ARP Materials, Inc. v. United States

• Decision Date: 11 June 2021
• Docket Number: Court No. 20-00144,Slip Op. No. 21-73, Court No. 20-00147
• Citation: 520 F.Supp.3d 1341
• Court: U.S. Court of International Trade
• Parties: ARP MATERIALS, INC., Plaintiff, v. UNITED STATES, Defendant. The Harrison Steel Castings Co., Plaintiff, v. United States, Defendant.

520 F.Supp.3d 1341

ARP MATERIALS, INC., Plaintiff,

v.UNITED STATES, Defendant.

The Harrison Steel Castings Co., Plaintiff,

v.United States, Defendant.

Slip Op. No. 21-73

Court No. 20-00144

Court No. 20-00147

United States Court of International Trade.

June 11, 2021

Jamie L. Shookman, Trial Attorney, Commercial Litigation Branch, Jeffrey Bossert Clark, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and L. Misha Preheim, Civil Division, U.S. Department of Justice of New York, NY, on the briefs for Defendant. Of counsel on the briefs were Philip Butler, Associate General Counsel, Office of General Counsel, Office of the U.S. Trade Representative of Washington, DC, and Paula Smith, Assistant Chief Counsel, Edward Maurer, Deputy Assistant Chief Counsel, and Valerie Sorensen-Clark, Attorney, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection of New York, NY.

Christopher M. Kane, Daniel J. Gluck, and Mariana del Rio Kostenwein, Simon Gluck & Kane LLP of New York, NY, on the brief for Plaintiffs.

Baker, Judge:

In these cases, two importers invoke 28 U.S.C. § 1581(i) —a jurisdictional grant of last resort—seeking to compel refunds of retaliatory tariffs that the U.S. Trade Representative imposed on their goods from China and then later rescinded. The USTR's rescission of the tariffs rendered U.S. Customs and Border Protection's classification of these goods (as subject to the tariffs) erroneous.

Based on the USTR's rescission of the retaliatory tariffs, one of the importers timely protested Customs’ classification decision as to certain of the goods in question. Customs duly reclassified the goods as exempt from the tariffs and the importer received a refund after this litigation began. As to those goods, the importer's refund claim is moot and the court lacks constitutional subject-matter jurisdiction.

As to the remaining goods at issue in these suits, the importers could have timely protested Customs’ classification decisions. If Customs had denied such protests, the importers then could have sought relief in this court by invoking its jurisdiction under § 1581(a). The importers, however, failed to timely protest Customs’ classification decisions. Because jurisdiction would have existed under § 1581(a) had the importers timely protested, the court lacks statutory subject-matter jurisdiction under § 1581(i). The court therefore grants the government's motion to dismiss.

Statutory and Regulatory Background

A. The classification of imported goods

Goods imported into the United States are subject to a process known as "classification." This statutorily-mandated process requires Customs to determine where such goods fit into the Harmonized Tariff Schedule of the United States (HTSUS), 19 U.S.C. § 1202. See 19 U.S.C. § 1500(b) (requiring Customs to "fix the final classification and rate of duty applicable to [imported] merchandise").

The HTSUS is a systematic organizational code of headings and subheadings: "[T]he headings set forth general categories of merchandise, and the subheadings provide a more particularized segregation of the goods within each category." Wilton Indus., Inc. v. United States , 741 F.3d 1263, 1266 (Fed. Cir. 2013). In effect, the HTSUS is for imported goods what the Dewey Decimal System is for library books.

In classifying imported goods for tariff purposes, Customs assigns them to an HTSUS subheading code, which determines the applicable duty rate. See Alexander W. Koff, Tina Potuto Kimble, & Gus Coritsidis, "International Trade Disputes," in International Aspects of U.S. Litigation, A Practitioner's Deskbook 934 (2017). Customs’ determination of which HTSUS subheading to assign is critical because the applicable duty, or tariff, can vary considerably depending on which HTSUS subheading applies. See id. at 934 n.66. Customs assigns the HTSUS code applicable to the import on the date of entry. 19 C.F.R. § 141.69.¹

By statute, "decisions of [Customs], including the legality of all orders and findings entering into the same," as to, inter alia , "the classification and rate and amount of duties chargeable," even if that decision is erroneous, "shall be final and conclusive upon all persons ... unless a protest is filed in accordance with this section, or unless a civil action contesting the denial of a protest, in whole or in part, is commenced in the United States Court of International Trade" in a timely fashion. 19 U.S.C. § 1514(a)(2). A protest, including a protest challenging a classification, see 19 C.F.R. § 174.11 (permitting protests as to "[t]he classification and rate and amount of duties chargeable"), "shall be filed with [Customs] within 180 days after but not before—(A) date of liquidation or reliquidation." 19 U.S.C. § 1514(c)(3)(A).

