Kent Int'l, Inc. v. United States, Court No. 15–00135

• Decision Date: 08 September 2017
• Docket Number: Court No. 15–00135,Slip Op. 17–123
• Citation: 264 F.Supp.3d 1340
• Parties: KENT INTERNATIONAL, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

264 F.Supp.3d 1340

KENT INTERNATIONAL, INC., Plaintiff,

v.UNITED STATES, Defendant.

Court No. 15–00135

Slip Op. 17–123

United States Court of International Trade.

September 8, 2017

Philip Y. Simons and Jerry P. Wiskin, Simons & Wiskin, of So. Amboy, NJ for Plaintiff Kent International, Inc.

Hardeep K. Josan, Trial Attorney, Commercial Litigation Branch, Civil Division, U S. Department of Justice, of New York, NY, for Defendant United States. With her on the brief were Chad A. Readier, Acting Assistant Attorney General, Jeanne E. Davidson, Director, Amy M. Rubin, Assistant Director. Of counsel on the brief was Yelena Slepak, Office of Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection of New York, NY.

OPINION and ORDER

Gordon, Judge:

Before the court is Defendant United States' partial motion to dismiss the second and third causes of action ("Count 2" and "Count 3" respectively) of Plaintiff's complaint pursuant to USCIT Rule 12(b)(6)¹ . Defendant seeks to dismiss Plaintiff's Count 2, which alleges the existence of an established and uniform practice under Section 315 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1315(d),² and Count 3, which alleges the existence of a treatment under 19 U.S.C. § 1625(c) and 19 C.F.R. § 177.12(c)(1)(i). See Def.'s Partial Mot. to Dismiss. at 1, ECF No. 16 ("Def.'s Mot.") ; see also Compl. ¶¶ 49, 72–74, ECF No. 9. Plaintiff responded and cross-moved to stay consideration of Defendant's motion until the court resolved Plaintiff's first cause of action, a challenge to the classification of the imported merchandise. Pl.'s Cross–Mot. to Stay Def's. Partial Mot. to Dismiss & Pl.'s Opp. to Def.'s Partial Mot. to Dismiss at 2, ECF No. 18. The court denied Plaintiff's motion to stay and reserved decision on Defendant's motion to dismiss. See Kent Int'l Inc. v. United States, 40 CIT ––––, 161 F.Supp.3d 1340 (2016) (" Kent I"). For the reasons set forth below, the court denies Defendant's motion to dismiss Counts 2 and 3 of Plaintiff's complaint.

I. Background

The background of this litigation is summarized briefly below and provided in detail in Kent I. Plaintiff imported a product known as WeeRide Kangaroo child bicycle seats that U.S. Customs and Border Protection ("Customs") classified under HTSUS subheading 8714.99.80, dutiable at 10% ad valorem. Plaintiff raises three claims in its complaint: (1) that the subject merchandise is properly classifiable under HTSUS subheading 9401.80.40, duty-free;³ (2) that Customs had an established and uniform practice of classifying child bicycle seats under HTSUS subheading 9401.80; and (3) that the imported merchandise is classifiable under HTSUS subheading 9401.80 because Plaintiff is entitled to the same treatment afforded other importers of child bicycle seats pursuant to 19 C.F.R. § 177.12. Compl.

II. Standard of Review

In deciding a USCIT Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, the court assumes all factual allegations to be true and draws all reasonable inferences in the plaintiff's favor. Cedars–Sinai Med. Ctr. v. Watkins, 11 F.3d 1573, 1583–84 & n.13 (Fed. Cir. 1993).

A plaintiff's factual allegations must be "enough to raise a 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 Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim of 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 Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ).

III. Discussion

Plaintiff alleges that, in 2005, Customs, through its New York Office ("New York Customs"), issued a ruling letter NY L86862 ("2005 Ruling") classifying Plaintiff's imported child bicycle seats under HTSUS heading 8714, dutiable at 10 % ad valorem. Compl. ¶ 21. Plaintiff further alleges that between 2007 and 2011 New York Customs issued other ruling letters to Bell Sports ("Bell Ruling") (2007), Todson Inc. ("Todson Ruling") (2009), and Brix Child Safety Inc. ("Brix Ruling") (2011) (collectively, "Child Bicycle Seat Rulings"), classifying similar imported child bicycle seats under HTSUS heading 9401, duty free. Compl. ¶¶ 22, 29, 35. According to Plaintiff, from Fall 2007 through September 2014, various importers made numerous entries of child bicycle seats, with "some of these entries ... [occurring] at ports other than those utilized by plaintiff," and that Customs liquidated all of those entries under HTSUS subheading 9401.80, duty free. Id. ¶¶ 39–41, 46.

