Arbor Foods Inc. v. U.S.

• Decision Date: 30 September 1996
• Docket Number: No. 95-1405,95-1405
• Citation: 97 F.3d 534
• Parties: ARBOR FOODS INCORPORATED, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 534

97 F.3d 534

18 ITRD 1743

ARBOR FOODS INCORPORATED, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

No. 95-1405.

United States Court of Appeals Federal Circuit.

Sept. 30, 1996.

Robert B. Silverman, Grunfeld, Desiderio, Lebowitz & Silverman LLP, New York City, argued, for plaintiff-appellant. With him on the brief, was David M. Murphy.

Barbara Silver Williams, Attorney, Civil Division, Commercial Litigation Branch, Department of Justice, International Trade Field Office, New York City, argued, for defendant-appellee. With her on the brief, were Frank W. Hunger, Assistant Attorney General, and David M. Cohen, Director, Washington, DC, and Joseph I. Liebman, Attorney in Charge, International Trade Field Office. Of counsel on the brief were Robert J. Heilferty, Attorney-Advisor, Office of the Chief Counsel for International Trade, U.S. Department of Commerce, and Karen P. Binder, (Acting) Deputy Assistant Chief Counsel, Office of Assistant Chief Counsel Before LOURIE, Circuit Judge, SKELTON, Senior Circuit Judge, and SCHALL, Circuit Judge.

International Trade Litigation, U.S. Customs Service.

SCHALL, Circuit Judge.

Arbor Foods Incorporated ("Arbor") appeals the April 20, 1995 decision of the United States Court of International Trade in Docket No. 93-08-0046, 885 F.Supp. 281. In its decision, the court granted summary judgment for the United States Customs Service ("Customs") in Arbor's suit against Customs challenging Customs' refusal to admit sealed containers of sugar syrup into a foreign-trade zone ("FTZ"). We affirm.

BACKGROUND

This case involves sugar syrup and FTZs. In 1982, President Reagan issued an executive proclamation that imposed a quota on the importation of raw and refined sugar. Proclamation No. 4941, 47 Fed.Reg. 19661 (1982). In 1983 and 1985, additional quotas were imposed upon various imported products that contained sugar. Proclamation No. 5071, 48 Fed.Reg. 30089 (1983); Proclamation No. 5294, 50 Fed.Reg. 4187 (1985).

FTZs are areas given advantageous treatment under the customs laws in order to expedite and encourage foreign commerce. See 19 U.S.C. §§ 81a-81u (1994); 19 C.F.R. §§ 146.0-146.96 (1996). They are located in or adjacent to ports of entry in the United States. Merchandise generally may be brought into a FTZ and manipulated and manufactured without being subject to the customs laws of the United States. See Citgo Petroleum Corp. v. United States Foreign-Trade Zones Bd., 83 F.3d 397, 400 (Fed.Cir.1996); Goodman Mfg., L.P. v. United States, 69 F.3d 505, 506 (Fed.Cir.1995); see also 19 U.S.C. § 81c.

For example, a company that ships raw materials into a foreign-trade zone, processes the raw materials into finished products, and then exports the finished products is not required to pay duties on the raw materials, as they are deemed never to have entered the customs territory of the United States. Similarly, a company that ships raw materials into the zone, manufactures finished products in the zone, and imports those products into the United States may be eligible to pay duties on the finished products rather than the (often higher) duties that would otherwise be assessed on the raw materials.

Citgo, 83 F.3d at 399.

In 1992, Arbor sought to enter drums and tank trailers of blended sugar syrup from Canada into FTZ No. 8 in Toledo, Ohio. Arbor believed that, under the statutes and regulations governing FTZs, its sugar syrup should be allowed entry into FTZ No. 8 and should therefore be exempt from quota restraints. Accordingly, on June 24, 1992, Arbor requested a binding ruling from Customs regarding the classification and quota treatment of the sugar syrup. Arbor's request stated that the syrup would be stored in the zone and then entered without modification into the United States for consumption.

Customs declined to issue the requested ruling. Instead, on December 9, 1992, Customs responded by letter: "It is our understanding that the Foreign-Trade Zones Board [ ("FTZB" or "Board") ] has concerns regarding the above proposed transaction. Consequently, you should contact the Board to determine whether or not the operation will be permitted." The FTZB is charged by statute with governing FTZs. See 19 U.S.C. § 81a(b); 15 C.F.R. §§

Page 400

1-400.53 (1996). The FTZB "consists of the Secretary of the Department of Commerce (chairman), the Secretary of the Treasury, and the Secretary of the Army, or their designated alternates." 15 C.F.R. § 400.2(b).

