Otter Prods. v. United States

• Decision Date: 29 March 2023
• Docket Number: 22-00033,Slip Op. 23-43
• Parties: OTTER PRODUCTS, LLC, Plaintiff, v. UNITED STATES, ET AL., Defendants.
• Court: U.S. Court of International Trade

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OTTER PRODUCTS, LLC, Plaintiff, v. UNITED STATES, ET AL., Defendants.

No. 22-00033

Slip Op. 23-43

Court of Appeals of International Trade

March 29, 2023

[Dismissing for lack of jurisdiction plaintiff's action for interest on customs duty overpayments made in connection with prior disclosures.]

Louis S. Mastriani and Lydia C. Pardini, Polsinelli PC, of Washington, DC for plaintiff Otter Products, LLC.

Beverly A. Farrell, Senior Trial Attorney, and Justin R Miller, Attorney-In-Charge, International Trade Field Office Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of New York, NY for defendants United States U.S. Customs and Border Protection, and Chris Magnus in his capacity as Commissioner of U.S. Customs and Border Protection. Also on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General, and Patricia M. McCarthy, Director. Of counsel on the brief was Sabahat Chaudhary, Office of Assistant Chief Counsel, International Trade Litigation, U.S. Customs and Border Protection, of Washington, DC.

Before: Claire R. Kelly, Judge

OPINION

Claire R. Kelly, Judge

Before the court is plaintiff Otter Products, LLC's motion for judgment on the agency record challenging the refusal of defendants United States, U.S. Customs and Border Protection ("CBP"), and CBP Commissioner Chris Magnus (collectively "Defendants") to pay interest on Otter's duty overpayments. [Otter's] Mot. J. on the Agency R. ("Pl. Mot.") and accompanying Mem. Supp. [Pl. Mot.] ("Pl. Br."), Sept. 12, 2022, ECF Nos. 28-29; see also [Otter's] Reply Supp. [Pl. Mot.], Feb. 16, 2023, ECF No. 40. Otter claims that CBP's refusal to pay interest on its duty overpayments made in connection with its prior disclosures is contrary to law, arbitrary, capricious, an abuse of discretion, and contrary to equity.^[1] Pl. Mot. at 1. Defendants argue Congress did not provide for interest on duty overpayments in connection with prior disclosures. Defs.' Resp. to [Pl. Mot.] at 3, 6-17, Dec. 15, 2022, ECF No. 34 ("Def. Br."). For the following reasons, the court dismisses the case for lack of subject matter jurisdiction.

BACKGROUND

Otter is the importer of record of the Commuter and Defender Series cell phone cases. Starting in 2010, Otter discovered that it (i) had failed to declare the value of certain assists^[2] in connection with the valuation of its products and (ii) had inconsistently classified those products. Specifically, at the time of entry, Otter had classified its cases under both 3926.90.9980 of the Harmonized Tariff Schedule of the United States (2012) ("HTSUS"), subject to a 5.3 percent duty rate and 4202.32.9560, HTSUS, subject to a 17.6 percent duty rate, instead of under 4202.99.9000, HTSUS, at a 20 percent duty rate. Letter to CBP at 2, AK 1661-66 (May 16, 2012), ECF No. 46-3. ^[3] In connection with these errors, Otter later filed several prior disclosures to limit its potential penalty exposure.^[4]

First, on November 17, 2010, Otter submitted a prior disclosure, which covered assists it provided since 2006 in connection with its finished durable protective covers.^[5] See Letter to Commissioner of Customs at 1-2, AK 27-29 (Nov. 17, 2010), ECF No. 46; see also CBP Mem., AK 14 (Apr. 24, 2019), ECF No. 46. Between September 29, 2011 and July 30, 2012, Otter submitted interim duty payments related to the value of the assists it received for entries in the time period from January 1, 2006 to May 2, 2012 ("PD Payment 1"). Letter to CBP at 1-3, AK 31-34 (Feb. 17, 2011), ECF No. 46 (covering assists from January 1, 2006 to December 21, 2010); Letter to CBP at 1, AK 136-38 (Sept. 29, 2011), ECF No. 46 (covering assists from January 1, 2011 to August 31, 2011); Letter to CBP at 1-2, AK 143-47 (May 7, 2012), ECF No. 46 (payment for assists from January 1, 2006 to December 31, 2011); Letter to CBP at 1, AK 149-153 (July 30, 2012), ECF No. 46 (payment for assists from January 1, 2012 to May 2, 2012); see Letter to CBP at 1-2, AK 132-34 (Mar. 23, 2011), ECF No. 46 (proposing quarterly interim duty payments). PD Payment 1 reflected the additional duty due as a result of applying the ad valorem rate of duty associated with subheading 4202.99.9000, HTSUS, i.e., 20 percent as applied to the value of the assists that had not been properly declared. See Letter to CBP at 2, AK 136-38 (Sept. 29, 2011), ECF No. 46 (discussing accounting for assists and calculation of loss of revenue). After tendering PD Payment 1 and CBP approved its reconciliation applications, Otter began flagging entries for value reconciliation on May 3, 2012 going forward, to account for the value of assists.^[6] Letter to CBP at 2, AK 149-153 (July 30, 2012), ECF No. 46; see also Letter to CBP at 2, AK 136-38 (Sept. 29, 2011), ECF No. 46 (at the direction of CBP, Otter applied to participate in reconciliation, while making periodic interim duty payments on assists).

