Michael Simon Design, Inc. v. U.S.

• Citation: 637 F.Supp.2d 1218
• Decision Date: 20 July 2009
• Docket Number: Slip Op. 09-75. Court No. 09-00016.
• Parties: MICHAEL SIMON DESIGN, INC., tru 8, Inc. d/b/a Arriviste, and Target Stores, a division of Target Corporation, Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

637 F.Supp.2d 1218

MICHAEL SIMON DESIGN, INC., tru 8, Inc. d/b/a Arriviste, and Target Stores, a division of Target Corporation, Plaintiffs, v. UNITED STATES, Defendant.

Slip Op. 09-75. Court No. 09-00016.

United States Court of International Trade.

July 20, 2009.

Barnes, Richardson & Colburn (Alan Goggins, Eric W. Lander), for Plaintiffs.

Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Patricia M. McCarthy, Assistant Branch Director, Mikki Cottet, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Of Counsel: Karl S. von Schriltz, Attorney, Office of General Counsel, U.S. International Trade Commission, Yelena Slepak, Attorney, Office of the Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection), for Defendant.

Before: Hon. Judith M. Barzilay.

OPINION

BARZILAY, Judge.

This case adds yet another chapter to the long story of the classification of certain holiday apparel and other utilitarian holiday merchandise, an issue to which this court and the Federal Circuit has dedicated a considerable amount of attention. See, e.g., Michael Simon Design, Inc. v. United States, 501 F.3d 1303 (Fed.Cir. 2007); Park B. Smith, Ltd. v. United States, 347 F.3d 922 (Fed.Cir.2003); Midwest of Cannon Falls, Inc. v. United States, 122 F.3d 1423 (Fed.Cir.1997). Here, Plaintiffs Michael Simon Design, Inc., Tru 8, Inc. d/b/a Arriviste, and Target Stores, a division of the Target Corporation (collectively, the "Plaintiffs") challenge those changes to the Harmonized Tariff Schedule of the United States ("HTSUS"), which were initially recommended by the U.S. International Trade Commission ("ITC") and ultimately given legal effect by the President of the United States ("President") in the early part of 2007.¹ Proclamation No. 8097, 72 Fed.Reg. 453 (Jan. 4, 2007) ("Proclamation No. 8097"). Defendant United States moves to dismiss Plaintiffs' claims (1) for lack of subject matter jurisdiction under 28 U.S.C. § 1581(i) and (2) for failing to state a claim upon which relief may be granted.² Alternatively, if the court has jurisdiction over Plaintiffs' challenge to the ITC's recommendations, Defendant argues that the complaints should be dismissed because (3) they are untimely and (4) Plaintiffs failed to exhaust their administrative remedies. For the reasons stated below, the court finds that it is without jurisdiction to hear Plaintiffs' claims and, therefore, grants Defendant's Motion to Dismiss.

I. Background

A. The Harmonized System & the Harmonized Tariff Schedule of the United States

In 1983, members of the Customs Co-operation Council—a multilateral customs organization now operating as the World Customs Organization ("WCO")—agreed to the International Convention on the Harmonized Commodity Description and Coding System (June 14, 1983) (the "Convention"). See Def. Br. Ex. B. The Convention established the Harmonized System, which was "the culmination of a ten-year effort by the United States and its major trading partners [that] develop[ed] a single modern product nomenclature for international use as a standard system of classifying goods for customs." Faus Group, Inc. v. United States, 28 CIT 1879, 1881 n. 5, 358 F.Supp.2d 1244, 1247 n. 5 (2004) (quotations & citations omitted). On August 23, 1988, Congress passed legislation implementing the Convention in the Omnibus Trade and Competitiveness Act of 1988, an act which incorporates, among other measures, the Harmonized System into United States law as the HTSUS. Pub.L. No. 100-418, 102 Stat. 1107. The U.S. Customs & Border Protection ("Customs") has classified products entering the U.S. according to the HTSUS since January 1, 1989, the date the legislation implementing the Convention took effect. 19 U.S.C. § 1202.

The Omnibus Trade and Competitiveness Act authorizes the President, among other actions, to modify the HTSUS based on the recommendation of the ITC so long as the changes (1) are in conformity with the obligations of the U.S. under the Convention and (2) do not run counter to the economic interest of the U.S.³ 19 U.S.C. § 3006(a). The President may proclaim a modification to the HTSUS only after the expiration of a period of sixty legislative days, which begins on the date that the President submits a report to the U.S. House of Representatives Committee on Ways and Means and to the U.S. Senate Committee on Finance.⁴ The President's report to the two congressional committees must outline the proposed modification and the reasons for making it. § 3006(b)(1). Each modification announced by the President takes effect thirty days after the proclamation is published in the Federal Register. § 3006(c).

