Pac Fung Feather Co., Ltd. v. US

• Decision Date: 28 December 1995
• Docket Number: Slip Op. 95-207,Court No. 95-10-01299.
• Citation: 911 F. Supp. 529,19 CIT 1451
• Parties: PAC FUNG FEATHER COMPANY, LTD. and Natural Feather & Textiles, Inc., Plaintiffs, v. The UNITED STATES, et al., Defendants.
• Court: U.S. Court of International Trade

911 F. Supp. 529

19 CIT 1451

PAC FUNG FEATHER COMPANY, LTD. and Natural Feather & Textiles, Inc., Plaintiffs, v. The UNITED STATES, et al., Defendants.

Slip Op. 95-207, Court No. 95-10-01299.

United States Court of International Trade.

December 28, 1995.

Neville, Peterson & Williams (John M. Peterson, George W. Thompson, Margaret R. Polito, Arthur K. Purcell and James A. Marino) for plaintiffs.

Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (Rhonda K. Schnare), Mark G. Nackman, General Attorney, Office of Assistant Chief Counsel, International Trade Litigation, United States Customs Service, of counsel, for defendants.

OPINION

RESTANI, Judge:

This action is before the court on cross-motions for summary judgment made pursuant to USCIT Rule 56 by plaintiffs Pac Fung Feather Company, Ltd. ("Pac Fung") and Natural Feather & Textiles, Inc., Pac Fung's U.S. selling agent, and defendants United States, et al. Plaintiffs contest the final regulations promulgated by the United States Customs Service ("Customs") concerning the rules of origin for textile and apparel products. See Rules of Origin for Textile and Apparel Prods., 60 Fed.Reg. 46,188 (Dep't Treas.1995). In addition to their cross-motion, defendants move to dismiss plaintiffs' action on the basis of certain jurisdictional defects.

STATUTORY AND REGULATORY SCHEME

On December 8, 1994, President Clinton signed into law the Uruguay Round Agreements Act, Pub.L. No. 103-465, 108 Stat. 4809 (1994) ("URAA"). Section 334(a) of the URAA directs that the Secretary of the Treasury promulgate "rules implementing the principles contained in section 334(b) for determining the origin of textiles and apparel products." 19 U.S.C. § 3592(a) (1994). The principles set forth in section 334(b) provide, in relevant part, as follows:

(1) In General. — Except as otherwise provided for by statute, a textile or apparel product, for purposes of the customs laws and the administration of quantitative restrictions, originates in a country ... and is the growth, product, or manufacture of that country ..., if —

(A) the product is wholly obtained or produced in that country ...;

(B) the product is a yarn, thread, twine, cordage, rope, cable, or braiding and —

(i) the constituent staple fibers are spun in that country ..., or

(ii) the continuous filament is extruded in that country ...,

(C) the product is a fabric, including a fabric classified under chapter 59 of the Harmonized Tariff Schedules of the United States ("HTSUS"), and the constituent fibers, filaments, or yarns are woven, knitted, needled, tufted, felted, entangled, or transformed by any other fabric-making process in that country ...; or

(D) the product is any other textile or apparel product that is wholly assembled in that country ... from its component pieces.

(2) Special Rules. — Notwithstanding paragraph (1)(D) — (A) the origin of a good that is classified under one of the following HTSUS headings or subheadings shall be determined under subparagraph (A), (B), or (C) of paragraph (1), as appropriate: 5609, 5807, 5811, 6209.20.50.40, 6213, 6214, 6301, 6302, 6303, 6304, 6305, 6306, 6307.10, 6307.90, 6308, or 9404.90;¹ ...

....

(3) Multicountry Rule. — If the origin of a good cannot be determined under paragraph (1) or (2), then that good shall be considered to originate in, and be the growth, product, or manufacture of —

(A) the country ... in which the most important assembly or manufacturing process occurs, or

(B) if the origin of the good cannot be determined under subparagraph (A), the last country ... in which important assembly or manufacturing occurs.

19 U.S.C. § 3592(b) (1994) (emphasis added).

On May 23, 1995, Customs published a notice of proposed regulatory rules to implement the origin principles set forth above. Rules of Origin for Textile and Apparel Prods., 60 Fed.Reg. 27,378 (Dep't Treas. 1995). In its notice, Customs addressed concerns as to the application of section 334(b)(2)(A), the "Special Rule" for products falling under certain HTSUS headings and subheadings. See 19 U.S.C. § 3592(b)(2)(A). Customs stated the following:

The words "as appropriate" in section 334(b)(2)(A) of the URAA appear to have created some confusion regarding the application of that statutory provision. In this regard it has been suggested to Customs, for example, that because neither a bed sheet nor a comforter (each of which is classifiable in a tariff provision listed in section 334(b)(2)(A)) is a fabric, it would not be appropriate to determine the origin of the sheet or comforter by resorting to section 334(b)(1)(C) which on its face covers only fabric. Customs does not agree with this suggested interpretation because all of the HTSUS provisions listed in section 334(b)(2)(A) cover goods that have been advanced beyond the form of (in other words, have been made from) yarn, thread, etc., or fabric. Accordingly, the suggested interpretation would make a nullity of section 334(b)(2)(A).

