Cyber Power Sys. (USA) Inc. v. United States

• Decision Date: 20 July 2022
• Docket Number: Slip Op. 22-85,Court No. 21-00200
• Citation: 586 F.Supp.3d 1325
• Parties: CYBER POWER SYSTEMS (USA) INC., Plaintiff, v. UNITED STATES, Defendant, United States, Counterclaimant, v. Cyber Power Systems (USA) Inc., Counterclaim Defendant.
• Court: U.S. Court of International Trade

586 F.Supp.3d 1325

CYBER POWER SYSTEMS (USA) INC., Plaintiff,

v.UNITED STATES, Defendant,United States, Counterclaimant,

v.Cyber Power Systems (USA) Inc., Counterclaim Defendant.

Slip Op. 22-85

Court No. 21-00200

United States Court of International Trade.

July 20, 2022

John M. Peterson and Richard F. O'Neill, Neville Peterson, LLP, of New York, NY, and Patrick B. Klein, Neville Peterson, LLP, of Seattle, WA, argued for plaintiff Cyber Power Systems (USA) Inc.

Beverly A. Farrell, Senior Trial Attorney, and Elisa S. Solomon, Trial Attorney, Civil Division, Commercial Litigation Branch, U.S. Department of Justice, of New York, NY, argued for defendant United States. Also on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General, Patricia M. McCarthy, Director, and Justin R. Miller, Attorney-in-Charge, International Trade Field Office.

OPINION AND ORDER

Kelly, Judge:

Before the court is Plaintiff/Counterclaim Defendant Cyber Power Systems (USA) Inc.’s ("Cyber Power") motion to dismiss Defendant/Counterclaimant United States’ ("Defendant") counterclaim. Pl.’s Mot. to Dismiss Def.’s Countercl., Jan. 11, 2022, ECF No. 17 ("Pl. Mot."); see also Memo. of Points and Authorities in Supp. of [Pl. Mot.], Jan. 11, 2022, ECF No. 17-2 ("Pl. Br."); Ans. & Countercl. of [Def.], Dec. 21, 2021, ECF No. 14 (the "Counterclaim"). In the Counterclaim, Defendant asks the court to re-classify under Harmonized Tariff Schedule of the United States ("HTSUS") subheading 8544.42.90 subject merchandise entered by Cyber Power and order U.S. Customs and Border Protection ("CBP") to reliquidate the merchandise at a rate of 2.6% ad valorem.¹ Countercl. ¶¶ 18, Prayer for Relief.

Cyber Power argues the court should dismiss the Counterclaim because (i) Defendant fails to allege a cause of action; (ii) the liquidation of the subject merchandise is final; and (iii) allowing Defendant to prosecute the Counterclaim, violates Cyber Power's rights under the Equal Protection Clause of the United States Constitution. Pl. Br. at 3–25. Defendant argues that Cyber Power's motion should be denied because (i) the Counterclaim states a claim for increased duties under 19 U.S.C. §§ 1202, 1503, and 1514(a) ; and (ii) liquidation is not final because Cyber Power protested the classification of the subject merchandise and the amount of duties assessed. [Def.’s] Memo. in Opp'n to [Pl. Mot.], 4–5, 11 n.4, Mar. 15, 2022, ECF No. 25 ("Def. Br."). For the following reasons, the Counterclaim is redenominated as a defense under United States Court of International Trade Rule 8(d)(2) and Cyber Power's motion to dismiss the Counterclaim is denied as moot.

BACKGROUND²

Cyber Power is the importer of record of the ten entries at issue in this action covering seven types of cables (the "Subject Cables") entered at the Port of Minneapolis, Minnesota in 2019, and classified by CBP at the time of liquidation under HTSUS subheading 8544.42.20.³ Countercl. ¶¶ 3, 5–7; see also Compl. ¶ 6, Oct. 22, 2021, ECF No. 11. However, pursuant to Section 301 of the U.S. Trade Act of 1974, merchandise classified under HTSUS subheading 8544.42.20 originating from the People's Republic of China ("China") may also be further classified under temporary HTSUS subheading 9903.88.03 and assessed additional duties at a rate of 10 percent ad valorem if entered before May 10, 2019, and 25 percent ad valorem if entered on or after May 10, 2019 (the "Section 301 Duties"). Countercl. ¶ 9; see also Def. Br. at 2–3 (summarizing events leading to the creation and assessment of the Section 301 Duties). CBP imposed Section 301 Duties on the Subject Cables. Countercl. ¶ 10.

