Hartford Fire Ins. Co. v. U.S.

• Decision Date: 08 October 2008
• Docket Number: No. 2008-1071.,2008-1071.
• Citation: 544 F.3d 1289
• Parties: HARTFORD FIRE INSURANCE COMPANY, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

544 F.3d 1289

HARTFORD FIRE INSURANCE COMPANY, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 2008-1071.

United States Court of Appeals, Federal Circuit.

October 8, 2008.

Frederic D. Van Arnam, Jr., Barnes, Richardson & Colburn, of New York, New York, argued for plaintiff-appellant. With him on the brief was Eric W. Lander.

Michael J. Dierberg, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, for defendant-appellee. With him on the brief were Jeffrey S. Bucholtz, Acting Assistant Attorney General; Jeanne E. Davidson, Director; and Franklin E. White, Jr., Assistant Director. Of counsel was Beth C. Brotman, Office of the Assistant Chief Counsel, United States Customs and Border Protection, of New York, New York.

Before MAYER, LOURIE, and PROST, Circuit Judges.

MAYER, Circuit Judge.

Hartford Fire Insurance Company appeals the judgment of the United States Court of International Trade, finding no subject matter jurisdiction over its claim to find its surety bonds unenforceable. Hartford Fire Ins. Co. v. United States, 507 F.Supp.2d 1331 (Ct. Int'l Trade 2007). Because we agree that the true nature of the action is a failure to file an administrative protest to a demand for payment on a surety bond, we affirm.

BACKGROUND

In February 2004, importer Brother Packaging imported three entries of polyethylene t-shirt bags into the United States pursuant to surety bonds covering applicable duties. These bonds were executed in April 2002 and December 2004 naming appellant Hartford Fire Insurance Company ("Hartford") as the surety. The merchandise was subject to antidumping duties. Upon entry, the United States Customs Service ("Customs") classified the imported merchandise under Harmonized Tariff Schedule of the United States subheading 3923.29, requiring a duty of 3% ad valorem under a countervailing duty order. However, upon liquidation Customs reclassified the imported goods under subheading 3923.21, dutiable at 84.78% ad valorem under an antidumping duty order. In February 2006, Customs issued a formal demand to Hartford to pay the duties.

Hartford alleged that its bond was unenforceable because the Continued Dumping and Subsidy Offset Act of 2000 ("CDSOA" or "Byrd Amendment"), 19 U.S.C. § 1675c (repealed 2006), altered the distribution of collected duties, and because it was not obligated to pay a subsidy to the U.S. domestic industry. Before the Byrd Amendment, collected duties were placed into the general treasury. Pursuant to the Act however, upon liquidation of the dutiable goods, collected duties were placed into special accounts within the general treasury for disbursement on each antidumping duty or countervailing duty order. 19 U.S.C. § 1675c(e); 19 C.F.R. § 159.64 (2008). These funds would be distributed out of the accounts to affected domestic producers pro rata as a "continued dumping and subsidy offset." 19 U.S.C. § 1675c(a). Hartford claimed that this change in the law materially altered its bond agreements, which it claims required funds paid on the bonds to be distributed to the United States, and not to any individual or company. Hartford therefore argued that jurisdiction resided in the United States Court of International Trade pursuant to 28 U.S.C. § 1581(i) (2006) to determine the common law surety issue of the enforceability of the bonds.¹

Hartford filed suit in the Court of International Trade in March 2007 asking the court to declare the bonds unenforceable. The court held that because the true nature of the action was a challenge to a customs charge protestable under 28 U.S.C. § 1581(a),² jurisdiction pursuant to 28 U.S.C. § 1581(i) was not available unless Hartford showed that section 1581(a) was "manifestly inadequate." The court dismissed, finding that section 1581(a) was adequate, and that Hartford should have timely pursued this administrative remedy. Hartford appealed to this court arguing that the Court of International Trade erred as a matter of law in finding jurisdiction under section 1581(a) and failing to find that section 1581(a) would have been manifestly inadequate as a vehicle for relief, rendering section 1581(i) available. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5) (2006).

DISCUSSION

"As an appellate body, we have inherent jurisdiction to determine whether a lower tribunal had jurisdiction." Interspiro USA v. Figgie Int'l, Inc., 18 F.3d 927, 930 (Fed.Cir.1994) (citing C.R. Bard, Inc. v. Schwartz, 716 F.2d 874, 877 (Fed. Cir.1983)). Because jurisdiction is an issue of law, our review is de novo. Xerox Corp. v. United States, 289 F.3d 792, 793-94 (Fed.Cir.2002).

