Best Key Textiles Co. v. United States, Slip Op. 14 -22

• Decision Date: 25 February 2014
• Docket Number: Slip Op. 14 -22,Court No. 13-00367
• Parties: BEST KEY TEXTILES CO. LTD., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

BEST KEY TEXTILES CO. LTD., Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 14 -22 Court No. 13-00367

UNITED STATES COURT OF INTERNATIONAL TRADE

Decided: February 25, 2014

Before: R. Kenton Musgrave, Senior Judge

OPINION

[Granting motion for reconsideration and dismissing complaint.]

John M. Peterson, Maria E. Celis, Richard F. O'Neill, George W. Thompson, and Russell A. Semmel, Neville Peterson LLP of New York, NY, for the plaintiff.

Marcella Powell and Beverly A. Farrell, Trial Attorneys, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY, for the defendant. With them on the brief were Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, and Amy M. Rubin, Acting Assistant Director, International Trade Field Office. Of counsel on the briefs were Claudia Burke and Tara K. Hogan, U.S. Department of Justice, and Paula S. Smith, Attorney, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection.

Musgrave, Senior Judge: Considering the plaintiff's motion for reconsideration of that part of the prior opinion on this matter (familiarity with which is here presumed) that addresses jurisdiction under 28 U.S.C. §1581(i)(4), see Slip Op. 13-148 (Dec. 13, 2013), as well as the plaintiff's alternative motion for transfer to the U.S. District Court for the District of Columbia pursuant to 28 U.S.C. §1631, the court concludes that quality of the briefing obviates the plaintiff'smotion for oral argument thereon. Opposition from the defendant U.S. Customs and Border Protection ("Customs" or "CBP") contends that the prior decision is correct on the plaintiff's lack of prudential standing to raise the claims it attempts to advance here. The court agrees it is "highly questionable" whether a Customs' ruling that lowers the rate of duty on a product the plaintiff has no expressed intention of importing can result in aggrievement or adverse effect to the plaintiff,¹ either directly or under a "zone of interests" analysis, as intended under the Administrative Procedure Act ("APA"). See 5 U.S.C. §702; Clarke v. Securities Industry Ass'n, 479 U.S. 388, 395 (1987) ("it was [never] thought . . . that Congress, in enacting § 702, had . . . intended to allow suit by every person suffering injury in fact"). While the court stands by its prior ruling in general, it is, nonetheless, the plaintiff's product that is the subject of the ruling at issue, and the court has undoubted exclusive jurisdiction over the general administration and enforcement of this type of matter in 28 U.S.C. §1581(i)(4). The court will therefore presume Customs' ruling "reviewable," see Clarke, 479 U.S. at 399, and the complaint's allegation of "aggrievement" sufficient to invoke jurisdiction under section 1581(i)(4). See 5 U.S.C. §702; 28 U.S.C. §2640(e); see also id. The prior judgment and that portion of the opinion addressing jurisdiction under section 1581(i)(4) are therefore vacated and hereby replaced, and the motions for transfer and oral argument are denied as moot. This opinion addresses the merits of the plaintiff's complaint.

I. Background; Standard of Review

By way of brief background, Customs conducted a revocation ruling proceeding in accordance with 19 U.S.C. § 1625(c). The proceeding resulted in issuance of Headquarters RulingLetter HQ H202560, dated September 17, 2013 ("Revocation Ruling" or "RR"), which revoked New York Ruling Letter ("NY") N187601 (Oct. 25, 2011) ("Yarn Ruling"). The Yarn Ruling had classified the plaintiff's proprietary "BKMY" yarn under heading 5605, Harmonized Tariff Schedule of the United States ("HTSUS"), as "metalized" yarn dutiable at 13.2% ad valorum. The Revocation Ruling's replacement of the Yarn Ruling holds that BKMY is not a metalized yarn of heading 5605 but a polyester yarn dutiable at 8% ad valorum.

The issue before Customs, during the formal notice-and-comment revocation proceeding and the less formal Yarn Ruling request, was the proper statutory classification of the imported yarn for customs duty purposes. This inquiry required (1) ascertaining the proper meaning of specific terms in relevant tariff provisions, which is a question of law; and (2) determining whether the article comes within the description of such terms as properly construed, which is a question of fact. See, e.g., Park B. Smith, Ltd. v. United States, 347 F.3d 922 (Fed. Cir. 2003). These questions implicate the proper standard of judicial review on the matter as it now stands.