"Liquidation" refers to the process by which an importer's liability is fixed based on duties owed upon the date of entry. Upon entry of goods, the importer must deposit estimated duties and fees with Customs. Subsequently, Customs "liquidates" the entry to make a "final computation or ascertainment of duties owed" on that entry of merchandise. 19 C.F.R. § 159.1 ; see also 19 U.S.C. § 1500.

Liquidation also necessarily includes Customs’ final determination regarding classification of that entry of merchandise. See Corporate Counsel's Guide to Importation Under the U.S. Customs Law § 1:112 (2020); see also Chemsol, LLC v. United States , 755 F.3d 1345, 1350 (Fed. Cir. 2014) ("This court has confirmed that liquidation is the final challengeable event and findings related to liquidation ... merge with the liquidation.") (cleaned up); Volkswagen of Am., Inc. v. United States , 532 F.3d 1365, 1370 (Fed. Cir. 2008) (characterizing circuit precedent as standing for the proposition that "all aspects of entry [are] merged in the liquidation") (citing United States v. Utex Int'l, Inc. , 857 F.2d 1408, 1409–10, 1412 (Fed. Cir. 1988) ). Liquidation normally occurs within one year of entry, though it may occur later under certain circumstances. 19 C.F.R. § 159.12.

Following liquidation, Customs either collects any additional amounts due, with interest, if the importer's deposit was lower than the final assessment or refunds any excess deposit, with interest, if the deposit was higher than the final assessment. 19 U.S.C. § 1505(b). Thus, the protest statute requires that if an importer believes Customs made a mistake by classifying its goods under the wrong HTSUS code, the importer must file a protest within 180 days after Customs liquidates the entry (thus fixing the final amount due) or else lose the right to challenge the classification. See 19 U.S.C. § 1514(a)(2).

A protest challenging classification may lead to "reliquidation." As the term implies, reliquidation means Customs re-assesses the duties and fees due. If Customs grants the protest and reclassifies the entry under an HTSUS code subject to a lower rate of duty, Customs must recalculate the amount due—hence, "reliquidation."

B. The USTR's imposition of Section 301 duties

Section 301 of the Trade Act of 1974 authorizes the USTR to take various actions to protect U.S. interests when foreign trade partners violate trade agreements or otherwise take actions adverse to U.S. trade interests. See 19 U.S.C. § 2411(a)(1). Pursuant to this authority, in 2017 the USTR undertook a Section 301 investigation of Chinese trade practices.

Initiation of Section 301 Investigation; Hearing; and Request for Public Comments: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 82 Fed. Reg. 40,213, 40,213 (USTR Aug. 24, 2017).

After finding that China's conduct was actionable under the statute, the USTR proposed an additional 25 percent ad valorem duty on various products imported from that country. Notice of Determination and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 83 Fed. Reg. 14,906, 14,907 (USTR Apr. 6, 2018).

The USTR later imposed Section 301 tariffs on goods from China via a series of "tranches," or "lists," referred to as List 1 through List 4B. The USTR imposed the tariffs by inserting new subheadings into the HTSUS to encompass the articles on the lists. See, e.g. , Notice of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation , 83 Fed. Reg. 40,823, 40,825 (USTR Aug. 16, 2018) (inserting subheading 9903.88.02 as part of the List 2 process). These cases involve Lists 2² and 3.³

The USTR's imposition of Section 301 duties was not self-executing, however. To effectuate these duties as to any given entry of imports, Customs first had to classify the entries under the applicable HTSUS subheadings. Any importer that contended Customs erroneously classified its imports under the subheadings subject to Section 301 tariffs could, after the entries liquidated, protest such classification as discussed above.

C. The USTR's retroactive exclusions from Section 301 duties

The USTR's notices of Section 301 duties also stated that importers could request that specific products classified within an affected tariff heading be excluded (that is, exempted) from such duties. See 83 Fed. Reg. at 40,824 (List 2) ;⁴ 84 Fed. Reg. at 20,460 (List 3).⁵

The notices directed importers seeking exclusions to identify "the particular product in terms of the physical characteristics ... that distinguish it from other products within the covered 8-digit subheading," and noted that the USTR would "not consider [exclusion] requests that identif[ied] the product at issue in terms of the identity of the producer, importer, ultimate consumer, actual use or chief use, or trademark or trade-names." 83 Fed. Reg. at 47,236 –37.

For both the List 2 and List 3 processes, the USTR posted web pages...