International Custom Products, Inc. v. U.S.

Decision Date31 March 2008
Docket NumberSlip Op. 08-36. Court No. 07-00318.
Citation549 F.Supp.2d 1384
PartiesINTERNATIONAL CUSTOM PRODUCTS, INC., Plaintiff, v. UNITED STATES, Defendant.
CourtU.S. Court of International Trade

Mayer Brown LLP (Andrew A. Nicely and Simeon M. Kriesberg), for Plaintiff.

Jeffrey S. Bucholtz, Acting Assistant Attorney General; Jeanne E. Davidson, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (Edward F. Kenny), and Yelena Slepak, of counsel, Office of Assistant to Chief Counsel, International Trade Litigation, Department of Homeland Security, U.S. Customs and Border Protection, for Defendant.

Before: Gregory W. Carman, Judge.

OPINION & ORDER

CARMAN, Judge.

Before the Court is the USCIT Rule 12(b)(5) motion of Defendant (the "Government") to dismiss Plaintiffs action for failure to state a claim upon which relief can be granted.1 Plaintiff, International Gustom Products ("ICP"), alleges that U.S. Customs and Border Protection ("Customs") revoked a classification ruling previously given to ICP, resulting in a different classification of the product ICP imported and a significantly higher applicable tariff. ICP alleges that Customs's conduct violated various laws: specifically, the statutory provision pertaining to revocation of classification rulings, the Administrative Procedure Act, and the Due Process clause of the Fifth Amendment to the Constitution. Certain of these claims do not state a claim upon which relief can be granted. However, others do. As a result, the Court grants in part and denies in part the Government's motion.

FACTUAL BACKGROUND

ICP is an importer and distributor of products sold to processed "food manufacturers. In April 1999, ICP began importing "white sauce," which is a milkfat-based product used in sauces, salad dressings, and other food products. Prior to commencing importation of white sauce, ICP requested and received a ruling from Customs on the classification of white sauce, which issued on January 20, 1999, as New York letter ruling ("NYLR") D86228. The ruling classified the white sauce under subheading 2103.90.9060 of the Harmonized Tariff Schedule of the United States ("HTSUS"), which has since been renumbered as subheading 2103.90.9091.2 In reliance on the ruling, ICP alleges that it entered into a three-year purchase agreement with its foreign supplier and a three-year supply agreement with its largest customer. ICP also alleges that it relied on the advance ruling by making preparations to commence a food-manufacturing business in the United States, including purchasing a plant site and conducting product research and development.

In March 2004, Customs notified ICP that it was initiating a tariff rate investigation of ICP's white sauce. Based on its investigation, and without providing for notice and comment, Customs issued a notice to ICP in April 2005 (called a "Notice of Action"). The April 2005 Notice of Action stated that all 86 of ICP's then-unliquidated entries of white sauce, as well as any future entries, would be classified under subheading 0405.20.3000 rather than under subheading 2103.90.9060.3 The change in classification substantially increased the applicable tariff.4 On May 6, 2005, Customs liquidated 60 out of the 86 entries listed in the Notice of Action. A few days later, and without paying the tariff duties or filing a protest with Customs, ICP filed suit at this Court, alleging jurisdiction under 28 U.S.C. § 1581(h).5 As in this case, ICP complained that Customs had unlawfully revoked ICP's classification ruling. The court sua sponte found jurisdiction under this Court's residual jurisdiction provision, 28 U.S.C. § 1581(i), and ruled in favor of ICP. Int'l Custom Prods., Inc. v. United States, 374 F.Supp.2d 1311, 1333 (2005) ("ICP I"). On appeal, the Court of Appeals for the Federal Circuit held that this Court lacked jurisdiction under section 1581(i) to hear ICP's challenge, vacated the trial court's decision, and ordered the trial court to dismiss ICP's complaint for lack of jurisdiction.6 Int'l Custom Prods., Inc. v. United States, 467 F.3d 1324, 1328 (Fed.Cir.2006).

