfish from a source in Thailand prior to purchasing crawfish

tail meat from Seamaster.       Id. at 20.

            On February 24, 1998, Porter sent a letter to Caro

Produce regarding POPCA’s Crawfish Etouffe promotion beginning

March 9, 1998, and ending April 11, 1998. Pl.’s Br. Letter from

Porter to Caro Produce-Angel Homan, Ex. 10, at 36, Feb. 24, 1998.

The letter recited that POPCA ordered 1,200 cases of crawfish in

24.1 lb. bags from Rupari. Id.

            On March 13, 1998, Seamaster filed a consumption entry

describing the imported merchandise as 1,900 cartons of frozen

crawfish,      classified   under   U.S.     Harmonized   Tariff       Schedule
Consol. Court No. 10-00119                                                       Page 8


(“HTSUS”) 0306.19.0010, free of duty, and marked as a product of

Thailand. Pl.’s Br. Entry Summary Ex. 11A, at 1.

             American Casualty issued customs bonds to Seamaster for

the importation of crawfish tail meat. Compl. At ¶6, Customs Bonds

Ex. A, at 2-5, Apr. 15, 1998, ECF No. 2-1.                   American Casualty, as

surety,    guaranteed      payment      for   any    duty,    tax,     or   charge,    or

compliance with law or regulation, as a result of Seamaster’s

imports. Id.

             On April 18, 1998, Seamaster filed three consumption

entries that described the imported merchandise as 1,750 cartons

of cooked crawfish meat, classified under HTSUS 1605.40.1000, free

of duty, and marked as products of Thailand. Pl.’s Br. Entry

Summary Ex. 11A, at 10.               Seamaster did not identify any of the

entries as being subject to antidumping orders as required by 19

C.F.R. § 141.61(c). See id. Rupari was listed as the notifying

party   on      certificates     of    origin   that    accompanied         these   four

entries. Pl.’s Br. Certificates of Origin Ex. 11A, at 7, 15, 26,

37.       The    entry    summaries,       entry     documents,        invoices,      and

certificates of origin all stated that the crawfish meat originated

in Thailand. Id. at 1-42.

             Seamaster,     as    the    importer      of    record,    entered     four

containers of crawfish tail meat into the commerce of the United

States through the Los Angeles/Long Beach Seaport by means of

documents       filed    with    Customs      that    claimed     the       merchandise
Consol. Court No. 10-00119                                  Page 9


originated in Thailand. Compl. at ¶17. The four entries were

released for consumption and Rupari sold some or all of the entries

to POPCA. Pl.’s Br. Porter Decl. Ex. 10, at ¶10.   All four entries

were subject to a 201.63 percent antidumping duty margin under the

antidumping order. Final Determination, 62 Fed. Reg. at 41,358.

Seamaster did not classify the entries as subject to antidumping

duties, nor did it remit any amount of the applicable duties to

Customs. Compl. at ¶18.

          On May 4, 1998, Porter had a telephone conversation with

Floyd, Rupari’s Vice President of seafood sales, regarding the

alleged crawfish tail meat purchased from Rupari and upcoming

shipments of frozen crawfish tail meat. Pl.’s Br. Ex. 10, at 3-4,

Porter Decl. at ¶10. According to Porter:

          During that conversation, I asked Larry
          [Floyd] how it was that Rupari could sell its
          Chinese crawfish tail meat so cheaply. I also
          commented that Rupari’s crawfish was cheaper
          than all of the other Chinese crawfish tail
          meat being sold in the United States at that
          time.    Larry responded that they, which I
          understood to be Rupari, “can get it in where
          it would not be known as Chinese crawfish.” I
          asked Larry how and he explained that the
          Chinese crawfish tail meat was shipped to
          Thailand where it was “processed.”     He said
          that the country of origin could be the place
          where the crawfish is packed. Larry also used
          the word “tariff,” stating that Rupari’s
          crawfish would not have to pay the same amount
          in tariffs. I responded, “Is that on the up-
          and-up?”     I was uncomfortable with this
          approach and shared my concern with Larry.

Id.
Consol. Court No. 10-00119                                         Page 10



           Also on May 4, 1998, Floyd sent Porter a facsimile on

Rupari letterhead, in which he wrote the following:

           As per our conversation on the telephone
           earlier concerning cooked peeled crawfish meat
           from Thialand, [sic] this product was cooked
           in China and sent to Thialand [sic] in the
           whole round and totally processed in Thialand
           [sic] and packed under the Seamaster lable
           [sic]. I really don’t understand what all the
           comotion [sic] is all about because we could
           bring in the whole cooked product into the
           United States and peel and pack it here and it
           would become product of the U.S.A.

