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

Decision Date15 June 2005
Docket NumberSLIP OP. 05-71.,Court No. 05-00341.
Citation374 F.Supp.2d 1311
PartiesINTERNATIONAL CUSTOM PRODUCTS, INC, Plaintiff, v. UNITED STATES of America, Defendant.
CourtU.S. Court of International Trade

Mayer, Brown, Rowe & Maw, LLP, Washington, DC (Simeon Munchick Kriesberg), Washington, D.C., for Plaintiff.

Peter D. Keisler, Assistant Attorney General; Barbara S. Williams, Attorney in Charge, International Trade Field Office; Edward F. Kenny, U.S. Department of Justice, Civil Division, Commercial Litigation Branch, Washington, DC, for Defendant.


CARMAN, Judge.

This case is before this Court pursuant to the following motions of the parties: Plaintiff's Motion for Summary Judgment;1 Defendant's Motion to Dismiss Plaintiff's Action for Lack of Subject Matter Jurisdiction and for Failing to State a Claim upon which Relief Can Be Granted ("Defendant's Motion to Dismiss"); and Defendant's Motion for Judgment on the Agency Record Pursuant to Rule 56.1 of the Rules of the United States Court of International Trade ("Defendant's Motion for Judgment on the Agency Record"). Plaintiff contested the imposition of a rate advance by the Bureau of Customs and Border Protection ("Customs") on certain imported product referred to as "white sauce." Based upon the findings of fact and conclusions of law set forth below, this Court enters final judgment in favor of Plaintiff.


PlaintiffInternational Custom Products, Inc. ("ICP" or Plaintiff) — is an importer and distributor of dairy ingredients. It is not presently a manufacturer but has made a multimillion dollar investment in a manufacturing facility that is under construction in Pennsylvania. Plaintiff imported a product referred to as "white sauce," which is the imported article that is the subject of this litigation. White sauce is a milkfat based product that is used as a base for other products (for example, sauces, salad dressings, and processed cheeses).

Between 1988 and 1994, Plaintiff purchased imported white sauce in domestic transactions. In 1998, in anticipation of itself becoming an importer of white sauce, Plaintiff sought a binding tariff classification ruling from the United States Customs Service (now the Bureau of Customs and Border Protection ("Customs")). On January 20, 1999, Customs issued New York letter ruling D86228, which classified the product described in Plaintiff's ruling request in Harmonized Tariff Schedule of the United States ("HTSUS") tariff subheading 2103.90.9060.2 HTSUS tariff subheading 2103.90.9060 has since been renumbered and is currently tariff subheading 2103.90.9091.3

Plaintiff has been entering white sauce in reliance upon ruling N.Y. D86228 since 1999. In that time, Plaintiff has not altered the ingredients of the imported white sauce. As confirmed by laboratory results, Customs also agrees that Plaintiff has not altered the composition of the imported white sauce.

In March 2004, Customs requested information regarding an importation of Kosher white sauce. Plaintiff cooperated with the request for information, responded to specific questions about its white sauce, provided samples of the white sauce, and supplied its customer list. Customs continued its investigation of Plaintiff's importation of white sauce and queried Plaintiff's primary customer about its use of Plaintiff's white sauce. In November 2004, that customer responded that it used all white sauce purchased from Plaintiff in the manufacture of various cheese products.

Based upon the results of its investigation, Customs concluded that the white sauce Plaintiff had been importing was not accurately described by ruling N.Y. D86228. Customs further determined that Plaintiff's white sauce was classifiable in HTSUS tariff subheading 0405.20.3000.4 On April 18, 2005, Customs issued a Notice of Action reclassifying unliquidated entries and all future shipments of Plaintiff's white sauce in HTSUS tariff subheading 0405.20.3000. The Notice of Action covers approximately 86 entries of Plaintiff's white sauce and specifies that "action has been taken" to rate advance the imported white sauce. The net result of Customs' reclassification of Plaintiff's imported white sauce is an estimated 2400% increase in duty. In addition, the Notice of Action states that "all shipments of this product must be classified as above."

When it received the Notice of Action, Plaintiff immediately ceased importing white sauce. All merchandise then on the water has been placed in a customs bonded warehouse.

