B-West Imports, Inc. v. US

• Court: U.S. Court of International Trade
• Writing for the Court: RESTANI
• Citation: B-West Imports, Inc. v. US, 880 F. Supp. 853, 19 CIT 303 (Ct. Int'l Trade 1995)
• Decision Date: 24 February 1995
• Docket Number: Slip Op. 95-28. Court No. 94-06-00371.
• Parties: B-WEST IMPORTS, INC., Hing Long Trading Co., K-Sports Imports, Inc., Eagle Exim, Inc., Briklee Trading Co., Century Arms, Inc., Intrac Corporation, Northwest Imports, J's Pacific Enterprise, Inc. and Sportsarms of Florida, Plaintiffs, v. UNITED STATES, et al., Defendants.

880 F. Supp. 853

19 CIT 303

B-WEST IMPORTS, INC., Hing Long Trading Co., K-Sports Imports, Inc., Eagle Exim, Inc., Briklee Trading Co., Century Arms, Inc., Intrac Corporation, Northwest Imports, J's Pacific Enterprise, Inc. and Sportsarms of Florida, Plaintiffs, v. UNITED STATES, et al., Defendants.

Slip Op. 95-28. Court No. 94-06-00371.

United States Court of International Trade.

February 24, 1995.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

O'Connor & Hannan (Donald R. Dinan, William W. Nickerson and Craig A. Koenigs), for plaintiffs.

Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice (Jeffrey M. Telep), Bradley A. Buckles, Imelda Koett and Teresa Ficaretta, Bureau of Alcohol, Tobacco & Firearms, U.S. Dept. of Treasury, of counsel, Orde Kittrie, Atty. Advisor, Office of the Legal Advisor, U.S. Dept. of State, of counsel, Ellen McClain, Office of Chief Counsel, U.S. Customs Service, of counsel, for defendants.

OPINION

RESTANI, Judge:

This action is before the court on cross-motions for summary judgment made pursuant to USCIT Rule 56 by defendants United States, et al., and plaintiffs B-West Imports, Inc., Hing Long Trading Co., K-Sports Imports, Inc., Eagle Exim, Inc., Briklee Trading Co., Century Arms, Inc., Intrac Corporation, Northwest Imports, J's Pacific Enterprise, Inc. and Sportsarms of Florida. Plaintiffs, importers of munitions, challenge the decision of the Bureau of Alcohol, Tobacco & Firearms ("ATF") of the United States Department of the Treasury banning the importation of defense articles¹ from the People's Republic of China ("China") instituted under section 2778 of the Arms Export Control Act ("AECA"). 22 U.S.C. § 2778 (1988).

Facts

On May 26, 1994, President Clinton announced the renewal by the United States of Most Favored Nation trading status to China. In light of "continuing human rights abuses," however, the President declared a ban on the "import of munitions, principally guns and ammunition from China." Following the President's announcement, Secretary of State Warren Christopher issued a letter to Secretary of Treasury Lloyd M. Bentsen, advising him of the termination of China's exemption from the list of proscribed countries from which defense articles may not be imported. The letter further advised the Treasury Department to "take all necessary steps to prohibit the import of all defense articles enumerated in the U.S. Munitions List." As authority for this action, Secretary Christopher cited section 38 of the AECA, codified at 22 U.S.C. § 2778, and Executive Order No. 11,958, 42 Fed.Reg. 4311 (1977), reprinted as amended in 22 U.S.C. § 2751 note (1988) (Ex.Ord. No. 11,958. Administration of Chapter).

The United States Customs Service ("Customs") responded with an administrative notice dated May 27, 1994, ordering all "tariff commodities from China" to be detained until further notice. On May 31, 1994, Customs limited the detention to all shipments of "Chapter 93 tariff commodities² exported from China regardless of the country of origin." This was followed by a more detailed administrative notice on June 7, 1994, indicating that, as of May 28, 1994, 12:01 a.m. EDT, all articles from China on the U.S. Munitions List were prohibited from importation. Additionally, any current permits to import such articles from China were declared null and void. Defense articles imported into the United States prior to the embargo were also banned from importation if no entry had been filed with Customs, or if the articles were imported into a bonded warehouse or foreign trade zone. These articles, however, were permitted exportation back to China or the country of origin without State Department approval if returned prior to June 30, 1994. The following day, Customs issued a revised notice adding that exceptions to the embargo could be made on a case-by-case basis if a request was submitted to Customs Headquarters.³

On June 27, 1994, the ATF issued notices to affected importers advising them of the import ban and the revocation of their existing import permits. The notice informed importers that requests may be made within 30 days of receipt of the letter "for an opportunity to present additional information and to have a full review of their case by the ATF." Further, importers seeking an exception to the import ban were required to file new permit applications along with "an explanation of why the importation was in accordance with the security and foreign policy of the United States." These applications would be referred to the State Department for consideration.