Pl.’s Br. Fax from Floyd to Porter Ex. 20, at 1, May 4, 1998, ECF.

No. 94-11.

           Seamaster, as the importer of record, attempted to enter

five more entries of crawfish tail meat into the United States

between approximately June 13, 1998, and June 20, 1998. Pl.’s Br.

Entry/Immediate Delivery Forms, Certificates of Origin, Bills of

Lading, Invoices, Ex. 11B, at 1-28 ECF No. 94-8.                 Seamaster

classified the crawfish tail meat in these five entries as duty

free under 1605.40.1000 HTSUS.        Id.    Seamaster labeled all five

entries as products of Thailand. Id. The crawfish tail meat was

subject   to   antidumping   duties   of    201.63   percent,   because   it

originated in China, but Seamaster did not classify the merchandise

properly. Id.; see also Final Determination, 62 Fed. Reg. at

41,358. Customs examined and seized the five entries of crawfish

tail meat under 19 U.S.C. § 1595a(c)(2)(E), because the cartons
Consol. Court No. 10-00119                                          Page 11


were intentionally marked as products of Thailand in violation of

19 U.S.C. § 1304. Compl. at ¶21.

          On   June   26,    1998,    Customs   issued   a   request    for

information to Seamaster, as importer of record, asking them to

substantiate the claimed Thai origin of the five seized entries,

and asking for an explanation of Seamaster’s relationships with

Rupari and Sea Bonanza. Pl.’s Br. U.S. Customs Service Request for

Information, Ex. 13, at 1, June 26, 1998, ECF No. 94-10.

          On   June    29,    1998,     Customs   commenced     a      fraud

investigation against Rupari for the possible circumvention of

antidumping duties.    Pl.’s Br. Tr. of Dep. of C. Vernon Francis,

Ex. 12, at 12, Sept. 24, 2013, ECF No. 94-9.

          On July 1, 1998, Rupari, through its employee, Stilwell,

filed a letter with Customs on behalf of Seamaster, the importer

of record, wishing to clarify the origin of the crawfish meat.

Pl.’s Br. Letter from Stilwell to Mr. David Shaw, US Customs

Service, Ex. 15, at 1, July 1, 1998, ECF No. 94-11.              Stilwell

stated in the letter that the crawfish tail meat in the five seized

entries was “cooked, peeled, and processed” by Sea Bonanza at its

plant in Thailand.    Id.

          On July 6, 1998, Customs issued a second request for

information to Seamaster asking for records from Sea Bonanza to

substantiate the facts in the letter referenced claiming that the

crawfish tail meat was processed in Thailand from raw crawfish
Consol. Court No. 10-00119                                          Page 12


harvested in Thailand. Pl.’s Br. Second Request for Information

Ex. 13, at 2-4.

            On July 10, 1998, Rupari, through its employee Stilwell,

filed documents in response to this second request for information.

Compl. at ¶25. One of those documents was a letter written by

Seamaster    that   authorized     Rupari   to     act    as   Seamaster’s

representative in all dealings with Customs related to the release

of the seized entries of Chinese crawfish tail meat.             Pl.’s Br.

Letter of Authorization from Seamaster to U.S. Customs, Ex. 23, at

46, July 9, 1998.

            On July 13, 1998, Customs issued a third request for

information to Seamaster again asking for further substantiation

of the claim that the crawfish originated in Thailand.           Pl.’s Br.

Third Request for Information Ex. 13, at 5, July 13, 1998.

            On July 13, 1998, Rupari, through its employee Stilwell,

filed a series of documents with Customs. Compl. at ¶27. Among

those   documents   was   a   purported   letter   from    Mahyam   Tingham

Fisheries Co. Ltd. stating that it cultivated crawfish in Bangkok,

Thailand, which it sold to Sea Bonanza, complete with invoices for

the sale of live crawfish. Pl.’s Br. Letter of Explanation from

Mahyam, Ex. 15, at 2-5, July 10, 1998.           The Bureau of Business

Information of the Government Service Division in Thailand has

confirmed that they failed to find any business registration for

the name “Mahyam Tingham Fisheries Co., Ltd.”             Pl.’s Br. Letter
Consol. Court No. 10-00119                                 Page 13


from the Bureau of Business Information of Thailand to Ms. Barry

Tang, Ex. 18, at 1, May 10, 2013.

