Aviall of Texas, Inc. v. US

Decision Date05 August 1994
Docket NumberCourt No. 92-12-00840. Slip Op. 94-125.
Citation18 CIT 727,861 F. Supp. 100
PartiesAVIALL OF TEXAS, INC., Plaintiff, v. The UNITED STATES, Defendant.
CourtU.S. Court of International Trade

Law Offices of Michael P. Maxwell, Michael P. Maxwell, Los Angeles, CA, for plaintiff.

Frank W. Hunger, Asst. Atty. Gen., Joseph I. Liebman, Attorney in Charge, Intern. Trade Field Office, Commercial Litigation Branch, Civil Div., U.S. Dept. of Justice, Saul Davis, Washington, DC, for defendant.

Grunfeld, Desiderio, Lebowitz & Silverman, Jonathan M. Fee, David M. Murphy, New York City, for amicus curiae, Gulfstream Aerospace Corp.

OPINION

MUSGRAVE, Judge.

Plaintiff initiated this action to challenge Customs' refusal to reliquidate thirty entries of parts of jet engines and other parts of civil aircraft. Plaintiff moves for summary judgment pursuant to Rule 56 of the Rules of the United States Court of International Trade. Defendant cross-moves for summary judgment. The Court has jurisdiction under 28 U.S.C. § 1581(a) and, for the reasons which follow, enters judgment for plaintiff.

Background

Aviall of Texas, Inc. ("Aviall") is in the business of repairing aircraft engines and engine parts; and selling or leasing engines. Aviall also sells new aircraft parts. Aviall's business is limited to dealing in aircraft engine parts, and related aircraft parts used in civil aircraft. These parts have been entered free of duty pursuant to the Agreement on Trade in Civil Aircraft ("ATCA") which is set forth in General Note 3, HTSUS, and implemented by 19 C.F.R. § 10.183.1

Since 1981 Aviall has imported engines and engine parts which were intended for use and were actually used as parts of civil aircraft in the subject entries. Aviall's broker filed a blanket certification on November 7, 1989 with the U.S. Customs Service ("Customs") District Director in Dallas as required for duty free treatment under the regulation implementing the ATCA. See Defendant's Exhibit A, letter of September 24, 1992 (from Radix Group International, Inc.). This blanket certification is authorized by 19 C.F.R. § 10.183(c)(2) and is valid for one year pursuant to the terms of that regulation. Aviall alleges that through inadvertence its broker forgot to renew the blanket certification,2 though importations of civil aircraft parts continued. At the time of entry, Aviall submitted entry summaries which claimed duty-free treatment setting forth HTSUS headings preceded by the designation "C" as required in General Note 3(c)(iv), HTSUS.3 Several months later, Customs found that the blanket certification had expired. The import specialist liquidated the subject entries for an advance of duty, and denied duty free treatment because the blanket certification of use as civil aircraft parts on file had not been timely renewed.

Aviall filed timely protests regarding the subject liquidations pursuant to 19 U.S.C. § 1514. Aviall supported its protests with entry-by-entry certifications to cover all the subject merchandise, in addition to promptly filing an annual blanket certification. These protests noted that the blanket certification was not renewed due to clerical error. See 19 U.S.C. § 1520(c)(1).4 The import specialist denied the protests based on the perceived failure by Aviall to provide proper evidence of any real clerical error.5

Aviall raises two principal claims against Customs' treatment of its merchandise. First, Aviall argues that it complied with 19 C.F.R. § 10.183 by filing a written, approved blanket certification as required by the regulation. The fact that this blanket certification expired does not result in a "missing document," but merely results in the blanket certification on record being defective. Moreover, Aviall argues that this defect is curable by the terms of 19 U.S.C. §§ 1514, 1520(c)(1), and 19 C.F.R. § 10.112.6

Second, Aviall argues that the regulation, as interpreted, denies the statutory right of protest and the regulatory right to submit documents under 19 C.F.R. 10.112, and as such is invalid because it was not only duly promulgated pursuant to the Federal Register Act. See 5 U.S.C. § 553(b)(3). Amicus curiae Gulfstream Aerospace Corporation supports Aviall's position regarding Customs' refusal to reliquidate the entries. Amicus curiae argues that 19 C.F.R. § 10.183 is invalid in part, and that late filing is permitted under 19 C.F.R. § 10.112 and 19 U.S.C. § 1514.