Customs issued a notice dated August 5, 1994, clarifying which defense articles were subject to import restrictions under the embargo. The notice provided that those articles entered into the geographical territory of the United States⁴ on or after May 28, 1994 were subject to the import ban. Thus, defense articles within United States territory prior to that date, whether in foreign trade zones, a Customs bonded warehouse, or on a dock unentered, were not subject to import restrictions. These articles would be permitted entry, provided the importers obtained new import permits from the ATF.

The notice further provided that imported articles subject to the embargo could either be (1) returned to China or the country of origin by August 31, 1994 without State Department approval, (2) retained in a bonded warehouse until an export license was obtained if not exported prior to August 31, 1994, or (3) destroyed under Customs' supervision. The ATF issued a subsequent letter dated August 10, 1994 informing affected importers of Customs' notice and specifying the documentation to be submitted with new permit applications by importers seeking a foreign policy exception from the State Department.

Congress incorporated the terms of the embargo into the Act of Aug. 26, 1994, Pub.L. No. 103-317, § 609, 108 Stat. 1724, 1774 (1994) ("Craig Amendment"), creating an additional exception. The Craig Amendment provided relief from the import ban to those importers who possessed valid import permits before May 26, 1994, and whose products had either been "in a bonded warehouse or foreign trade zone, in port, or, as determined by the United States on a case-by-case basis, in transit."⁵ In letters issued September 6, 1994, the ATF specified the application procedures for those importers seeking relief under this additional exception.

Plaintiffs allege that (1) the AECA does not authorize the President and the administering agencies to impose an import embargo, (2) the acts by Customs and the ATF invalidating and revoking existing import licenses were ultra vires, and (3) the implementation of the embargo, with respect to "in transit" goods was arbitrary, capricious and contrary to the stated objectives of the embargo. Plaintiffs also raise constitutional claims contending the embargo violated the Due Process Clause and Takings Clause of the Fifth Amendment. Defendants oppose these contentions, additionally alleging that plaintiffs have failed to exhaust their administrative remedies.

Standard of Review

Summary judgment is appropriately granted where the pleadings and affidavits show no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. USCIT Rule 56(d); e.g., Pfaff Am. Sales Corp. v. United States, 16 CIT 1073, 1075, 1992 WL 391085 (1992).

Discussion

I. Exhaustion of Administrative Remedies

Defendants have submitted documents indicating that some or all of the plaintiffs have filed applications seeking relief from the import ban. According to defendants, the avenues of relief available to affected importers were (1) an exception granted under the Craig Amendment, (2) a foreign policy exception granted by the State Department, and (3) full review of their case by the ATF. To date, all of the plaintiffs⁶ have applied for relief under these various administrative proceedings and, although some have been granted relief for their products, many plaintiffs still have applications pending. Thus, defendants ask the court to dismiss plaintiffs' complaint for failure to exhaust its administrative remedies. The court declines to do so.

Congress has directed that this court "shall, where appropriate, require the exhaustion of administrative remedies." 28 U.S.C. § 2637(d) (1988); see, e.g., Encon Indus., Inc. v. United States, Slip Op. 94-145, at 3, 1994 WL 520917 (Sept. 19, 1994); Borusan Holding A.S. v. United States, 16 CIT 278, 284, 1992 WL 82493 (1992). Unless exhaustion of administrative remedies, however, is mandated by statute, it is within the discretion of the court to apply the exhaustion doctrine. Ceramica Regiomontana, S.A. v. United States, 16 CIT 358, 359, 1992 WL 107338 (1992); Timken Co. v. United States, 10 CIT 86, 92-93, 630 F.Supp. 1327, 1334 (1986). Thus, the court need not require exhaustion in "exceptional cases or particular circumstances ... where injustice might otherwise result," see Rhone Poulenc, S.A. v. United States, 7 CIT 133, 134-35, 583 F.Supp. 607, 609-10 (1984) (quoting Hormel v. Helvering, 312 U.S. 552, 557, 61 S.Ct. 719, 721, 85 L.Ed. 1037 (1941)), nor should exhaustion operate to prevent a reasonable opportunity to object to significant agency action. See American Maritime Ass'n v. United States, 766 F.2d 545, 566 n. 30 (D.C.Cir. 1985).

In the present case, plaintiffs are challenging a significant agency action, the import embargo, where the administrative remedies proffered to plaintiffs were not clearly delineated by the administering agencies. The bases upon which plaintiffs were to submit requests for a full review of their case by the ATF or an exception from the State Department were general and were modified or became more specific only after subsequent notices had been issued. The Craig Amendment provided yet another basis for relief from the import ban for "in transit"...