          There was also a letter from Sea Bonanza stating that it

purchased raw crawfish from Mahyam that it processed into tail

meat for sale to Seamaster, which Seamaster then imported into the

United States.   Pl.’s Br. Letter of Confirmation from Sea Bonanza,

Ex. 23, at 47, July 10, 1998.

          [[
Consol. Court No. 10-00119                                         Page 14




                                   ]]

             On July 25, 1998, Wang, the owner of Yupeng, sent a

facsimile to Rupari and Stilwell which stated that Yupeng did not

have the money to pay the ocean freight to ship crawfish to

Thailand; however, Yupeng would fulfill Rupari’s order of “whole

crawfish” which would be mixed with “ten tons of crawfish meat.”

Pl.’s Br. Facsimile from Wang to Rupari Ex. 16, at 1, July 25,

1998, ECF No. 94-11.

          On August 5, 1998, the Agricultural Affairs Office of

the American Embassy in Thailand confirmed that there was no

commercial     production   of   indigenous      freshwater   crawfish    in

Thailand. Pl.’s Br. Facsimile from Agricultural Affairs Office,

American Embassy, Bangkok, Thailand, to Roy Johnson, Louisiana

Dept. of Agriculture, Ex. 8, at 1, Aug. 5, 1998.

             On April 9, 2001, Customs sent Rupari and Stilwell a

Pre-penalty    Notice   which    set    the   tentative   determination   of

culpability at fraud, but also noted that “[i]nasmuch as the

Government may plead in the alternative in any de novo proceeding

before the Court of International Trade, Customs alternatively

alleges that the violation in question occurred as a result of

negligence or gross negligence.”          Pl.’s Br. Pre-penalty Notice,
Consol. Court No. 10-00119                                             Page 15


Ex. 19, at 2, Apr. 9, 2001, ECF No. 94-11.          On November 14, 2001,

Customs issued Rupari and Stilwell a Penalty Notice which included

the same language as the Pre-penalty notice mentioned above. Pl.’s

Br. Penalty Notice, Ex. 24, at 18-20, Nov. 14, 2001, ECF No. 94-

13.

            On April 7, 2010, Customs filed a complaint against

American    Casualty    claiming    that   it   owed   the    United    States

$1,279,648.83 plus statutory interest for unpaid customs duties

under bonds pursuant to 19 U.S.C. § § 1505, 1592(d), 1505(c), and

580.   Compl. at ¶1, April 7, 2010, ECF No. 2.

            On June 20, 2011, Customs filed a Complaint against

Rupari for violations of 19 U.S.C. § 1592 (a). Compl. ¶1, June 20,

2011, ECF No. 2.       The Complaint alleged that Defendant attempted

to enter five containers of Chinese crawfish tail meat by means of

documents falsely claiming that the crawfish tail meat originated

in Thailand. Id. at ¶8.      Customs sought the domestic value of the

merchandise Rupari attempted to enter into the United States which

was $2,784,636.18, or in the alternative, the maximum amount for

grossly negligent or negligent violations of 19 U.S.C. § 1592.

Id. at ¶52.

            On December 22, 2011, this Court ordered that the case

against    American    Casualty    be   consolidated   with    that    against

Rupari. Order, Dec. 22, 2011, ECF No. 22.
Consol. Court No. 10-00119                                               Page 16


            On May 13, 2013, Stilwell died.         Def.’s Mot. to Dismiss

Public Version, Death Certificate Ex. 5, at 1, July 19, 2013, ECF

No. 75-5.    Additionally, Floyd died, however, his date of death is

not known by the court.        On January 22, 2014, Customs conducted

the deposition of a confidential informant who recounted an alleged

conversation with Stilwell in which Stilwell stated that [[



                                                                    ]]     Pl.’s

Br. Conf. Dep. of Confidential Informant Ex., 1 at 7, ECF No. 80.

               Subsequently,   Defendant    filed     a   motion   to    dismiss

arguing     that   Customs   failed   to   properly       allege   fraud    with

particularity and Customs failed to exhaust its administrative

remedies for Counts II (gross negligence) and III (negligence).

Def.’s Br. at 4-5.

             Customs opposes Defendant’s Motion to Dismiss, and it

also requests leave to amend its Complaint.           Pl.’s Br. at 13.

