American Air Parcel Forwarding Co., Ltd. v. U.S.

• Decision Date: 14 October 1983
• Docket Number: No. 83-716,83-716
• Parties: , 2 Fed. Cir. (T) 1 AMERICAN AIR PARCEL FORWARDING COMPANY, LTD., a Hong Kong Corporation; and E.C. McAfee Company, a Michigan Corporation, for the Account of American Air Parcel Forwarding Company, Ltd., Appellants, v. UNITED STATES of America: the Secretary of the Treasury; United States Customs Service; the Commissioner of Customs, United States Customs Service; the Assistant Commissioner of Customs (Commercial Operations), United States Customs Service; Director Office of Regulations and Rulings, United States Customs Service; and District Director of Customs, United States Customs Service, Detroit, Michigan, Jointly and Severally, Appellees. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 1546

718 F.2d 1546

5 ITRD 1129, 2 Fed. Cir. (T) 1

AMERICAN AIR PARCEL FORWARDING COMPANY, LTD., a Hong Kong

Corporation; and E.C. McAfee Company, a Michigan

Corporation, for the Account of American

Air Parcel Forwarding Company, Ltd., Appellants, v. UNITED STATES of America: the Secretary of the Treasury;

United States Customs Service; the Commissioner of Customs,

United States Customs Service; the Assistant Commissioner

of Customs (Commercial Operations), United States Customs

Service; Director Office of Regulations and Rulings, United

States Customs Service; and District Director of Customs,

United States Customs Service, Detroit, Michigan, Jointly

and Severally, Appellees.

Appeal No. 83-716.

United States Court of Appeals, Federal Circuit.

Oct. 14, 1983.

Jonathan Miller, of Southfield, Mich., and Richard A. Kulics, of Centerline, Mich., argued for appellants.

Joseph I. Liebman, of New York City, argued for appellee. With him on the brief were J. Paul McGrath, Asst. Atty. Gen., David M. Cohen, Director, Washington, D.C., and Susan Handler-Menahem, New York City.

Before FRIEDMAN and NIES, Circuit Judges, and SKELTON, Senior Circuit Judge.

NIES, Circuit Judge.

This is an appeal from a final order of the United States Court of International Trade, 557 F.Supp. 605 (C.I.T.1983), dismissing an action in which appellant importers challenge the basis on which the United States Customs Service has made and is making its valuation of made-to-measure clothing produced in Hong Kong. The Court of International Trade held that jurisdiction over the action could not be founded on 28 U.S.C. Sec. 1581(h) and (i) as asserted by the importers. We affirm.

Background

American Air Parcel Forwarding Company, Ltd., a Hong Kong corporation, is a foreign freight consolidator which handled shipments from Hong Kong to the United States of made-to-measure clothing which is the subject of this action.

E.C. McAfee Company is a customshouse broker and is the importer of record of the 12 entries listed in an attachment to the pleadings.

The facts of the transactions are disputed by the parties and we will say only that the subject clothing is custom made by tailors in Hong Kong for individual U.S. customers who order the merchandise in the United States through salesmen for Hong Kong distributors.

The present appeal stems from the efforts of appellants (collectively "importers") to bar the assessment of duty based on the sales price paid by the United States consumer (approximately $200.00). Importers assert that the valuation must be based on the payment in Hong Kong by the distributors to tailors for "cut, make and trim" operations plus the cost of material (approximately $75.00).

While only 12 specific entries are identified in an attachment to the pleadings, appellants assert that hundreds of additional unliquidated entries, as well as future importations, are the subject of the complaint. The complaint itself is couched in broad terms of seeking "review of the arbitrary and capricious revocation of a ruling issued by the U.S. Customs Service and the arbitrary and capricious refusal by that agency and its representatives to rescind that revocation." Jurisdiction is asserted under 28 U.S.C. Sec. 1581(h) and (i)(4). ¹

With respect to the identified shipments, these entries were made in Detroit between March 3, 1980, and August 1, 1980, by McAfee, for the account of Air Parcel, who paid estimated duties based on the Hong Kong transactions. Air Parcel billed only this amount to the U.S. consumer in addition to the charge for the merchandise. Apparently other Customs field offices proposed to assess identical merchandise at the price paid by U.S. consumers on the ground that there was no "sale" in Hong Kong within the meaning of the applicable statute. In January 1980 the District Director of Detroit, Michigan, at the behest of the importers, initiated a request for internal advice from the Office of Regulation and Rulings. Based on representations by the importers as to the facts of the Hong Kong apparel trade, the response was made on October 17, 1980, with certain provisos, that:

Holding.--On the basis of the information provided, it is our opinion that the sales between the tailors and distributors in Hong Kong of made-to-measure clothing are appropriate for establishing export value under the new law ....

