Int'l Custom Prods., Inc. v. United States

• Decision Date: 04 September 2013
• Docket Number: Slip Op. 13–120.,Court No. 08–00189.
• Parties: INTERNATIONAL CUSTOM PRODUCTS, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

931 F.Supp.2d 1338

INTERNATIONAL CUSTOM PRODUCTS, INC., Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 13–120. Court No. 08–00189.

United States Court of International Trade.

Sept. 4, 2013.

Gregory H. Teufel and Jeremy L.S. Samek, Eckert Seamans Cherin & Mellott, LLC of Pittsburgh, PA, for Plaintiff. With them on the briefs were Simeon M. Kriesberg, Andrew A. Nicely, and Jeffrey C. Lowe, Mayer Brown LLP, of Washington, DC.

Edward F. Kenny, Trial Attorney, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice, of New York, NY, for Defendant. With him on the briefs were Gregory G. Katsas, Assistant Attorney General, Barbara S. Williams, Attorney–in–Charge, and John J. Todor, Trial Attorney. Of counsel on the briefs was Yelena Slepak, Office of Assistant Chief Counsel, International Trade Litigation, United States Customs and Border Protection.

Opinion & Order

CARMAN, Judge:

The matter before this Court is a Motion to Dismiss Plaintiff's Complaint filed by Defendant United States (“Defendant” or “the government”). The government moves to dismiss Counts 1–8 pursuant to USCIT Rule 12(b)(1) for lack of subject matter jurisdiction; and to dismiss Count 8 (in the alternative) and Count 9 pursuant to USCIT Rule 12(b)(5) for failure to state a claim upon which relief can be granted. For the reasons set forth below, the Court grants Defendant's motion.

Background

International Custom Products (“ICP” or “Plaintiff”) seeks relief from an action taken by U.S. Customs and Border Protection (“Customs” or “Defendant”) reclassifying and liquidating 13 entries of Plaintiff's imported product known as “white sauce.” Compl. ¶ 2. In 1999, Plaintiff obtained a ruling letter from Customs, NYRL D86228, classifying “white sauce” under HTSUS 2103.90.90 as “sauces and preparations therefor ... other ... other ... other ... other,” with a duty rate of 6.4% ad valorem. Id. ¶ 12. In April 2005, Customs issued a “Notice of Action” that 99 entries of “white sauce” were being reclassified and liquidated under HTSUS 0405.20.3000 as “dairy spread,” at the rate of $1.996 per kilogram. Id. ¶ 14. This reclassification had the effect of increasing the duties owed on Plaintiff's entries of “white sauce” by approximately 2400%. Id. ¶ 8. Plaintiff asserts that in issuing the Notice of Action, Customs did not follow various statutory and regulatory requirements, and thereby infringed upon several of Plaintiff's rights. See generally Compl. This case is the sixth lawsuit brought by Plaintiff with respect to the classification and liquidation of some or all of 99 entries of “white sauce.” Id. ¶ 6.

A brief time line is illuminating. In July of 2007, Plaintiff protested the reclassification and liquidation of a single entry of “white sauce” with request for accelerated disposition. Pl.'s Opp. to Def.'s Mot. to Dismiss (“Pl.'s Mot.”) at 6. Thirty days later, after the protest was deemed denied, Plaintiff paid the duties owing on that single entry and commenced Int'l Custom Prods. v. United States, Court No. 07–318 (“ ICP IV ”), on August 28, 2007. Id. Immediately after commencing that case, Plaintiff filed protest number 1101–07–100220 covering 13 entries of “white sauce” entered between October 2003 and October 2004. Compl. ¶¶ 16–17. This second protest was denied on November 26, 2007. Id. ¶ 17. Over the course of the following month, ICP filed eight additional protests covering the balance of its entries of “white sauce” affected by the 2005 Notice of Action. Pl.'s Mot. Ex. 2. Rather than ruling on these eight protests, however, by the end of December 2007, Customs voluntarily placed them all into a “suspended protest status” pending the outcome of ICP IV. Id.; Compl. ¶ 17. Because the protest with respect to the 13 entries had been denied and not suspended, ICP now owes the government approximately $28,000,000.00 in duties on these 13 entries alone. Compl. at 16; Mem. in Support of Def.'s Mot. to Dismiss (“Def.'s Mot.”) at 6. The treatment of these 13 entries is contested in this litigation. Compl. ¶ 1.

Plaintiff's Complaint includes nine counts. In Count 1, Plaintiff asserts that Customs violated the law by effectively revoking NYRL D86228 without first complying with the notice and comment requirements of 19 U.S.C. § 1625(c)(1). Compl. ¶¶ 30–36. In Count 2, Plaintiff asserts that Customs violated its longstanding treatment of “white sauce” without first complying with the requirements of 19 U.S.C. § 1625(c)(2). Id. ¶¶ 37–44. In Count 3, Plaintiff asserts that Customs violated 19 C.F.R. § 177.9 by classifying the 13 entries of “white sauce” in a manner inconsistent with the advance ruling letter. Id. ¶¶ 45–50. In Count 4, Plaintiff asserts that Customs failed to demonstrate a “compelling reason” for revoking the advance ruling letter. Id. ¶¶ 51–54. In Count 5, Plaintiff asserts that in issuing the Notice of Action in 2005, Customs violated the notice and comment requirements of the Administrative Procedure Act (“APA”). Id. ¶¶ 55–58.