                                DISCUSSION

             There are three issues that the court must analyze in

addressing Defendant’s Motion to Dismiss: (1) whether the court

should allow Customs to amend its Complaint; (2) whether Customs

alleged fraud with particularity; (3) whether Customs failed to

exhaust its administrative remedies with respect to negligence and

gross negligence.
Consol. Court No. 10-00119                                      Page 17


     1. Whether the   court   should   allow   Customs   to   amend   its
        Complaint.

           Customs seeks leave to amend its Complaint, reasoning

that Defendant would not suffer any prejudice, because this action

has advanced significantly beyond discovery, Defendant answered

the complaint, and Defendant waited until the close of discovery

to file its Motion to Dismiss.    Pl.’s Br. at 13-14.     Customs also

notes that this is its first request to amend the complaint.          Id.

           Defendant opposes Customs’ request to amend, because it

argues that waiting years after the Complaint was filed to amend

by adding new information constitutes undue delay that prejudices

their case. Def.’s Reply to Pl.’s Resp. to Def.’s Mot. to Dismiss

Confidential Version at 5-6, Mar. 29, 2015, ECF No. 98 (“Def.’s

Reply”).

           Rule 15 of the Rules of the U.S. Court of International

Trade provides that “[t]he court should freely give leave” to amend

a pleading “when justice so requires.” USCIT R. 15(a)(2).         While

Rule 15 requires that leave to amend be freely given, the Court

must also consider whether there was undue delay, bad faith or

dilatory motive on the part of the Plaintiff, undue prejudice to

the opposing party, a repeated failure to cure deficiencies by

amendments previously allowed, and futility of amendment.         Foman

v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222, 226

(1962).
Consol. Court No. 10-00119                                                 Page 18


                The view that delay becomes undue when it prejudices

the opposing party is generally accepted. Ford Motor Co. v. United

States, 19 CIT 946, 956, 896 F. Supp. 1224, 1231 (1995) (citing

United States v. Mex. Feed & Seed Co., 980 F.2d 478, 485 (8th Cir.

1992)).     In turn, to demonstrate prejudice, Defendant “must show

that it was unfairly disadvantaged or deprived of the opportunity

to present facts or evidence which it would have offered had the

amendment been timely.”        Id. (quoting Cuffy v. Getty Ref. & Mktg.

Co., 648 F.Supp. 802, 806 (D.Del. 1986)).

            First,    Defendant     argues   that       the   inclusion    of    the

Declaration of Porter would prejudice it, because the Declaration

details a phone conversation between Porter and Floyd, in which

Floyd allegedly stated that the crawfish tail meat was from China.

Def.’s Reply at 7.       Floyd is now deceased, and Defendant contends

that   as   a   result   of   his   death,   it   has    been   deprived    of    an

opportunity to challenge Porter’s statements.                 Id.

            Although Floyd is deceased, Defendant argues that the

May 4, 1998 fax from Floyd to Porter, occurring the same day as

the phone call, shows that the conversation was limited to whole

crawfish which are not within the scope of the antidumping order.

Specifically, Defendant points out that the fax refers to crawfish

“in the whole round” and “whole cooked product.”                Id. at 8.

            Defendant has not been deprived of an opportunity to

challenge Porter’s statements, because the contemporaneous fax to
Consol. Court No. 10-00119                                  Page 19


Porter could show that the conversation was limited to whole

crawfish which are not within the scope of the antidumping order.

Id.   Defendant is not prejudiced by the inclusion of Porter’s

Declaration or the fax, because it has not been deprived of an

opportunity to challenge Porter’s statements.   See Ford, 19 CIT at

956, 896 F. Supp. at 1231. The court will allow Customs to amend

its Complaint to include information relative to the Declaration

of Porter.

          Defendant also argues that amending the Complaint to

include additional facts to support Count I, fraud, would be

futile. Def.’s Reply at 5. Specifically, Defendants argue that

including facts relating to the facsimile from Wang, Yupeng and

Seamaster’s owner, to Rupari and Stilwell would not survive a

motion to dismiss, because the government’s conclusion that the

goods were transshipped to the U.S. from China and that Rupari and

Stilwell were aware of the transshipment does not logically flow

from the facsimile. Id. at 8.

          If an amendment would not survive a motion to dismiss

pursuant to USCIT Rule 12(b)(6), it is deemed futile.        United

States v. Active Frontier Int’l, Inc., 37 CIT ___, Slip Op. 13-8

(Jan. 16, 2013).   To survive a motion to dismiss, a complaint must

contain sufficient factual matter, accepted as true, to state a

claim to relief that is plausible on its face. Twombly, 550 U.S.

at 570, 127 S. Ct. at 1974, 167 L. Ed. 2d at 949.   To be plausible,
Consol. Court No. 10-00119                                            Page 20


the complaint need not show a probability of plaintiff’s success,

but it must evidence more than a mere possibility of a right to

relief. Id. at 556-57, 127 S. Ct. at 1965-66, 167 L. Ed. 2d at

940-41.