The Court of International Trade has jurisdiction limited to specific cases enumerated in 28 U.S.C. § 1581. In subsection 1581(a), Congress set out an express scheme for administrative and judicial review of Customs' actions. Int'l Custom Prods., Inc. v. United States, 467 F.3d 1324, 1326 (Fed.Cir.2006). The system grants the court exclusive jurisdiction to hear cases contesting a protest denial in an administrative hearing before Customs pursuant to section 515 of the Tariff Act of 1930, 19 U.S.C. § 1515. Id. at 1326-27. Section 1581(i) grants the court exclusive, residual jurisdiction to hear civil actions against the United States concerning importation revenues, tariffs and duties, embargoes, and administration and enforcement of matters involving section 515 of the Tariff Act and other matters not relevant to this case. While we have previously labeled subsection 1581(i) as a "catch all provision", see, e.g., Norcal/Crosetti Foods, Inc. v. United States, 963 F.2d 356, 359 (Fed.Cir.1992), we have also consistently held that to prevent circumvention of the administrative processes crafted by Congress, jurisdiction under subsection 1581(i) may not be invoked if jurisdiction under another subsection of section 1581 is or could have been available, unless the other subsection is shown to be manifestly inadequate. Int'l Custom Prods., 467 F.3d at 1327. Therefore, "where a litigant has access to [the Court of International Trade] under traditional means, such as 28 U.S.C. § 1581(a), it must avail itself of this avenue of approach by complying with all the relevant prerequisites thereto. It cannot circumvent the prerequisites of 1581(a) by invoking jurisdiction under 1581(i)" unless such traditional means are manifestly inadequate. Am. Air Parcel Forwarding Co. v. United States, 718 F.2d 1546, 1549 (Fed. Cir.1983) (quoting Am. Air Parcel Forwarding Co. v. United States, 557 F.Supp. 605, 607 (Ct. Int'l Trade 1983)).

Jurisdiction pursuant to subsection 1581(a) is available to litigants challenging the denial of a protest under 19 U.S.C. § 1515 (2006). Protests against Customs decisions can be filed against "any clerical error, mistake of fact, or other inadvertence, whether or not resulting from or contained in an electronic transmission, adverse to the importer, in any entry, liquidation, or reliquidation, and, decisions of the Customs Service, including the legality of all orders and findings entering into the same" concerning seven enumerated matters including "(3) all charges or exactions of whatever character within the jurisdiction of the Secretary of the Treasury." 19 U.S.C. § 1514(a) (2006) (emphasis added). Absent such a protest, the Customs decision is final. Id. A protestant must file a protest of a decision, order, or finding described in subsection 1514(a) within 180 days after but not before the date of liquidation or reliquidation. Id. § 1514(c)(3).

The trial court found that Customs' 2006 demand for payment was a charge within the meaning of 19 U.S.C. § 1514(a) to which Hartford then had 180 days to protest before the action became final. Hartford does not challenge that the demand for payment was a charge. Therefore, if the claims had been timely, they could have been asserted in a protest before Customs. The protest would have offered the opportunity to present any defenses to the charge, and if the protest resulted in a denial, it would have garnered jurisdiction in the Court of International Trade pursuant to subsection 1581(a). Because Hartford could have secured jurisdiction pursuant to subsection 1581(a), the court therefore does not have jurisdiction pursuant to subsection 1581(i) to entertain a challenge to the charge without a showing that subsection 1581(a) was manifestly inadequate.

Hartford, however, argues that it is not challenging the charge in the 2006 demand for payment, but rather is asking the court to find the bonds unenforceable. Couching its claim as a contract dispute between principal, surety, and the government, it claims therefore that jurisdiction under subsection 1581(a) is not available because adjudicating the enforceability of surety bonds is outside the scope of Customs decisions protestable under to 19 U.S.C. § 1514(a).³ Instead it alleges that its claims sound in common law state suretyship and contract law, outside of Customs' authority to determine. Accordingly, it argues, this contract dispute lies solely within the broad grant of residual jurisdiction under subsection 1581(i). This argument fails for a number of reasons.

While this court has described subsection 1581(i) as a "broad residual jurisdictional provision," we have in the same breath said that "the unambiguous precedents of this court make clear that its scope is strictly limited, and that the protest procedure cannot be easily circumvented." Int'l Custom Prods., 467 F.3d at 1327 (internal quotations omitted). To prevent usurpation of the protest scheme Congress has crafted, it is of utmost importance that mere recitation of a basis for jurisdiction not be controlling. Norsk Hydro Can., Inc. v. United States, 472 F.3d 1347, 1355 (Fed.Cir.2006). Just as we must look to the true nature of the action in a district court in determining jurisdiction on appeal, the trial court was correct to look to...