Pillsbury Co. v. U.S.

• Decision Date: 19 April 2005
• Docket Number: SLIP OP. 05-51.,Court No. 03-00096.
• Citation: 368 F.Supp.2d 1319
• Parties: THE PILLSBURY COMPANY, Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

368 F.Supp.2d 1319

THE PILLSBURY COMPANY, Plaintiff, v. UNITED STATES, Defendant.

SLIP OP. 05-51.

Court No. 03-00096.

United States Court of International Trade.

April 19, 2005.

Neville Peterson LLP, Washington, DC (John M. Peterson, Maria E. Celis, Margaret R. Polito, and George W. Thompson) for The Pillsbury Company.

Peter D. Keisler, Assistant Attorney General, Barbara S. Williams, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice Chi S. Choy, Office of Assistant Chief Counsel, U.S. Customs and Border Protection, for Defendant, of counsel.

OPINION

POGUE, Judge.

Plaintiff, The Pillsbury Company ("Pillsbury"), challenges a decision by the United States Bureau of Customs and Border Protection ("Customs" or "Defendant") classifying certain imports of ice cream. Customs classified Plaintiff's imports under subheading 2105.00.20 of the Harmonized Tariff Schedule of the United States (1999) ("HTSUS") dutiable at a rate of 51.7 cents per kilogram plus 17.5% ad valorem. Pillsbury asserts that Customs should have classified these imports under subheading 2105.00.10, HTSUS, and assessed a 20% ad valorem duty.

Before the Court are cross-motions for summary judgment. As the parties have agreed to all the essential facts, the issue presented is a pure question of law, rendering this case ripe for summary judgment. Brother Int'l Corp. v. United States, 26 CIT 867, 869, 248 F.Supp.2d 1224, 1226 (2002); USCIT R. 56(c). The Court has exclusive jurisdiction over this question pursuant to 19 U.S.C. § 1514 (2000) and 28 U.S.C. § 1581(a). For the reasons set forth below, the Court finds that Customs should have classified the imports in question under subheading 2105.00.10, HTSUS, and therefore grants summary judgment for the Plaintiff.

I. BACKGROUND

A.

As part of the Uruguay Round of the General Agreement on Tariffs and Trade ("GATT"), the member states of the World Trade Organization ("WTO")¹ agreed to abolish quantitative limitations on imports of agricultural products. WTO Agreement on Agriculture, art. 4(2);² see also 7 U.S.C. § 624(f), 7 C.F.R. § 6.20 (2005). Nevertheless, the Uruguay Round did permit member states to adopt tariff rates that are contingent on the volume of imports of a certain product, often referred to as tariff rate quotas ("TRQs"). Under the TRQ regime, the tariff rate is adjusted depending on the volume of imports of a given product into the United States during a certain year. TRQs are a departure from the absolute quota restrictions under the GATT because nations are not allowed to set specific limits on imports — rather, member states are only allowed to increase tariff rates for imports after certain levels of imports have been reached. To take a simplified version of the facts in this case as an example of a TRQ, the United States may agree to allow 5,191,031 liters of ice cream into the United States, at a tariff rate of 20% ad valorem, and then, after that quota level has been reached, assess a tariff rate of 51.7 cents per kilogram plus 17.5% ad valorem for all subsequent entries.³ The United States, a member state of the WTO, has adopted many TRQs.

Before the Uruguay Round began, Congress expressed the negotiating objectives of the United States: to develop "(1) more open, equitable, and reciprocal market access; (2) the reduction or elimination of barriers and other trade-distorting policies and practices; and (3) a more effective system of international trading disciplines and procedures." 19 U.S.C. § 2901(a). To this end, Congress granted the President the authority to "enter into trade agreements with foreign countries; and [subject to certain limitations proclaim]⁴ — (I) such modification or continuance of any existing duty, (ii) such continuance of existing duty-free or excise treatment, or (iii) such additional duties; as he determines to be required or appropriate to carry out any such trade agreement." 19 U.S.C. § 2902 (emphasis added).

Specifically, with regard to the provisions at issue in this case, during the Uruguay Round negotiations, the United States agreed to certain commitments with regard to the importation of ice cream. This agreement is recorded as "Schedule XX" (a schedule listing the United States' tariff concessions for numerous products). See Schedule XX — United States of America, annexed to the Marrakesh Protocol to the General Agreement on Tariffs and Trade 1994 ("Schedule XX"). Pursuant to his authority granted by Congress, i.e., 19 U.S.C. § 2902, President Clinton proclaimed portions of Schedule XX into United States law. See Presidential Proclamation 6763 of Dec. 23, 1994, 60 Fed.Reg. 1007, 1131 & 1137 (Jan. 4, 1995). Nearly simultaneously, Congress expressed its support for the United States' commitments under Schedule XX by providing the President specific authority to: (i) proclaim Schedule XX into U.S. law;⁵ (ii) proclaim future agreements to reduce duties under the "auspices of the WTO";⁶ and (iii) to correct "technical errors in Schedule XX or to make other rectifications to the Schedule."⁷ See H.R.Rep. No. 103-826, pt. 1, at 28-29 (1994); S.Rep. No. 103-412, at 18 (1994).⁸ As part of these concerted actions of Congress and the President, the United States adopted a TRQ for ice cream codifying Schedule XX as Note 5 to Chapter 21, HTSUS ("Note 5").⁹