On September 11, 2020, Cyber Power protested the liquidation of the Subject Cables under temporary HTSUS subheading 9903.88.03 and the assessment of the Section 301 Duties.⁴ Memo. of Points and Authorities in Supp. of Protest of [Cyber Power], July 9, 2021, ECF No. 9-1 ("Protest"); Countercl. ¶ 11. In its protest, Cyber Power argued that the Subject Cables fall within an exclusion to the Section 301 Duties and are therefore properly classified under temporary HTSUS subheading 9903.88.33,⁵ not temporary subheading 9903.88.03. Compl. ¶¶ 8–14; Countercl.; Answer ¶¶ 8–14; Protest at 5–11; see also Def. Br. at 1–2. On November 4, 2020, CBP denied Cyber Power's Protest, stating that Cyber Power failed to demonstrate that the Subject Cables meet the definition of telecommunications cables for HTSUS subheading 8544.42.20, and "[t]herefore CBP has determined that the correct classification for the [Subject] [C]ables is HTSUS 8544.42.9090."⁶ Countercl. ¶ 12. Merchandise classified under HTSUS subheading 8544.42.90 is subject to a duty rate of 2.6% ad valorem in addition to applicable Section 301 Duties. See id. ¶¶ 17–20. The parties do not allege that CBP reclassified or re-liquidated the Subject Cables under HTSUS subheading 8544.42.90 when CBP denied Cyber Power's protest. See generally Countercl.; Compl.; see also Def. Br. at 3 (stating CBP did not reclassify or re-liquidate the Subject Cables under HTSUS subheading 8544.42.90).

On April 28, 2021, Cyber Power commenced this action by filing a summons challenging CBP's denial of Cyber Power's protest. Countercl. ¶ 13; see also Summons, Apr. 28, 2021, ECF No. 1. On December 21, 2021, Defendant filed the Counterclaim. See Countercl. On January 11, 2022, Cyber Power filed the present motion to dismiss the Counterclaim. See Pl. Mot. Parties briefed the motion and Cyber Power requested oral argument. Def. Br.; Pl.’s Reply in Supp. of [Pl. Mot.], Apr. 5, 2022, ECF No. 27; Pl.’s Mot. for Oral Arg. on [Pl. Mot.], Apr. 7, 2022, ECF No. 28. The court heard oral argument on May 25, 2022. See Oral Arg., May 25, 2022, ECF No. 32.

JURISDICTION AND STANDARD OF REVIEW

The court has jurisdiction over the Counterclaim pursuant to 28 U.S.C. § 1583, which grants the U.S. Court of International Trade jurisdiction over counterclaims involving the imported merchandise that is the subject matter of a civil action pending in the Court. 28 U.S.C. § 1583. Rule 8(a)(2) of the Rules of the U.S. Court of International Trade (collectively, the "Rules", and individually, "Rule") requires that a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Rule 8(a)(2). Further, Rule 8(d)(2) provides that when a party mistakenly designates a defense as a counterclaim, the "court must, if justice requires, treat the pleading as though it were correctly designated." Rule 8(d)(2).

To survive a motion to dismiss for failure to state a claim upon which relief can be granted brought under Rule 12(b)(6), a pleading "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ).⁷ When considering a motion to dismiss a counterclaim, the court assumes all well-pleaded factual allegations in the counterclaim to be true and draws all reasonable inferences in favor of the non-moving party. Wanxiang Am. Corp. v. United States, 12 F.4th 1369, 1373 (Fed. Cir. 2021).

DISCUSSION

Cyber Power's motion to dismiss asks the court to answer one question: What statutory authority does Defendant have for asserting the Counterclaim? Defendant argues that 19 U.S.C. §§ 1202, 1503, and 1514(a) give it authority to assert the Counterclaim and to seek reliquidation from CBP under a different classification. Def. Br. at 4–5, 11 n.4. Yet none of the sections of the U.S. Code cited by Defendant provide a basis for the Counterclaim. Section 1202 only sets forth the HTSUS; nothing in Section 1202 can be read to imply a cause of action for the United States to assert a counterclaim.⁸ See 19 U.S.C. § 1202. Section 1503 provides that "if reliquidation is required pursuant to a final judgment or order of the U.S. Court of International Trade which includes a reappraisement of imported merchandise, the basis for such assessment shall be the final appraised value determined by such court." Id. § 1503. Section 1503 relates to the value of merchandise, not the classification, and, in any event, that section only states that the Court has the power to order reliquidation based on a reappraisement of the value of imported merchandise; nothing in Section 1503 grants the United States a cause of action to assert a counterclaim. Id. Finally, Section 1514(a) provides importers with a mechanism to protest liquidation; it does not provide the government with an avenue to assert counterclaims contesting CBP's classification. Id. § 1514(a). That a timely protest suspends the finality of liquidation for all parties, including the United States, does not imply that the United States may assert a counterclaim. Id.

Congress enacted a comprehensive scheme governing import duties, including multiple provisions, detailing specific remedies, allowing CBP to classify, re-classify, and collect duties on goods imported into the United States. See 19 U.S.C. §§ 1500, 1501, 1504, 1505, 1509, 1515, 1581 – 1631 ; 28 U.S.C. § 1592; see generally Title 19, Ch. 4 of the U.S. Code. Nowhere in that comprehensive scheme did Congress explicitly authorize the United States to assert a counterclaim challenging CBP's classification. Furthermore, a counterclaim contesting CBP's classification of merchandise upon liquidation requires the United States to make a claim against itself. CBP, a federal agency, classified and liquidated the entry that the defendant, United States, now seeks to have reliquidated. In light of the multitude of specific remedies available to CBP to classify merchandise and to fix and collect duties, the court declines to read into the applicable statutes an implied cause of action to assert a counterclaim challenging CBP's classification. See Consol. Edison Co. of N.Y. v. O'Leary, 117 F.3d 538,...