          The court finds that amending the Complaint to include

the information discussed in the facsimile would not be futile,

because the amendment would survive a motion to dismiss. See Active

Frontier Int’l, Inc., 37 CIT ___, Slip Op. 13-8 (Jan. 16, 2013).

The amendment     would   survive   a   motion   to   dismiss,    because   it

evidences a more than a mere possibility of a right to relief, as

one could reasonably interpret the fax to show that Rupari was

aware of the transshipment of crawfish tail meat.                See Twombly,

550 U.S. at 570, 127 S. Ct. at 1974, 167 L. Ed. 2d at 949; see

also Pl.’s Br. Facsimile from Wang to Rupari Ex. 16, at 1.

          Next,    Defendant   argues     that    the   inclusion     of    the

deposition testimony of a confidential informant who recalled a

verbal, unrecorded, conversation with the now deceased Stilwell

will prejudice its case.       Def.’s Reply at 10. Customs seeks to

amend the Complaint to include the deposition testimony, because

[[




                                                                             ]]

The Defendant has been deprived of an opportunity to present
Consol. Court No. 10-00119                                           Page 21


evidence it would have offered had the amendment been timely,

specifically    Stilwell’s    testimony,   to    rebut    the   confidential

informant’s account of the purported conversation with Stilwell,

because Stilwell died on May 13, 2013, and the deposition of the

confidential informant occurred afterwards on January 22, 2014.

See Ford, 19 CIT at 956, 896 F.Supp. at 1231; Def.’s Br. Stilwell

Death Certificate Ex. 5 at 1, ECF No. 75-5; Pl.’s Br. Dep. of Conf.

Informant Ex. 1, at 1.      Consequently, inclusion of this deposition

will prejudice Defendant, and the court will not permit Customs to

amend its complaint to add this information.

      2. Customs alleged fraud with particularity.

           The Defendant argues that Customs’ Complaint fails to

contain sufficient underlying facts creating a plausible inference

that Rupari knew the statements contained in letters and other

documents to Customs were false and that they intended to deceive

Customs. Def.’s Br. at 5-6.        The Court disagrees.

           Rule 9(b) of the Rules of the Court of International

Trade   requires   that     Customs   “state    with     particularity   the

circumstances constituting fraud or mistake.               Malice, intent,

knowledge, and other conditions of a person’s mind may be alleged

generally.”    USCIT R. 9(b). Even though knowledge and intent may

be   alleged   generally,    the   pleadings    must   “allege    sufficient

underlying facts from which a court may reasonably infer that party

acted with the requisite state of mind.”           Exergen Corp. v. Wal-
Consol. Court No. 10-00119                                 Page 22


Mart Stores, Inc., 575 F.3d 1312, 1327 (Fed. Cir. 2009). “A fraud

pleading must include informational elements of ‘who, what, when,

where, and how: the first paragraph of any newspaper story.’”

United States v. Islip, 22 CIT 852, 869, 18 F.Supp.2d 1047, 1063

(1998) (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th

Cir. 1990)).   “Most courts have required the claimant to allege at

a minimum the identity of the person who made the fraudulent

statement; the time, place, and content of the misrepresentation;

the resulting injury; and the method by which the misrepresentation

was communicated.” Islip, 22 CIT at 869, 18 F.Supp.2d at 1063

(citing 2 Moore's Federal Practice § 9.03, at 9–18 n.12 (3d

ed.1998)).

          Defendant contends that the bare fact that Rupari had

done business with Seamaster’s Chinese parent company, Yupeng,

prior to the imposition of antidumping duties does not permit the

inference that Rupari knew that the crawfish originated in China.

Def.’s Br. at 7.   Defendant is correct that this fact alone does

not permit the inference that Rupari definitively knew the origin

of the crawfish to be China, but this individual fact cannot be

viewed in a vacuum as suggested by Defendant.    Rather, this fact

must be viewed in light of the other facts mentioned in the

Complaint, as discussed below.