Also during 2005, ICP made 11 additional entries of white sauce, one of which, Entry Number 180-0590029-7, is the subject of this action. At the time of entry, ICP posted a bond for the 11 entries corresponding to the rate that would apply were the entries to be classified in accordance with ICP's classification ruling. However, Customs sought to increase the bond for the 11 entries, as well as any future entries, to correspond to the higher tariff rate indicated in the April 2005 Notice of Action. In response, ICP filed a second action at this Court ("ICP II"). Following the court's grant of a preliminary injunction against increasing the bond, the entries were released from warehouse. The court then dismissed the action for lack of a justiciable controversy regarding the bond because the 11 entries had been released under the old bond requirements, and future imports were speculative. Int'l Custom Products, Inc. v. United States, 2005 WL 2980587, at *4-5 (CIT Nov. 8, 2005). ICP did not appeal the decision.

Then, in 2007, Customs issued a second Notice of Action stating that, like the prior entries, the 11 entries made during 2005 would be liquidated at the higher tariff rate indicated in the April 2005 Notice of Action. Customs liquidated the entry that is the subject of this action on June 29, 2007; ICP protested the liquidation on July 26, 2007, and thereafter filed suit in this Court. In the main, ICP contends that Customs should have liquidated the entry consistently with ICP's classification ruling, rather than at the higher rate listed in the Notices of Action. The particular claims raised by ICP will be addressed below.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(a) (2000), which provides for judicial review of protests denied by Customs.

STANDARD OP REVIEW

In deciding a USCIT Rule 12(b)(5) motion to dismiss for failure to state a claim upon which relief can be granted, the court accepts as true the facts alleged in the plaintiffs pleading and construes all inferences in the plaintiffs favor. United States v. Ford Motor Co., 497 F.3d 1331, 1336 (Fed.Cir.2007); Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed. Cir.1991). Dismissal for failure to state a claim upon which relief can be granted is proper if the plaintiffs factual allegations are not "enough to raise the right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell All. Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1965, 167 L.Ed.2d 929 (2007) (citations omitted).

DISCUSSION

Customs moves to dismiss each of the five counts in ICP's complaint for failure to state a claim upon which relief can be granted. For the reasons discussed below, the Court grants Customs's motion as to Counts III and IV of ICP's Complaint, and denies the motion as to Counts I, II, and V.

I. Count I

ICP's first claim is that the April 2005 Notice of Action issued by Customs violated 19 U.S.C. § 1625(c)(1) (2000). ICP alleges that the Notice of Action effectively revoked the classification ruling Customs had given to ICP, and that the revocation was unlawful because ICP was not first provided notice and an opportunity to comment, and because the revocation was applied retroactively. (See Compl. ¶¶ 27-33.)

Section 1625(c)(1) of title 19, U.S.Code, provides that before Customs may issue an "interpretive ruling or decision" that would modify or revoke a prior interpretive ruling or decision, Customs must publish notice of its intent to do so, and give interested parties an opportunity to comment. Section 1625(c)(1) also provides that any modification or revocation shall not become effective until 60 days after the final interpretive ruling or decision is published.

Customs argues that section 1625(c)(1) does not apply here, and that, therefore, ICP has failed to state a claim upon which relief can be granted. First, Customs contends that the April 2005 Notice of Action does not constitute an "interpretive ruling or decision." Customs argues that Congress intended the phrase "interpretive ruling or decision" to "cover only interpretive documents like rulings, ruling letters, internal advice memoranda, and protest review decisions," but not Notices of Action. (Def.'s Mot. to Dismiss 15.) Second, Customs argues that the April 2005 Notice of Action did not "effectively revoke" ICP's classification ruling. (Id. at 20-24.) The Court will address both arguments below.

A.

The first question facing the Court is whether the April 2005 Notice of Action issued by Customs is an "interpretive ruling or decision." Customs argues that Congress did not intend "decision" to mean any decision made by Customs, but rather, only certain types of decisions. (Def.'s Mot. to Dismiss 12.) The decisions Customs alleges Congress intended to cover are "interpretive, instructive, and far reaching directives" issued by Customs headquarters. (Id. at 16.) Customs maintains that a Notice of Action does not meet these requirements because it is merely a courtesy to importers, involves only a specific entry, and is issued at the port level. Customs also insists that it would be unworkable for Customs to be required to provide for notice and comment before it issues a Notice of Action.

When faced with a question of statutory interpretation, the first task of a court is to identify "whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-14, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)....

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