On May 6, 2005, Customs liquidated sixty (60) of the entries included on the Notice of Action. On May 9, 2005, Plaintiff filed a summons and complaint with this Court, alleging jurisdiction pursuant to 28 U.S.C. § 1581(h) (2000).5 Plaintiff requested — among other things — a declaratory judgment that the Notice of Action is null and void because Customs failed to follow its own administrative procedures by revoking or modifying ICP's ruling other than pursuant to 19 U.S.C. § 1625(c) (2000).6

I. Plaintiff's Contentions
A. Jurisdiction

Although ICP initially pleaded that this Court had jurisdiction over this matter pursuant to 28 U.S.C. § 1581(h), it altered its position and embraced the Court's suggestion that jurisdiction was available under 28 U.S.C. § 1581(i)(4) (2000). In support of the position that the other subsections of § 1581 were manifestly inadequate,7 Plaintiff argued that it could not be assured — under another subsection of § 1581 — that it would be heard on the merits of its case in time to provide meaningful relief. (Pl.'s Mem. of P. & A. in Opp'n to Def.'s Mot. to Dismiss and Def.'s Mot. for J. on the Agency R. and in Supp. of Pl.'s Mot. for Summ. J. ("Pl.'s Reply") at 5.) Plaintiff stated that it would be unable to meet contractual commitments with its principal customer if its importations of white sauce did not resume by the end of May 2005. (Pl.'s Reply at 6.) Further, ICP replied that it faces millions of dollars of tax liability if it is unable to finalize the purchase and installation of the equipment for its manufacturing plant. (Pl.'s Reply at 6.) If the Notice of Action is allowed to stand, ICP alleged that it will breach its contract with its principal supplier. (Pl.'s Reply at 6.) Plaintiff further argued that jurisdiction was proper under § 1581(i)(4) because it would allow the Court to provide a prospective remedy, which a traditional case under § 1581(a) would not.8 (Pl.'s Reply at 7.)

B. Exhaustion of Administrative Remedies

In response to Customs' argument that Plaintiff's claims be dismissed because it failed to exhaust its administrative remedies, Plaintiff asserted that its claims are ripe for adjudication and that exhaustion of administrative remedies is not appropriate as a matter of law in this case. (Pl.'s Reply at 9.) In support of its position, Plaintiff offered that its issues are fit for judicial decision (because the issues are purely legal, were posed concretely, and relate to a final agency action) and because ICP would suffer hardship if the court withheld its consideration. (Pl.'s Reply at 9 (citing Abbott Labs. v. Gardner, 387 U.S. 136, 148-151, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967)).) Further, Plaintiff cited 28 U.S.C. § 2637(d) (2000) for the proposition that exhaustion of administrative remedies under § 1581(i) is required only "where appropriate." (Pl.'s Reply at 9.)

C. Unlawful Notice of Action

ICP also set forth the reasons that the Notice of Action issued by Customs was not lawful. First, ICP stated that Customs' conclusion that the principal use of the white sauce had changed was incorrect as a matter of law because Customs did not properly apply the rule for determining principal use. (Pl.'s Reply at 13.) According to ICP, Customs failed to determine the class or kind of goods to which its imported white sauce belongs (Pl.'s Reply at 15-16) and incorrectly relied upon the actual use of the imported white sauce to establish principal use (Pl.'s Reply at 16-18). ICP further argued that even if the actual use of the imported white sauce were different from the principal use of the class or kind of goods to which the white sauce belongs the binding ruling would remain valid because principal use provisions contemplate that some goods classified thereunder may be put to atypical uses. (Pl.'s Reply at 18-22.)

D. § 1625 Applies to the Notice of Action

ICP next argued that Customs' Notice of Action is an "interpretive ruling or decision" within the scope of 19 U.S.C. § 1625(c). (Pl.'s Reply at 22.) In support of the argument, Plaintiff asserted that Customs' consistent treatment of ICP's white sauce for more than ten (10) years was sufficient to establish at "treatment" within the scope of § 1625(c). (Pl.'s Reply at 23.) In addition, ICP asserted that the Notice of Action satisfied the requirements of an "interpretive ruling" as the term has been defined by this Court and in accordance with Congressional intent. (Pl.'s Reply at 24-30.) Regardless of whether the Notice of Action is an interpretive ruling, Plaintiff urged the Court to rule that the Notice of Action is a "decision" as contemplated by § 1625(c) based on the common meaning of the term and other courts' interpretations. (Pl.'s Reply at 30-34.) Even if the principal use of ICP's white sauce had changed, Plaintiff submitted that Customs was nonetheless bound to follow the administrative procedures to revoke or modify ICP's ruling. (Pl.'s Reply at 34.)

E. Other Issues

Customs challenged Plaintiff's causes of action pursuant to the Administrative Procedure Act (APA) and the Due Process Clause of the United States Constitution.9 In its brief, Plaintiff refuted Customs' assertions and repeated the validity of ICP's claims. (Pl.'s Reply at 36-37.)

II. Defendant's Contentions

In response to Plaintiff's First Amended Complaint and Motion for Summary Judgment, the government filed a Motion to Dismiss...

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