          [[
Consol. Court No. 10-00119                                 Page 23




                              ]]

           Customs argues that the Declaration of Porter shows that

Rupari knew that the crawfish tail meat was from China, and thus

Customs pled fraud and intent with particularity. Pl.’s Br. 17-

18.   In his Declaration, Porter recounts a conversation on May 4,

1998, with Floyd, in which Floyd allegedly told him that Rupari’s

“Chinese crawfish tail meat” was cheaper than all of the others,

because the meat was shipped to Thailand where it was processed

and then it “would not be known as Chinese crawfish.” Pl.’s Br.

Porter Decl.   Ex. 10, at ¶10.
Consol. Court No. 10-00119                                               Page 24


             In contrast, Defendant claims that the facsimile from

Floyd   to   Porter   on   May   4,    1998,   sent   the   same   day   as   the

conversation, shows that the conversation was limited to whole

crawfish, which is not within the scope of the antidumping order,

as the fax referred to crawfish “in the whole round” and as “whole

cooked product.” Pl.’s Br. Fax from Floyd to Porter Ex. 20, at 1.

             Nevertheless, given that POPCA and Rupari previously

signed a contract for the supply of “Chinese [c]rawfish [t]ail

[m]eat,” and that the court construes the facts in the light most

favorable to the plaintiff in reviewing a motion to dismiss, the

court finds that Customs pled knowledge and intent with enough

particularity that its fraud claim survives the Motion to Dismiss.

See Pl.’s Br. Purchase Agreement between POPCA and Rupari, Ex. 10,

at 13; see also Bank of Guam, 578 F.3d at 1326.

             Moreover,     Plaintiff    pled   fraud    with   particularity,

because the complaint detailed the identity of the person who made

the fraudulent statement; the time, place, and content of the

misrepresentation; the resulting injury; and the method by which

the misrepresentation was communicated.           See Islip, 22 CIT at 869,

18 F.Supp.2d at 1063.         Specifically, the complaint alleged that

Stilwell, an employee of Rupari, fraudulently stated in a letter

dated July 1, 1998, to Customs on behalf of Seamaster, the importer

of record, that the crawfish tail meat in the five seized entries

was processed and packed by Sea Bonanza in Thailand from raw
Consol. Court No. 10-00119                                        Page 25


crawfish harvested by Mahyam in Thailand. Compl. ¶23; see id.

Customs further alleged that these statements had the potential to

influence its assessment of antidumping duties. Compl. at ¶35.

Moreover, the complaint alleged that Rupari, through its employee

Stilwell, filed on July 13, 1998, a series of documents with

Customs   which   it   knew   to   contain   false   representations   that

Thailand was the country of origin of the crawfish tail meat. Id.

at ¶27. The documents included the following: a purported letter

from Mahyam stating that it cultivated live crawfish which it sold

to Sea Bonanza, invoices for the sale of live crawfish, and a

letter purportedly from Sea Bonanza stating that it purchased

crawfish from Mahyam that it processed into tail meat for sale to

Seamaster. Id.

           Finally, Defendant contends that Customs failed to plead

fraud with particularity, because the fax from Yupeng to Rupari

does not demonstrate that Rupari knew that the crawfish tail meat

was from China at the time it responded to Customs.         Def.’s Br. at

8.   The fax was sent on July 25, 1998, after Stilwell made

representations and submitted documentation to Customs on July 1,

10, and 13, 1998. Pl.’s Br. Facsimile from Wang to Rupari Ex. 16.

            Although the fax, in and of itself, may not show that

Rupari knew that the statements were false at the time they were

made to Customs, as the statements occurred before the fax, the

fax could plausibly show that Rupari discovered that its statements
Consol. Court No. 10-00119                                  Page 26


were false after it sent its last response to Customs on July 13,

1998, and that it failed to inform Customs that its previous

statements, made just days before, were untrue.    Thus, Plaintiff

pled fraud with enough particularity to survive Defendant’s motion

to dismiss.

     3. Exhaustion of Administrative Remedies

          28 U.S.C. § 2637(d) provides that “[i]n any civil action

not specified in this section, the Court of International Trade

shall, where appropriate, require the exhaustion of administrative

remedies.” 28 U.S.C. § 2637(d).    If a new level of culpability is

first introduced in Court and not at the administrative level, the

party against whom the claim is alleged has been prevented from

seeking mitigation of the monetary penalty at the administrative

level as contemplated by 19 U.S.C. § 1592(b) and 19 U.S.C. § 1618.

United States v. Optrex, 29 CIT 1494, 1500 (2005) (not reported in

federal supplement); see also Def.’s Br. at 12.