This holding is denominated TAA # 10 and was published in the Customs Bulletin on March 11, 1981.

On March 12, 1981, the San Francisco District Director requested Customs Headquarters (Director, Classification and Value Division) to reconsider the holding in TAA # 10.

On July 23, 1981, the Customs Service issued a response to the request for reconsideration, affirming TAA # 10, but advising that an investigation to verify the facts upon which the ruling was based had been initiated.

In September 1981 the investigation was completed and the Office of Regulation and Rulings concluded that the trade patterns in the Hong Kong made-to-measure clothing industry conflicted with the pattern stated in the request for internal advice. On September 9, 1981, a telex was transmitted to Customs offices stating the above conclusion and requiring the assessment of duties on the basis of the price paid by the U.S. consumer.

On October 19, 1981, the Customs Service advised Air Parcel by letter that TAA # 10 was revoked pursuant to 19 CFR Sec. 177.9(d) and that, pursuant to 19 CFR Sec. 177.9(d)(2)(ii), the revocation was retroactive. This retroactive revocation is the heart of the controversy.

In November 1981 the 12 identified entries were liquidated with duties being assessed on the price paid by U.S. consumers. A protest was duly filed by McAfee on February 1, 1982. On February 4, 1982, no action having been taken on the protest and no payment having been made of liquidated duties, the importers filed a complaint in the Court of International Trade, followed by a motion for preliminary injunction seeking, inter alia, cancellation of these liquidations and reinstatement of TAA # 10. The Government moved to dismiss for lack of jurisdiction. The court denied the motion to dismiss and granted the motion for a preliminary injunction on August 31, 1982. Within a few days thereafter, the Court of Customs and Patent Appeals handed down a decision in United States v. Uniroyal, Inc., 687 F.2d 467 (CCPA 1982), defining the scope of jurisdiction of the Court of International Trade under 28 U.S.C. Sec. 1581(h) and (i). On the basis of this decision, the court granted the Government's renewed motion to dismiss and dissolved the injunction by order of January 19, 1983. The importers appeal from this order.

Importers allege that as a practical matter they are unable to collect additional duties from U.S. consumers after merchandise is delivered inasmuch as cost of collection exceeds the amount involved. Because of the revocation of TAA # 10, and the greatly increased duties it must pay on hundreds of entries, Air Parcel asserts that it has been driven into bankruptcy.

I

The Court of International Trade, in holding that 28 U.S.C. Sec. 1581(i) did not grant jurisdiction to the court over the complaint, provided the following analysis:

Reviewing 28 U.S.C. Sec. 1581(i), frequently referred to as the residual or "catch-all" jurisdiction provision, the court finds no legislative intent to grant a litigant use of this forum where the litigant has failed to exhaust the avenue of protest and denial before the Customs Service and payment of liquidated duties. In the leading case recently issued by the United States Court of Customs and Patent Appeals, (now the United States Court for the Federal Circuit), the court succinctly stated:

Nevertheless, the legislative history of the Customs Courts Act of 1980 demonstrates that Congress did not intend the Court of International Trade to have jurisdiction over appeals concerning completed transactions when the appellant had failed to utilize an avenue for effective protest before the Customs Service.

The United States v. Uniroyal, Inc., 687 F.2d 467, 471 ( [CCPA] 1982).

It is judicially apparent that where a litigant has access to this court under traditional means, such as 28 U.S.C. Sec. 1581(a), it must avail itself of this avenue of approach complying with all the relevant prerequisites thereto. It cannot circumvent the prerequisites of 1581(a) by invoking jurisdiction under 1581(i) ....

557 F.Supp. at 607.

The above interpretation of the Uniroyal decision is entirely correct. Importers argue, however, that the Uniroyal holding itself recognizes that the traditional avenue of protest and appeal under Sec. 1581(a) need not be utilized if it does not provide an "effective" remedy, supra, or if "inadequate as a matter of due process." (687 F.2d at 475 Nies, J., concurring).

Importers assert that the Sec. 1581(a) remedy is ineffective, as a matter of due process, in three well defined areas: (1) where a complaint raises a constitutional question, (2) where the Customs regulations have built unconscionable delay into the protest and review procedures, and (3) where procedures to safeguard the rights of the public are violated.

A

In essence, the constitutional issue asserted by importers is that there is a denial of due process whenever an agency fails to follow either a statute or a regulation which has the force of law. "Unlawful actions" by the Government, in the importers' view, "are a direct violation of the Constitution." The importers cite no authority for their proposition nor propose any limitation, and we find the importers' thesis basically unsound. Every instance in which the Government fails to act in accordance with a statute or regulation does not raise a constitutional issue. Indeed, the purpose of judicial review in customs cases is to determine the correctness of governmental action. Thus, the "exception" to the holding of Uniroyal which the importers seek to create appears to u...