Customs responds that the protests were properly denied due to Aviall's failure to provide proper evidence of clerical error. Customs asserts that the failure to renew the blanket certification was due to "negligent inaction" which could not be cured by the submission of entry-by-entry certifications dated after the time of entry. Customs further argues that the regulations found at 19 C.F.R. § 10.183 were a valid interpretation of congressional intent and that the regulations were duly promulgated.

Discussion

This case is before the Court on cross-motions for summary judgment. Under the rules of this Court, summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." USCIT R. 56(d). The Court will deny summary judgment if the parties present "a dispute about a fact such that a reasonable trier of fact could return a verdict against the movant." Ugg Int'l, Inc. v. United States, 17 CIT ___, ___, 813 F.Supp. 848, 852 (1993) (quotation and citation omitted). "In assessing the parties' claims, the Court must resolve all ambiguities and draw all reasonable inferences in favor of the party opposing summary judgment." Id.

This case does not present any genuine issue of material fact, certainly none of the facts are disputed, nor are there any claimed facts which would be enlarged upon or further explained by trial and cross-examination. The dispositive issues to be resolved are legal in nature. Because these issues are legal in nature, the Court concludes the parties' conflict raises questions of law which the Court may properly resolve by summary judgment.

The Court begins its review by examining the underlying legality of 19 C.F.R. § 10.183. The Federal Register Act requires that substantive rules be published in the Federal Register no less than 30 days prior to their effective date. Section 4(b)(3) of the APA, 5 U.S.C. § 553(b)(3), provides in relevant part:

General notice of proposed rulemaking shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law. The notice shall include —
* * * * * *
(3) either the terms or substance of the proposed rule or a description of the subjects and issues involved.

There appears to be no dispute over the applicability of the notice-and-comment requirement to the contested regulation. Rather, the dispute centers on whether the notice set forth in the notices of proposed rulemaking was adequate.

It is elementary that a final rule need not be identical to the original proposed rule. "The whole rationale of notice and comment rests on the expectation that the final rules will be somewhat different — and improved — from the rules originally proposed by the agency." Trans-Pacific Freight Conference v. Federal Maritime Commission, 650 F.2d 1235, 1249 (D.C.Cir.1980), cert. denied, 451 U.S. 984, 101 S.Ct. 2315, 68 L.Ed.2d 840 (1981). However, "where the change between the proposed and final rule is important, the question for the court is whether the final rule is a `logical outgrowth' of the rulemaking proceeding." United Steelworkers v. Marshall, 647 F.2d 1189, 1221 (D.C.Cir.1980), cert. denied sub nom. Lead Industries Ass'n, Inc. v. Donovan, 453 U.S. 913, 101 S.Ct. 3148, 69 L.Ed.2d 997 (1981). "If the final rule deviates too sharply from the proposal, affected parties will be deprived of notice and an opportunity to respond to the proposal." Small Refiner Lead Phase-Down Task Force v. United States Environmental Protection Agency, 705 F.2d 506, 547 (D.C.Cir.1983).

A determination of whether notice was adequate in this case turns, then, on an examination of the notice which the Secretary provided in relation to the final rule which was ultimately adopted. The ATCA was enacted into law by Section 601 of P.L. 96-39. As set forth in the HTSUS (19 U.S.C. § 1202), the Agreement provides:

(iv) Articles Eligible for Duty-Free Treatment Pursuant to the Agreement on Trade in Civil Aircraft.
Whenever a product is entered under a provision for which the rate of duty "Free (C)" appears in the "Special" subcolumn, the importer shall file a written statement, accompanied by such supporting documentation as the Secretary of the Treasury may require, with the appropriate customs officer stating that the imported article has been imported for use in civil aircraft, that it will be so used and that the article has been approved for such use by the Administrator of the Federal Aviation Authority (FAA) or by the airworthiness authority in the country of exportation, if such approval is recognized by the FAA as an acceptable substitute for FAA certification, or that an application for approval for such use had been submitted to, and accepted by, the Administrator of the FAA. For purposes of the tariff schedule, the term "civil aircraft" means all aircraft other than aircraft purchased for use by the Department of Defense or the United States Coast Guard.

General Note 3(c)(iv), HTSUS.

Following enactment of P.L. 96-39, Customs promulgated regulations to implement the Act. On August 8, 1980, Customs published its Notice of Proposed Rulemaking ("NPRM") in the Federal Register for notice and comment. The NPRM provided:

(c) Documentation
At the time of filing the entry summary, the importer shall submit
...

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