          Defendants charge that Commerce failed to exhaust its

administrative remedies for Count II, gross negligence, and Count

III, negligence, because, although the penalty letters indicated

that Customs alleged negligent and gross negligent violations in

the alternative, Customs did not pursue such claims.    Def.’s Br.

at 11, 14. The court disagrees.

          Defendants rely on Optrex to support their position.

See Optrex, 29 CIT at 1500.       In Optrex, Customs issued a pre-
Consol. Court No. 10-00119                                          Page 27


penalty notice which alleged that Optrex was negligent in providing

insufficient information in the entry documents to enable Customs

to determine the correct classification of its products. Id. at

1495.   The    final    penalty   claim   against   Optrex   was   based   on

negligence. Id. Customs then filed suit on a negligence theory.

Id. at 1495-96.        Subsequently, Customs sought leave of the court

to amend its complaint to include penalties for fraud and gross

negligence. Id. at 1496. The court in Optrex denied Customs’ motion

reasoning that “the statute was designed to give an importer an

opportunity to fully resolve a penalty proceeding before Customs,

before any action in this Court.” Id. at 1500-03. In other words,

Optrex was denied an opportunity to resolve the fraud and gross

negligence claims before the action was filed in this Court, as

these claims were not mentioned in the pre-penalty and penalty

notices.      Id. at 1495-1503.

               The facts in the instant case are not analogous to those

in Optrex. See id.          Unlike in Optrex, here, Customs alleged

negligence and gross negligence in the alternative in both the

pre-penalty and penalty notices:

              Inasmuch as the Government may plead in the
              alternative in any de novo proceeding before
              the Court of International Trade, Customs
              alternatively alleges that the violation in
              question occurred as a result of negligence or
              gross negligence. (Emphasis added).
Consol. Court No. 10-00119                                               Page 28


Pl.’s Br. Pre-penalty Notice, Ex. 19, at 2; Pl.’s Br. Penalty

Notice, Ex. 24, at 18-20.         Here, by listing the negligence and

gross negligence claims in the notices, Customs put the Defendant

on notice that they were pursuing penalties for negligence and

gross negligence in the event they could not prove fraud.                Customs

thereby presented Defendant with the opportunity to resolve the

negligence   and    gross   negligence     claims   at   the       administrative

level.

           Defendant cannot say that it was deprived of a chance to

mitigate the gross negligence and negligence penalties before

Customs commenced this action.        Defendant responded to the Pre-

penalty notice by letter dated June 8, 2001, in which it argued

that it acted in a commercially reasonable manner under the common

law standard of care, and that there were several mitigating

factors in favor of cancelling the penalties for gross negligence

and   negligence.   Pl.’s   Br.   Letter    from    Becker     &    Poliakoff   to

Customs, Ex. 23, at 1-19, June 8, 2001; see United States v. CTS

Holding, LLC, 39 CIT ____, Slip Op. 15-70 (June 30, 2015) (finding

that “Defendant’s attempts to resolve the penalty claim before

Customs, prior to Plaintiff’s bringing this action, demonstrate

that Defendant received sufficient, actual notice that the claim

sounded in negligence.”) Accordingly, Customs afforded Defendant

an opportunity to resolve the negligence and gross negligence

claims at the administrative level before the action was commenced
Consol. Court No. 10-00119                                 Page 29


in this Court.    Defendant’s own arguments show that it believed

Customs pursued penalties for gross negligence and negligence in

the event that fraud could not be proven.

          As with Optrex, Defendant also mistakenly relies on

United States v. Nitek Electronics, Inc., 844 F.Supp.2d 1298, 1298

(2012) (Not reported in Court of International Trade Reports),

appeal filed and docketed, Appeal No. 15-1166 (Fed. Cir. ____).

In Nitek, the court barred a penalty claim and held that Customs

failed to perfect its penalty claim where it sought to recover a

penalty “based upon a degree of culpability (negligence) that

differs from that alleged at the administrative level (gross

negligence).” Id. at 1305.      In Nitek the court also found that

“nothing prevented Customs from bringing penalty claims for both

negligence and gross negligence in the alternative, as it has done

in the past.”    Id. at 1308.

          By contrast, in this case, the degrees of culpability

alleged in the complaint, (fraud, or in the alternative gross

negligence, or negligence) were exactly the same as those alleged

at the administrative level (fraud or in the alternative gross

negligence, or negligence). Id. at 1305.    Unlike in Nitek, here,

Customs brought the negligence and gross negligence claims in the

alternative. See id. It cannot be said that Customs did not perfect

its penalty claim or that Defendants were robbed of an opportunity
Consol. Court No. 10-00119                                              Page 30


to resolve the negligence and gross negligence claims at the

administrative level. See id.