60 Fed.Reg. at 27,382.

Following a period for public comment, on September 5, 1995, Customs published the final regulatory amendments implementing the new origin rules for textile and apparel products.² 60 Fed.Reg. at 46,188. In that notice, Customs adhered to its interpretation of the Special Rule for specified HTSUS headings and subheadings. Customs reasoned that as all of the HTSUS provisions "cover goods that have been advanced beyond yarn or fabric form, the origin of those goods should be determined by the yarns ... or the fabrics which comprise the good." 60 Fed.Reg. at 46,192. Thus, for example,

when determining the origin of a bed sheet cut and finished in Country B from fabric woven in Country A, the appropriate rule is section 334(b)(1)(C) which concerns the origin of fabrics.

Customs dismissed challenges to its interpretation of the Special Rule, maintaining that

none of the interpretations suggested by those commentators adequately addressed the fact that all of the HTSUS headings and subheadings listed in the Special Rule provide for goods made from materials and that, therefore, the most reasonable interpretation of that section is that it is appropriate to determine the origin of those goods according to § 334(b)(1)(B), the rule for yarns, or § 334(b)(1)(C), the rule for fabrics.

60 Fed.Reg. at 46,192. Accordingly, Customs drafted the new regulations to reflect this position. In accordance with its interpretation of the Special Rule, Customs utilizes specific rules and requirements for determining the origin of goods falling under the enumerated HTSUS provisions. For example, "the country of origin of a good classifiable under heading 6301 through 6306 is the country ... in which the fabric comprising the good was formed by a fabric-making process."³ 60 Fed.Reg. at 46,203 (emphasis added).

Herein lies the heart of plaintiffs' cause of action. Pac Fung, headquartered in Hong Kong, manufactures home textile articles, such as comforter shells, flat and fitted bed sheets, pillowcases, pillow shams, and duvet covers. Compl. ¶ 3, at 2. Pac Fung manufactures these products in factories located in Hong Kong, the People's Republic of China, and Macau, using fabric woven in various countries, but primarily in China. Plaintiffs indicate that all of the products manufactured by Pac Fung, and exported to the United States, fall within an enumerated tariff provision of the Special Rule.⁴ See supra note 1; 19 U.S.C. § 3592(b)(2)(A). Under Customs' new final regulations, plaintiffs contend, those products manufactured by Pac Fung in Hong Kong or Macau using Chinesewoven fabric, will be deemed to originate in China. Thus, Pac Fung's imports of these products after July 1, 1996, the effective date of the new regulations, will be subject to quantitative textile restrictions on exports from China.

Plaintiffs assert that Customs' regulatory implementation of the statutory directive contained in section 334 of the URAA is arbitrary, capricious, and otherwise not in accordance with law. Plaintiffs ask the court to enjoin defendants from implementing and enforcing the new regulations, and request that the court remand this matter to the Department of the Treasury for the promulgation of new regulations that are in accordance with law. Defendants contend that the court should (1) dismiss plaintiffs' action for lack of subject matter jurisdiction and standing, or in the alternative, (2) enter summary judgment in defendants' favor.

DISCUSSION

I. Defendants' Motion to Dismiss

A. Jurisdiction

Plaintiffs claim jurisdiction over Customs' promulgation of the final rules of origin, pursuant to 28 U.S.C. § 1581(i)(3), (4) (1988 & Supp. V 1993).⁵ As is well established, section 1581(i) is a broad residual jurisdictional provision that "`may not be invoked when jurisdiction under another subsection of § 1581 is or could have been available, unless the remedy provided under that other subsection would be manifestly inadequate.'" Norcal/Crosetti Foods, Inc. v. United States, 963 F.2d 356, 359 (Fed.Cir. 1992) (quoting Miller & Co. v. United States, 824 F.2d 961, 963 (Fed.Cir.1987), cert. denied 484 U.S. 1041, 108 S.Ct. 773, 98 L.Ed.2d 859 (1988)). Defendants assert that section 1581(i) jurisdiction is unavailable to plaintiffs because plaintiffs "have failed to establish that the customary basis for invoking this Court's jurisdiction over future entries, 28 U.S.C. § 1581(h), is manifestly inadequate." Defs.' Mot. to Dismiss & Cross-Mot. Summ. J. at 5. Section 1581(h), Title 28, United States Code, provides that the

Court of International Trade shall have exclusive jurisdiction of any civil action commenced to review, prior to the importation of the goods involved, a ruling issued by the Secretary of the Treasury ... relating to classification, valuation, rate of duty, marking, restricted merchandise, entry requirements, drawbacks, ... or

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