On May 16, 2012, Otter submitted its second prior disclosure concerning certain errors, including both classification and valuation errors, on its duties of durable protective covers entered between 2007 and March 2012.^[7] Letter to CBP at 1-2, Ex. A, AK 1668-77 (July 9, 2012), ECF No. 46-3; Letter to CBP at 1-3, AK 166166 (May 16, 2012), ECF No. 46-3. Otter, in this second prior disclosure letter, informed CBP that Otter had protested CBP's classification of its merchandise under the subheading 4202.99.9000, HTSUS, at the 20 percent duty rate, instead of the subheading 3926.90.9980, HTSUS, at the 5.3 percent duty rate, which could ultimately impact the duty rate of the entries underlying that prior disclosure.^[8] See Letter to CBP at 3 n.1, AK 1668-77 (July 9, 2012), ECF No. 46-3. On July 9, 2012, Otter submitted its additional duty payment in connection with the errors for its entries from 2007 to March 2012 ("PD Payment 2"). Letter to CBP at 1, Att. A, AK 1668-77 (July 9, 2012), ECF No. 46-3; see also Check No. 22080, AK 1675 (July 5, 2012), ECF No. 46-3.

On May 13, 2013, TreeFrog Developments, Inc. d/b/a LifeProof ("LifeProof") submitted a prior disclosure concerning assists it provided for finished durable protective covers entered between July 2011 and April 30, 2013. Letter to CBP at 1, LB 37-39 (Nov. 23, 2016), ECF No. 47; Letter to CBP at 1, 4, Exs. A, B, LB 41-51 (May 13, 2013), ECF No. 47. On June 3, 2013, LifeProof amended its prior disclosure naming Otter the importer of record for its entries when one of Otter's companies purchased LifeProof. See Letter to CBP at 1-2, LB 92-93 (June 3, 2013), ECF No. 47; see also Ex. A: Pre-Penalty Statement, LB 458-60, ECF No. 47 ("LifeProof started importing under the Otter Products LLC Importer of Record Number in 2014, which is why some prior disclosure tenders were made by LifeProof and some were made by Otter Products, LLC"). Between May 14, 2013 and September 29, 2014, Otter submitted interim duty payments in connection with the value of the assists LifeProof provided during the time period of January 2013 to April 30, 2014 ("PD Payment 3"). See Letter to CBP at 1, LB 99-100 (Sept. 11, 2013), ECF No. 47; Letter to CBP at 1, LB 121-22 (July 29, 2014), ECF No. 47; Letter to CBP at 1, LB 145-46 (Sept. 29, 2014), ECF No. 47.

On July 2, 2013, after filing its prior disclosures and its entry into the reconciliation program, Otter protested CBP's classification of its merchandise in connection with four entries in 2012.^[9] Summons at 1, Otter Products, LLC v. United States, 70 F.Supp.3d 1281 (Ct. Int'l Trade 2015) (No. 13-00269) ("Otter Products I"), ECF No. 1. Otter claimed CBP should classify Otter's merchandise under subheading 3926.90.9980, HTSUS, instead of subheading 4202.99.9000, HTSUS. Otter Products I, 70 F.Supp.3d at 1284. CBP denied Otter's protest on August 1, 2013. Summons at 1, Otter Products I, 70 F.Supp.3d 1281 (No. 13-00269), ECF No. 1.

Otter filed its complaint in Otter Products I on August 2, 2013. Otter Products I, 70 F.Supp.3d at 1284. In Otter Products I in addition to reclassification of the subject entries, Otter sought the refund of overpaid duties in connection with the value of the assists it provided for the subject merchandise in that case. Id. At 1284, 1285 n.2. While that case was pending before this court, Otter informed CBP, which was reviewing Otter's prior disclosures, of its court challenge to CBP's classification of similar products. Letter to CBP at 2, LB 121-22 (July 29, 2014), ECF No. 47; see also Letter to CBP at 2, LB 145-46 (Sept. 29, 2014), ECF No. 47. After being informed of the classification challenge, CBP held the prior disclosure submissions in abeyance.^[10] See, e.g., Email to Page Hall, LB 9 (Aug. 17, 2015), ECF No. 22-1; see also CBP Mem. at 1, Ex. A, AK 2-7 (June 1, 2020), ECF No. 46 (closing out prior disclosures); CBP Mem. at 1, Ex. A, LB 247-49 (July 13, 2020), ECF 47 (closing out prior disclosure). This court granted judgment in favor of Otter, determining that its merchandise should be reclassified under subheading 3926.90.9980, HTSUS. Otter Products I, 70 F.Supp.3d at 1295, 1298. The Court of Appeals affirmed. Otter Products, LLC v. United States, 834 F.3d 1369, 1381 (Fed. Cir. 2016) ("Otter Products II").

After the Court of Appeals affirmed this court's holding in Otter Products I, Otter moved this court to enforce its judgment in Otter Products I by reopening a prior disclosure, which Otter had filed on December 5, 2013 and CBP had closed out on November 18, 2014. Otter Products, LLC v. United States, 532 F.Supp.3d 1345, 1347 (Ct. Int'l Trade 2021) ("Otter Products III"). On August 18, 2021, the court denied Otter's motion to enforce because the judgment in Otter Products I applied only to the entries included in the protest at issue in that case. Id. at 1347, 1351-53.

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