            Defendant also contends that the gross-negligence and

negligence claims must be dismissed, because Customs failed to

disclose all material facts establishing those violations in its

Pre-Penalty notice. Def.’s Br. at 14.

            In order to bring a section 1592 claim in this Court,

several statutory requirements must be met at the administrative

level. 19 U.S.C. § 1592 (b)(1). When Customs has reasonable cause

to believe there has been a violation of section 1592 it must issue

a pre-penalty notice which “disclose[s] all the material facts

which establish the alleged violation.”           Id. at (b)(1)(A)(iv).

            A violation is grossly negligent where it results from

an   act   or   omission   done   with   actual   knowledge   of   or   wanton

disregard for the relevant facts and with indifference to or

disregard for the offender’s obligations under the statute. 19

C.F.R. Pt. 171, App. B (C)(2). In the Pre-penalty Notice, Customs

wrote that Rupari purchased crawfish from Yupeng Fishery Ltd. in

China, knowing that the crawfish originated in China, and prepared

invoices and entry documents falsely stating that the crawfish

originated in Thailand. Pl.’s Br. Pre-penalty Notice, Ex. 19, at

3. The notice further alleged that this was done to avoid paying

antidumping duties in contravention of Rupari’s obligations under

the statute. Id.       The court finds that Customs disclosed all
Consol. Court No. 10-00119                                           Page 31


material facts which establish gross negligence and it denies

Defendant’s motion to dismiss the gross negligence claim.

            Negligence requires facts that establish that a duty of

reasonable care and competence existed and that Defendant failed

to exercise reasonable care and competence in making statements or

providing information to Customs.           19 C.F.R. Pt. 171, App. B

(C)(1).     Here, although Customs did not explicitly state that

Rupari owed a duty and breached that duty in the Pre-penalty and

Penalty notices, clearly, Rupari was adequately apprised of the

fact that this negligence claim involved allegations that Rupari

breached a duty of reasonable care, as evidenced by Rupari’s own

arguments   against   a   finding   of   negligence   by   Customs   at   the

administrative level:

            Rupari conducted itself in a commercially
            reasonable manner . . . . [A] general custom,
            use, or practice by those in the same business
            or trade may be considered some evidence of
            what constitutes reasonable conduct in that
            trade or business . . . . Other domestic buyers
            of crawfish and other seafood will, if
            necessary, testify that Rupari’s actions were
            no different than most such other domestic
            buyers in similar situations.

Pl.’s Br. Letter from Becker & Poliakof to Customs, Ex. 23, at 4-

5, June 8, 2001; see also United States v. Dantzler Lumber & Export

Co., 16 CIT 1050, 1059, 810 F.Supp. 1277, 1285 (1992) (finding

that as long as Defendants were adequately apprised of the scenario

of the action, Customs has met the requirement of disclosing all
Consol. Court No. 10-00119                                      Page 32


material   facts   establishing   the   violation).   Thus,   the   court

declines to dismiss the negligence count.

                              CONCLUSION

            For the reasons stated above, Plaintiff’s request for

leave to amend the Complaint is granted in part and denied in part

consistent with this opinion.     It is further

            ORDERED that Defendant’s Motion to Dismiss is DENIED; it

is further

            ORDERED that Plaintiff’s Request for Leave to Amend the

Complaint is GRANTED IN PART AND DENIED IN PART, consistent with

the court’s opinion; it is further

            ORDERED that Plaintiff shall file an Amended Complaint,

consistent with this opinion, no later than August 31, 2015; it is

further

            ORDERED that Defendants must submit their Amended Answer

no later than September 21, 2015; and it is further

             ORDERED that Plaintiff and Defendants must submit a

joint proposed scheduling order no later than September 28, 2015.

             SO ORDERED.



                                              /s/ Nicholas Tsoucalas
                                                Nicholas Tsoucalas
                                                   Senior Judge
Dated:    August 24, 2015
         New York, New York
                              ERRATA

Please make the following changes to United States v. American
Casualty Co. of Reading Pennsylvania, Consol. Court No.: 10-00119,
Slip Op. 15-94:

  •   On page 16, Lines 4-5: change “Customs conducted the
      deposition of a confidential informant who recounted” to “a
      confidential informant was deposed who recounted.”

  •   On page 26, Line 17: change “Commerce” to “Customs.”

August 26, 2015