Note 5 provides:

The aggregate quantity of ice cream entered under subheading 2105.00.10 in any calendar year shall not exceed 5,191,031 liters (articles the product of Mexico shall not be permitted or included in the aforementioned quantitative limitation and no such articles shall be classifiable therein).

Of the quantitative limitations provided for in this note, the countries listed below shall have access to not less than the quantities specified below:

                Quantity
                                  (liters)
                Belgium            922,315
                Denmark             13,059
                Jamaica              3,596
                Netherlands        104,477
                New Zealand        589,312
                

If ice cream imports fall within these limits (i.e., "in-quota"), Customs classifies the entries under subheading 2105.00.10 and assesses a 20% ad valorem duty rate. Subheading 2105.00.10, HTSUS. Alternatively, if the quota level is exhausted (i.e., "over-quota"), Customs classifies the entries under subheading 2105.00.20, HTSUS, and assesses a duty of 51.7 cents per kilogram plus 17.5% ad valorem. Subheading 2105.00.20, HTSUS. As is apparent in the language quoted above, Note 5 further provides that enumerated nations, i.e., those specifically mentioned, shall have access to a specified volume of imports regardless of how many liters of ice cream are imported from other nations. Additionally, because the amounts specifically allocated to the enumerated nations total 1,632,759 liters, far less than aggregate level allowable of 5,191,031 liters, the language implies that there exists a "common pool" which may be used by all WTO nations — including the enumerated nations if they have exceeded their minimum access quotas. For imports implicating the "common pool," Customs allocates the quota on a first-come-first-served basis. See 19 C.F.R. § 130 et seq.

What is unclear from Note 5's language, and what is at issue here, is whether ice cream imported from nations, other than those specifically listed, may qualify under the unused portions of the enumerated nations' allotments at the expiration of the year. To wit, whereas Note 5 is clear that the enumerated nations' imports may invade the "common pool" if the "common pool" has not been exhausted, the parties in this case disagree as to whether all other nations may invade the enumerated nations' unused allotments.

B.

Plaintiff is an importer of ice cream products. On March 27, 1999, an ice cream factory exploded in Le Mars, Iowa. That factory had been producing Haagen-Dazs ice cream for Pillsbury. Pl.'s Mem. Points and Authorities R. 56 Supp. Mot. Summ. J. at 2 ("Pl.'s Mem."). As a result of the explosion, Pillsbury did not have sufficient production in the United States to meet demand. Consequently, in the spring of 1999, Pillsbury imported ice cream from its Haagen-Dazs factory in France in order to meet its production needs. Id.

At first, Customs classified Pillsbury's entries under subheading 2105.00.10, HTSUS. However, commencing in July, 1999, 3,558,272 liters of the "common pool" had been imported and Customs then assessed Pillsbury's imports at the over-quota rate. When the quota year ended on December 31, 1999, the enumerated nations had not used their allotments. In fact, Belgium, Denmark, Jamaica, and New Zealand had shipped no ice cream to the United States during 1999, and the Netherlands had shipped only 82 liters of ice cream. See Pl.'s R. 56 Statement Material Facts Not in Dispute at paras. 13, 14; Def.'s Pl.s Stat. Mat. Facts at paras. 13, 14. Consequently, Customs permitted only 3,558,354 liters of ice cream to enter under the lower tariff rate. Given this short-fall, Pillsbury made a timely request to have certain of its over-quota imports reliquidated at the lower tariff rate. Customs did not respond to Pillsbury's request and, after 30 days, the protest was deemed denied. See 19 C.F.R. § 174.22(d). Pillsbury timely sought judicial review of Customs' denied protest.

II. STANDARD OF REVIEW

Although the parties disagree over the proper standard of review, this question is squarely addressed by the Supreme Court's decisions in United States v. Haggar Apparel Co., 526 U.S. 380, 119 S.Ct. 1392, 143 L.Ed.2d 480 (1999) and United States v. Mead, 533 U.S. 218, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001). In Haggar Apparel Co., 526 U.S. at 386-89, 119 S.Ct. 1392, the Supreme Court held that when Commerce adopts regulations pursuant to notice and comment rule making, the Court should accord those regulations deference pursuant to the Supreme Court's decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837,...