Arbor contacted the FTZB and explained its intention to enter sugar syrup into FTZ No. 8. On February 16, 1993, a FTZB official responded by letter that "[f]ormal FTZ Board approval would be needed before the zone use you propose could be conducted.... If you wish to submit a formal application to use the zone ..., please let me know. I must advise you, however, that based on past decisions, the FTZ would likely deny authority because of the adverse effect on the sugar quota programs."

On February 23, 1993, Arbor requested clarification of the February 16 letter. On March 2, 1993, the FTZB responded that:

FTZ Board approval would ... be needed in order for Arbor Foods to "enter blended syrups into the zone in sealed containers and, without manipulation or manufacture, enter the sealed containers of syrup into U.S. commerce from the zone." It is a type of activity that on its face would raise serious 'public interest' questions in light of the U.S. sugar program and the Board's decisions on sugar activity since the mid-1980's.

On April 16, 1993, Arbor submitted to Customs a properly executed "Application for Foreign Trade Zone Admission and/or Status Designation" requesting admission of its sugar syrup and "nonprivileged foreign" status. That same day, Customs, stating that "FTZ Board [a]pproval is required," rejected Arbor's application and refused to allow Arbor's sugar syrup to enter FTZ No. 8. A week later, Arbor filed a protest of the rejection with Customs, which Customs denied on May 24, 1993.

Arbor brought suit against Customs in the Court of International Trade, alleging that Customs' denial of its protest, and Customs' consequent refusal to allow entry of Arbor's sugar syrup into FTZ No. 8, was unlawful. ¹ The parties filed cross motions for summary judgment and the court granted Customs' motion. The court held that Customs acted lawfully in requiring Arbor to seek FTZB authorization before Customs admitted Arbor's sugar syrup, and that Customs properly denied admission of the sugar syrup into FTZ No. 8. This appeal followed.

DISCUSSION

I.

As a preliminary matter, the government argues that we should dismiss this appeal because Arbor failed to exhaust administrative remedies before filing suit in the Court of International Trade, as required by 28 U.S.C. § 2637 (1994). The government appears to make this argument based upon either part (a) or (d) of section 2637, which, respectively, in pertinent part provide as follows:

(a) A civil action contesting the denial of a protest under section 515 of the Tariff Act of 1930 may be commenced in the Court of International Trade only if all liquidated duties, charges, or exactions have been paid at the time the action is commenced,....

...

(d) In any civil action not specified in this section, the Court of International Trade shall, where appropriate, require the exhaustion of administrative remedies.

The government asserts that the agency involved in this case is the FTZB, and because the FTZB has not rendered a final decision in Arbor's case, the Court of International Trade should have dismissed the action for failure to exhaust administrative remedies. Arbor responds that the only decision at issue in this case is Customs' decision to refuse admission of Arbor's merchandise and that Customs' decision in this regard was final. Accordingly, it has exhausted its administrative remedies.

We reject the government's exhaustion argument. Arbor is seeking review of Customs' decision to require FTZB approval of Arbor's proposed entry of sugar syrup into FTZ No. 8. Arbor is not seeking review of any decision of the FTZB. There is no dispute that Customs' decision requiring FTZB approval was final. Moreover, insofar as 28 U.S.C. § 2637(a) is concerned, Customs does not argue that there were any liquidated duties, charges, or exactions owed by Arbor in relation to this protest at the time

this action was commenced. Thus, the agency involved--Customs, not the FTZB--has rendered a final decision in Arbor's case, and Arbor has exhausted its administrative remedies before Customs.

II.

We review the Court of International Trade's grant of summary judgment de novo. Norfolk & Western Ry. v. United States, 62 F.3d 1395, 1396 (Fed.Cir.1995). Under Rule 56(d) of the Rules of the United States Court of International Trade, summary judgment for the moving party is proper only if there is "no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Here, as the parties recognize, there is no genuine issue as to any material fact. Therefore, the case is "purely one of statutory interpretation over which we exercise our own independent judgment without deference to the trial court." Madison Galleries, Ltd. v. United States, 870 F.2d 627, 629 (Fed.Cir.1989).

III.

Turning to the merits, Arbor argues that 19 U.S.C. § 81c(a) and regulations promulgated pursuant to section 81c require Customs to admit Arbor's sugar syrup into FTZ No. 8 for storage. Section 81c(a) provides in pertinent part as follows:

Foreign and domestic merchandise of every description, except such as is prohibited by law, may, without being subject to the customs laws of the United States, except as otherwise provided in this chapter, be brought into a zone and may be stored, sold, exhibited, broken up, repacked, assembled, distributed, sorted, graded, cleaned, mixed with foreign or domestic merchandise or otherwise manipulated, or be...