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MEI INTL., INC. v. SCHENKERS INTL. FORWARDERS

July 15, 1992

MEI INTERNATIONAL, INC., Plaintiff
v.
SCHENKERS INTERNATIONAL FORWARDERS, Inc., Defendant



The opinion of the court was delivered by: CONSTANCE BAKER MOTLEY

FINDINGS OF FACT AND CONCLUSIONS OF LAW

 This case involves the allegedly negligent advice given to plaintiff, MEI International, Inc. (MEI), by defendant, Schenkers International Forwarders, Inc. (Schenkers), regarding the circumstances which permit an original importer to obtain a duty drawback under United States custom law. This action for damages was tried to the court on December 2, 3, 4, and 5, 1991. The court now makes the following findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure.

 FINDINGS OF FACT

 1. Plaintiff MEI is a Panamanian corporation. One aspect of MEI's business is the purchase and sale of goods. In the transactions relevant to this case, William G. Stern, a resident of London, England and a non-practicing member of the New York State Bar, acted as an agent on behalf of MEI and a profit-participant in MEI's buying and reselling of FILA goods. Mr. Jeffrey Hendrick, who resides in London, England and was affiliated with MEI from 1984 to 1986, also acted as an agent of MEI under the authority of Mr. Stern.

 2. Defendant Schenkers, a New York corporation, is a customs broker and freight forwarder licensed by the United States Treasury Department and the Federal Maritime Commission. Schenkers is engaged in the business of advising and assisting clients on the importation and exportation of goods into and from the United States and has experience and expertise in United States customs regulations and procedures.

 3. During the period of August, 1984, through December, 1985, MEI purchased five lots of unsold sportswear from FILA Sports, SPRL ("FILA"), an Italian corporation. Schenkers advised MEI with respect to the import/export implications of the first three lots purchased by MEI from FILA.

 5. Because MEI was unfamiliar with the process of importation and customs, MEI retained Schenkers to advise and assist MEI in importing the first two FILA lots into the United States. (Tr. 35-36)

 6. MEI, through Mr. Stern, first met with the Schenkers regarding the first lot of FILA merchandise sometime during the latter of half of 1984. (Tr. 34) At that time, Mr. Stern requested that Schenkers provide MEI with "comprehensive service" and indicated that MEI would require such services from Schenkers on a continuing basis. (Tr. 36)

 7. Schenkers fully performed the requested services for the first two FILA lots and rendered invoices to MEI containing standard contract terms. *fn1" MEI paid Schenkers in full for its services. The parties do not dispute their respective conduct with regard to the first two lots.

 8. The present dispute arises from the conduct of the parties with respect to the third lot of FILA merchandise purchased by MEI, referred to here as the "export lot." The export lot consisted of first quality, out of season FILA sportswear, similar to that contained in the first two lots of FILA goods. The garments contained in the export lot were manufactured in Italy and imported into the United States by FILA in 1983 and 1984, at which time customs duties had been paid.

 9. In December of 1985, M.E.I. agreed to purchase the export lot, which consisted of approximately 60,000 garments, from FILA's California subsidiary for the sum of $ 300,000.00. (Pl. Exh. 1, 2) At the time of the December purchase agreement, the export lot was located in California.

 10. The purchase agreement between MEI and FILA regarding the export lot, as stated in telexes dated December 11 and 12, 1985, required MEI to accept that portion of the goods imported into the United States in 1983 and 1984 "in a Free Zone or in Panama". (Pl. Exh. 1, 2) The purpose of this requirement was to enable FILA to reclaim customs duties in the amount of $ 80,000 that it had previously paid on the original importation of the goods. It was the understanding of MEI and FILA that the goods on which FILA had paid import duties in 1983 and 1984, a total of 23,159 pieces of merchandise, would be exported from the United States to enable FILA to reclaim the duties previously paid. (Pl. Exh. 7, 9; Tr. 52)

 11. At the time the goods in the export lot were originally imported into the United States by FILA, FILA had paid customs duties based on the original purchase price of the goods. The agreement purported to enable FILA to reclaim the duties originally paid by requiring MEI to accept shipment in a free trade zone or Panama. MEI would then pay customs duties based on the new commercial invoice. Because the unsold seasonal goods would be significantly less costly when MEI accepted them than they were when originally imported, the duties paid by MEI would be substantially lower than the duties previously paid by FILA.

 12. In early March of 1986, M.E.I. began consulting with Schenkers for advice and expertise regarding the handling of the export lot, including the U.S. customs aspects of the transaction, the location and consequences of utilizing a foreign trade zone or the United States equivalent of a bonded warehouse, and the drawback of duties by the original importer.

 14. In March of 1986, Mr. Stern telephoned Schenkers on behalf of MEI and spoke with Ms. Lisa Malwitz, then an assistant import manager for Schenkers. Mr. Stern inquired as to whether there existed in the United States the equivalent of "bonded warehouses" which exist in Europe, and if so, under what conditions such bonded warehouses could be used. (Tr. 58)

 15. At this time, Mr. Stern informed Ms. Malwitz that MEI required this information to facilitate a transaction whereby MEI would export certain goods which they had purchased from FILA and which were located in FILA's warehouse in California in order to enable FILA to obtain a duty drawback on the merchandise. (Tr. 63) Mr. Stern told Ms. Malwitz that MEI did not yet know the identity of the country to which the goods would be exported. (Tr. 63-64)

 16. During these telephone conversations, Ms. Malwitz told Mr. Stern that if the goods were shipped to a foreign trade zone, the previous importer would then be able to obtain a duty drawback on the goods, even though MEI did not yet know the country to which the goods would ultimately be sent. At the same time, Ms. Malwitz provided Mr. Stern with the address of a foreign trade zone in Long Beach, California. (Tr. 63-64) Subsequently, at a time prior to March 26, 1986, Ms. Malwitz sent MEI a telex confirming the address of the foreign trade zone. (Tr. 59-60; Pl. Exh. 8)

 17. On or about March 26, 1986, FILA advised MEI of certain details concerning the 23,159 pieces of clothing in the export lot and the required letter of credit. (Pl. Exh. 7) At this time, MEI advised FILA of the address information for the Foreign Trade Zone, and gave other ...


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