The ITC assists the President in this modification process by keeping the HTSUS under "continuous review" and by recommending to the President those changes that are "necessary or appropriate" for the U.S. to conform with its obligations under the Convention. 19 U.S.C. § 3005(a)(1). Upon receiving the proposed amendments from the WCO, the ITC conducts an investigation into the modifications that are necessary to conform the HTSUS with the Harmonized System, invites public comment, and ultimately issues a final report making specific recommendations to the President. § 3005(b)-(c). The ITC must make certain that its proposed modifications are consistent with the Convention and "sound nomenclature principles," and must also ensure that the changes maintain "substantial rate neutrality."⁵ § 3005(d)(1)(A)-(C).

B. The Proposed Amendments to the Harmonized System & Subsequent Developments

In June 2004, the WCO proposed several amendments to the Harmonized System, including Note 1(v) to Chapter 95,⁶ which added the following to a list of items already excluded from Chapter 95:

Tableware, kitchenware, toilet articles, carpets and other textile floor coverings, apparel, bed linen, table linen, toilet linen, kitchen linen and similar articles having a utlilitarian function (classified according to their constituent material). Proposed Modifications to the Harmonized Tariff Schedule of the United States, USITC Pub. 3851, Inv. No. 1205-6 at B-139 (Apr.2006), Def. Br. Ex. A ("Final Report"). Note 1(v) also referred to proposed subheadings 9817.95.01 and 9817.95.05, which assigned special duty rates to certain utilitarian articles.⁷

Pursuant to 19 U.S.C. § 3005 and based on these proposed amendments from the WCO, the ITC instituted investigation number 1205-6 ("Investigation No. 1205-6") on September 8, 2004. Proposed Modifications to the Harmonized Tariff Schedule of the United States, 69 Fed.Reg. 55,461 (ITC Sept. 14, 2004). In that notice, the ITC stated that it would issue a preliminary report on the proposed amendments no later than the end of February 2005. Id. at 55,462. The ITC also invited interested parties to comment on its preliminary report within thirty days, or no later than November 1, 2004. Id. When the ITC issued its preliminary report in February 2005, it forwarded that report to the U.S. Trade Representative ("USTR") along with the comments it received from four interested domestic parties and from Customs.⁸ Final Report at 2, Apps. E to I. Two of these comments, one submitted by the Foreign Trade Association of Southern California and the other by the Toy Industry Association, advanced arguments similar to those now made by Plaintiffs, i.e., that the proposed Note 1(v) to Chapter 95 and subheading 9817.95.05 would conflict with recent judicial determinations which allegedly held that all holiday-related articles, including utilitarian ones, should receive duty-free treatment as "festive articles" under said Chapter. Final Report at G-2 to G-9, H-3 to H-4. Importantly, Plaintiffs did not submit comments to the ITC in conjunction with Investigation No. 1205-6.⁹ In February 2005, Customs responded with two letters addressing the comments received by the ITC from the domestic interested parties. Final Report at I-1 to I-9. When the ITC issued its final report in April 2006, the agency submitted its recommendations to the President. Final Report at 1.

The President issued Proclamation 8097 and adopted the ITC's recommended modifications, following the required lapse of sixty days and after allowing time for congressional review of the proposed changes under § 3006(b)(1)-(2). Proclamation No. 8097, 72 Fed.Reg. 453 (Jan. 4, 2007). The modifications became effective on February 3, 2007, exactly thirty days after the Federal Register first published the President's proclamation. 72 Fed.Reg. at 458.

II. Standard of Review

The Court assumes that all undisputed facts alleged in the complaint are true and must draw all reasonable inferences in the plaintiffs' favor when it decides a motion to dismiss based upon either lack of subject matter jurisdiction or failure to state a claim for which relief may be granted. See Henke v. United States, 60 F.3d 795, 797 (Fed.Cir.1995); Gould, Inc. v. United States, 935 F.2d 1271, 1274 (Fed.Cir.1991).

A fundamental question in any action before the Court is whether subject matter jurisdiction exists over the claims presented. See Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94-95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). "Without jurisdiction the [C]ourt cannot proceed at all in any cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function remaining to the court is that of announcing the fact and dismissing the cause." Ex parte McCardle, 7 Wall. 506, 74 U.S. 506, 514, 19 L.Ed. 264 (1868). The party invoking the Court's jurisdiction bears the burden of establishing it. See Norsk Hydro Can., Inc. v. United States, 472 F.3d 1347, 1355 (Fed.Cir.2006).

Finally, assuming that all of the factual allegations are true, "a complaint must contain sufficient factual matter ... to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937,...