Plaintiff claims it made a series of entries of the subject merchandise at the Port of Newark ("Newark Customs") that Newark Customs classified under HTSUS subheading 8714.99.00, which, in turn, Kent protested relying on the Bell and Todson Rulings. Id. ¶¶ 23–27, 31–32, 58–63. In conjunction with its protests, Kent also filed two Applications for Further Review ("AFRs"), seeking review by Customs Headquarters ("Headquarters") of its claim for duty free classification. Id. ¶¶ 24–26. Newark Customs approved Kent's first set of protests, but did not refer the first AFR to Headquarters because it failed to meet the applicable criteria for an AFR. Id. ¶¶ 25, 59. Kent further claims that, after approving Plaintiff's first set of protests, Newark Customs agreed to send Kent's second set of protests to Headquarters for review in light of the Bell Ruling. Id. ¶¶ 27–28, 30. Kent further alleges that Newark Customs subsequently advised Plaintiff that its second AFR was sent to Headquarters. Id. ¶¶ 28, 30, 66. Kent also claims that Newark Customs approved Plaintiff's second set of protests, id. ¶ 31, but that Headquarters did not act on the second AFR in light of the approval of the protests by Newark Customs, id. ¶ 68.

Additionally, Plaintiff alleges that it made entries at the Port of Long Beach ("Long Beach Customs"), seeking duty free classification for its subject merchandise. Long Beach Customs denied Kent's claimed classification, which was protested in early 2011 ("Long Beach protests"). Id. ¶¶ 33–34, 69. In conjunction with its protests, Kent maintains that it filed a third AFR in April 2011, followed by supplemental submissions in 2014, seeking Headquarters' consideration of its duty free claim for the subject merchandise. Id. Plaintiff claims that, in the course of considering the Long Beach protests, Headquarters, in September 2011, advised Plaintiff that the Child Bicycle Seat Rulings were "not correctly decided" and would be revoked in late 2011. Id. ¶ 37. However, revocation did not occur for almost three years until July 2014, when notification of the revocation was published. Id. ¶ 38 (citing 48 Cust. B. & Dec. 29 (July 23, 2014) ("Revocation Ruling")). Thereafter, in February 2015, Customs denied Plaintiff's Long Beach protests and issued HQ Ruling H170637 ("2015 Ruling"), confirming the 2005 Ruling that Kent's child bicycle seats are classifiable under HTSUS 8714.99.00, dutiable at 10% ad valorem. Id. ¶ 69.

For ease of reference, set forth below is a timeline of the key rulings and actions taken by Customs in this action:

A. Count 2—Established and Uniform Practice

In Count 2, Plaintiff claims that Customs had "an established and uniform practice of classifying [child] bicycle seats under HTSUS subheading 9401.80." Id. ¶ 49. Under 19 U.S.C. § 1315(d), Customs cannot increase duties when an established and uniform practice ("EUP") exists either when there is (1) a declared EUP or (2) a "de facto" EUP. A declared EUP exists by virtue of a formal administrative declaration. Weslo, Inc. v. United States, 29 CIT 52, 56, 358 F.Supp.2d 1306, 1310 (2005). Absent that formal declaration, the court may find the existence of a "de facto" EUP when an importer can demonstrate that Customs made actual uniform liquidations over time. Id. (citing Heraeus–Amersil, Inc. v. United States, 8 CIT 329, 333, 600 F.Supp. 221, 225 (1984) ). Plaintiff does not allege the existence of a formal declared EUP, but rather the existence of a "de facto" EUP. To meet the plausibility standard, Plaintiff must allege facts of an established and uniform classification that would cause an importer, "in the absence of notice that a change in classification will occur," to reasonably expect adherence to that classification. Heraeus–Amersil, Inc. v. United States, 9 CIT 412, 416, 617 F.Supp. 89, 93 (1985), aff'd, 795 F.2d 1575 (Fed. Cir. 1986). Factors that suggest the existence of a "de facto" EUP include: (1) a high number of entries resulting in the alleged uniform classifications, (2) a high number of ports at which the merchandise was entered, (3) an extended period of time over which the alleged uniform classifications took place, and (4) a lack of uncertainty regarding the classification over time. Id., 9 CIT at 415–16, 617 F.Supp. at 93.

Turning to these four factors, Kent alleges that Customs classified numerous entries of child bicycle seats, duty free, under HTSUS subheading 9401.80 for multiple importers at multiple ports, other than the ports utilized by the Plaintiff. Compl. ¶¶ 39–41, 46. Plaintiff further alleges that over a seven year period—between 2007 and 2014—Customs classified child bicycle seats for Bell, Todson, and Brix under HTSUS heading 9401, duty free. Id. ¶¶ 22, 29, 35, 47. Kent also claims that, despite the 2005 Ruling, Customs granted Kent's protests for duty free classification for the Newark entries of its imported merchandise, but failed to grant Kent the same classification for its Long Beach entries. Id. ¶¶ 48, 58, 60, 69. It is true that Plaintiff has not alleged a specific number of entries and has not identified a specific number of ports, other than Newark and Long Beach. Nevertheless, the court can reasonably infer from these allegations...