On an ordinary sui generis classification question, by trial before the court, Customs is entitled to a presumption of correctness on its findings of fact, and review of its interpretation of relevant statutes is de novo. 28 U.S.C. § 2639(a)(1); see, e.g., Jarvis Clark Co. v. United States, 733 F.2d 873 (1984). The plaintiff argues that even though this case involves a pre-importation ruling, it is the court's obligation to find the "correct decision" to its product's classification pursuant to Jarvis Clark,² which it avers "does not involve or change the standard of review, but is merely amatter of procedure and remedy." Pl's Reply at 11. The court always endeavors to reach the "correct decision" -- even apart from Jarvis Clark -- but be that as it may, this is not an "ordinary" classification case. It is, of course, a review of an administrative record involving the administrative interpretation of the tariff statutes and the facts as they have been mustered before the agency. Such a proceeding is clearly governed by the scope and standard of judicial review of the Administrative Procedure Act ("APA") applicable to the court's residual jurisdiction rather than the evidentiary burdens of proof allocated in 28 U.S.C. §2639. See 5 U.S.C. § 706; 28 U.S.C. § 2640(e); Shakeproof Indus. Prods. Div. of Ill. Tool Works v. United States, 104 F.3d 1309, 1313 (Fed. Cir. 1997).

Section 706 of the APA provides in relevant part that "[t]o the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, . . ." and "hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. §706.³ An agency rule would "normally" be arbitrary and capricious "if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runscounter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." Motor Vehicle Mfrs. Ass'n. v. State Farm Mut., 463 U.S. 29, 43 (1983). In such a review, factual assertions in pleadings and briefs that are not a part of the administrative record must be ignored by the court. See, e.g., Jinan Yipin Corp., Ltd. v. United States, 35 CIT ___, 800 F. Supp. 2d 1226, 1264 n.48 (2011).

The "arbitrary and capricious" standard of review is "highly deferential," as the parties agree. Def's Resp. at 17, Pl's Reply at 9. See, e.g., Boltex Mfg. Co. v. United States, 24 CIT 972, 978, 140 F. Supp. 2d 1339, 1346 (2000) ("[i]t is well-settled that the arbitrary and capricious standard of review is not merely deferential to agency action, but the most deferential of the APA standards of review") (italics in original), referencing In re Gartside, 203 F.3d 1305, 1312 (Fed. Cir. 2000). Pursuant to this standard, the court must (1) consider whether the agency's decision was based on a consideration of relevant factors and whether there has been a clear error of judgment, and (2) analyze whether a rational connection exists between the agency's fact findings and its ultimate action. See Consolidated Fibers, Inc., v. United States, 32 CIT 24, 33-36, 535 F. Supp. 2d 1345, 1353-54 (2008) (comparing Consolidated Bearings Co. v. United States, 412 F.3d 1266, 1269 (Fed. Cir. 2005) with In re Gartside, 203 F.3d at 1312-13); see also 3 Charles H. Koch, Jr., Administrative Law and Practice §§ 10.1[1], 10.3, 10.4, 10.6 (2d ed. 1997 & Supp. 2006).

As above indicated, Customs' revocation rulings are conducted through formal notice and comment procedure. They therefore would appear to be not simply "interpretations contained in policy statements, agency manuals, and enforcement guidelines"⁴ beyond the "pale" of theChevron deference generally accorded to agency interpretations of statutes the agency is charged with administering. Cf. Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984) with Cathedral Candle Co. v. U.S. Intern. Trade Comm'n, 400 F.3d 1352, 1361 (Fed. Cir. 2005) ("[n]ormally, courts accord Chevron deference when Congress has authorized the administrative agency 'to engage in the process of rulemaking or adjudication that produces regulations or rulings for which deference is claimed'"), quoting Mead, 533 U.S. at 229; see also 5 U.S.C. §§ 551(4)&(5) (defining "rulemaking" as the "agency process for formulating, amending, or repealing a rule," and a rule is defined as "an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy").

However, the court remains mindful of Heartland By-Products, Inc. v. United States, 264 F.3d 1126 (Fed. Cir. 2001), which essentially declared that revocation rulings are in the same class of Customs' "rulings" that are to be afforded the so-called "deference" of Skidmore v. Swift & Co., 323 U.S. 134 (1944). 264 F.3d at 1135. See Mead, 533 U.S. at 228, 235; see, e.g., Warner-Lambert Co. v. United States, 425 F.3d 1381, 1384 (2005); Rocknel Fastener, Inc. v. United States, 267 F.3d 1354, 1357 (2001). Skidmore requires "respect" for the thoroughness evident in the administrative ruling, for the validity of the reasoning that led to the...