In Count 6, Plaintiff asserts that by failing to properly revoke the advance ruling letter, Customs violated ICP's rights under the Due Process Clause of the Fifth Amendment to the Constitution. Id. ¶¶ 59–65. In Count 7, Plaintiff asserts that Customs' unlawful reclassification of “white sauce” deprived ICP of its business in violation of ICP's constitutional right to due process of law. Id. ¶¶ 66–70. In Count 8, Plaintiff asserts that Customs knew that by denying Plaintiff's protest covering the 13 entries, and by failing to place the entries into “suspended liquidation or suspended protest status” pending the resolution of related litigation, that ICP could not pay the $28 million required to commence this lawsuit, and thereby acted to “unconstitutionally deprive[ ] ICP of its right of access to the courts.” Id. ¶ 78; see generally id. ¶¶ 71–78. In Count 9, Plaintiff asserts that the jurisdictional prerequisite of 28 U.S.C. § 2637(a) is unconstitutional as applied to ICP in this case, violating ICP's First and Fifth Amendment rights. Id. ¶¶ 79–85.

Defendant moves to dismiss Counts 1 through 8 pursuant to USCIT Rule 12(b)(1) for lack of subject matter jurisdiction. Alternatively and additionally, Defendant moves to dismiss Counts 8 and 9 pursuant to USCIT Rule 12(b)(5) for failure to state a claim upon which relief can be granted. ¹

Jurisdiction

Plaintiff asserts the Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(a), or alternatively pursuant to 28 U.S.C. § 1581(i)(4). Compl. ¶¶ 20–21. Defendant asserts that because ICP has not complied with the requirements of 28 U.S.C. § 2637(a), this Court does not have jurisdiction under Section 1581(a) to hear Counts 1 through 8. Def.'s Mot. 8. Defendant also asserts that this Court does not have jurisdiction under Section 1581(i)(4) to hear Counts 1 through 8. Id. 11–15. Defendant does not contest the Court's jurisdiction over Count 9 of Plaintiff's Complaint. See generally Def.'s Mot.

1. Counts 1 through 8 are Dismissed for Lack of Subject Matter Jurisdiction

An importer may bring a civil action in the Court of International Trade “contesting the denial of a protest under section 515 of the Tariff Act of 1930 ... only if all liquidated duties, charges, or exactions have been paid at the time the action is commenced....” 28 U.S.C. § 2637(a) (emphasis added). Plaintiff candidly acknowledges that it has not paid the duties on the 13 entries as required by Section 2637(a), but bids the Court to take jurisdiction over this case nonetheless. Compl. ¶¶ 21–22, 29. The Court cannot oblige. The Court of Appeals for the Federal Circuit (“CAFC”) has held that the “conditions upon which the government consents to be sued must be strictly observed and are not subject to implied exceptions.” NEC Corp. v. United States, 806 F.2d 247, 249 (Fed.Cir.1986). Because 28 U.S.C. § 2637(a) operates as just such a condition upon the waiver of sovereign immunity, it must be strictly construed in favor of the government. Cf. AutoAlliance Int'l, Inc. v. United States, 357 F.3d 1290, 1293 (Fed.Cir.2004) (finding that a related provision, 28 U.S.C. § 2636(a)(1), which requires litigation contesting denied protests to be commenced within 180 days of denial, “operates as a waiver of sovereign immunity [that] this court must strictly construe ... in favor of the sovereign”) (internal quotation and brackets omitted). Plaintiff's failure to pay “all liquidated duties, charges, or exactions ... related to each entry included in the denied protest” prior to commencing this action means that this Court does not have jurisdiction under 28 U.S.C. § 1581(a) to hear any of Plaintiff's claims. See28 U.S.C. § 2637(a); see also Georgetown Steel Corp. v. United States, 801 F.2d 1308, 1312 (Fed.Cir.1986) (“If a litigant fails to comply with the terms upon which the United States has consented to be sued, the court has no jurisdiction to entertain the suit.”) (internal quotation omitted).

Apparently anticipating this result, Plaintiff urges that “[i]f the Court concludes that jurisdiction is lacking under Section 1581(a) because ICP did not prepay the $28 million in duties at the higher rate, then this Court has jurisdiction under 28 U.S.C. § 1581(i)(4) because ICP does not have a remedy under Section 1581(a).” Compl. ¶ 21. The law does not permit the outcome Plaintiff seeks; the Plaintiff may not do indirectly what it is prohibited to do directly. The CAFC has previously invalidated attempts to avoid complying with the prerequisites for jurisdiction under Section 1581(a)—such as the prepayment requirement of Section 2637(a)—by invoking jurisdiction under Section 1581(i).

It is judicially apparent that where a litigant has access to this court under traditional means, such as 28 U.S.C. § 1581(a), it must avail itself of this avenue of approach complying with all the relevant prerequisites thereto. It cannot circumvent the...