Radtke v. U.S. Bureau of Customs & Border Prot.

• Decision Date: 14 November 2022
• Docket Number: Civil Action 17-cv-2412 (TSC)
• Parties: CAPTAIN PAUL RADTKE, et al., Plaintiffs, v. U.S. BUREAU OF CUSTOMS & BORDER PROTECTION, et al., Defendants.
• Court: U.S. District Court — District of Columbia

CAPTAIN PAUL RADTKE, et al., Plaintiffs,
v.
U.S. BUREAU OF CUSTOMS & BORDER PROTECTION, et al., Defendants.

Civil Action No. 17-cv-2412 (TSC)

United States District Court, District of Columbia

November 14, 2022

MEMORANDUM OPINION

TANYA S. CHUTKAN, United States District Judge.

Plaintiffs Captain Paul Radtke, Offshore Marine Service Association, and Shipbuilders Council of America have sued the Bureau of Customs and Border Protection (“CBP”) and its Acting Commissioner Kevin K. McAleenan. Plaintiffs allege that Defendants have violated the Administrative Procedure Act (“APA”) through a string of letter rulings incorrectly interpreting the Jones Act and subsequent decisions not to revoke those letter rulings. ECF No. 1, Compl., ¶¶ 1-2, 5. Defendants moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). ECF No. 18 (“Def. MJP”). Plaintiffs opposed and later moved for leave to amend their complaint. ECF No. 35 (“Pl. Mot. for Leave”). For the reasons below, the court will GRANT Plaintiffs' motion for leave to amend and DENY without prejudice Defendants' motion for judgment on the pleadings as moot.

I. BACKGROUND

A. Statutory Scheme

CBP is responsible for interpreting and enforcing Section 27 of the Merchant Marine Act of 1920, commonly known as the Jones Act, 46 U.S.C. § 55102, which governs the

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transportation of merchandise between points in the United States-also known as “coastwise transportation.” The Act requires that coastwise transportation be performed only by vessels flagged, owned, built, and crewed by Americans-often termed “Jones Act qualified vessels.” See 46 U.S.C. § 55102(b).

Pursuant to its general enforcement authority, CBP may issue interpretive “letter rulings” applying the Jones Act prospectively to individual transactions. See 19 U.S.C. §§ 1502, 1625(a); United States v. Mead Corp., 533 U.S. 218, 234 (2001). Letter rulings are intended to preview for “importers and other interested persons” CBP's view of a transaction before it is undertaken and completed. 19 C.F.R. § 177.1(a)(1). Generally, CBP only issues a letter ruling when requested by a “person who . . . has a direct and demonstrable interest in the question or questions presented in the ruling request,” id. § 177.1(c), when the prospective transaction is not “essentially hypothetical in nature,” id. § 177.7(a), and when issuing a letter ruling would not be “contrary to the sound administration of the Customs and related laws,” id. Once issued, however, a letter ruling constitutes CBP's “official position” on “the particular transaction or issue described therein and is binding on all Customs Service personnel.” Id. § 177.9(a).

By law, CBP must publish a letter ruling within 90 days of its issuance. 19 U.S.C. § 1625(a). Any “person may appeal an adverse interpretive ruling . . . to a higher level of authority within the Customs Service for de novo review,” and CBP must decide the appeal within 60 days. Id. § 1625(b).

While CBP may issue letter rulings without adversarial proceedings or notice and comment, the Jones Act imposes special procedures for changing the rulings. If CBP proposes an interpretive rule or decision that would “(1) modify . . . or revoke a prior interpretive ruling or decision which has been in effect for at least 60 days; or (2) “have the effect of modifying the

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treatment previously accorded by the Customs Service to substantially identical transactions,” CBP must provide a notice and comment period. Id. § 1625(c). “After consideration of any comments received,” CBP must “publish a final ruling or decision” no later than 30 days after the close of the notice and comment period. Id.

B. Plaintiffs' Administrative Challenges

Plaintiffs are two associations-the Offshore Marine Service Association (OMSA) and Shipbuilders Council of America (SCA)-and Captain Paul Radtke, who holds a U.S. Coast Guard vessel operating license. Compl. ¶¶ 6-8. Plaintiffs or their members build, own, or operate Jones Act qualified vessels. Id. Plaintiffs identify three ways in which CBP violated the APA and caused them actionable harm.

First, Plaintiffs challenge CBP's issuance of and failure to revoke twenty-five letter rulings dating as far back as 1976. They claim these letter rulings collectively departed from the Jones Act's requirements by “permitting foreign vessels to transport merchandise between U.S. points if they also engage in ancillary activities that are not regulated by the Jones Act,” id. ¶¶ 33-35, and “improperly narrow[ing] the definition of ‘merchandise' that must be transported by Jones Act,” id. ¶¶ 36-41. In 2009, and again in 2017, CBP initiated § 1625(c) proceedings that proposed to revoke or modify some or all the allegedly unlawful letter rulings. Id. ¶¶ 43-44, 50-63. In both instances, however, CBP ultimately decided to withdraw those proposals and make no changes after the close of the notice and comment periods. Id. ¶¶ 45, 66. After CBP withdrew the proposals in 2017, OMSA sent a letter to Kevin K. McAleenan purporting to “appeal, pursuant to 19 U.S.C. § 1625(b),” that decision. Id. ¶ 68; id. Exh. E, ECF No. 1-5, at 12. Plaintiffs contend that CBP never responded to the letter. Id. ¶ 69. Accordingly, the Complaint asserts that the twenty-five letter rulings, as well as CBP's 2017 decision not to

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revoke them and failure to respond to OMSA's appeal, were all “arbitrary, capricious, and abuses of discretion, and contrary to law.” Id. ¶ 84.

Second, Plaintiffs object to CBP's denial of OMSA's request for a letter ruling concerning decommissioning activities. An oil rig operator can abandon an offshore well in a process called decommissioning, during which the operator will often use vessels to remove any remaining installations or facilities before plugging the well. Compl. ¶¶ 86-87. In early 2016, OMSA sought a letter ruling confirming that the Jones Act governed foreign vessels transporting merchandise for decommissioning activities. Id. ¶ 89. CBP denied OMSA's request, stating that it was “hypothetical.” Id. ¶ 90. The next year, OMSA purported to “appeal, pursuant to 19 U.S.C. § 1625(b),” that denial along with the 2017 withdrawal. Id. ¶ 91; id. Exh. E, ECF No. 15, at 1-2. The Complaint contends that both CBP's denial of the request for a letter ruling, as well as its failure to respond to the appeal letter, are “arbitrary, capricious, an abuse of discretion, and contrary to law.” Id. ¶¶ 92-93.

Finally, Plaintiffs take issue with a 2012 letter ruling regarding the transportation of “nodes”-devices for measuring seismic data on the Outer Continental Shelf. In that letter ruling, CBP determined that if a foreign vessel transporting nodes qualified under the foreign country's laws as an “oceanographic research vessel,” then the requirements of the Jones Act did not apply. Id. ¶¶ 97, 100. That determination, the Complaint alleges, contravenes the Jones Act when read in conjunction with the Oceanographic Research Vessel Act, 46 U.S.C. § 2101, and the Outer Continental Shelf Lands Act, 43 U.S.C. § 1333, and therefore is also “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Compl. ¶ 103-04.

Plaintiffs claim that CBP's letter rulings “allow[] foreign-flagged vessels to continue to perform substantial amounts of work in the Gulf of Mexico”-work that otherwise “would be

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handled by U.S.-flagged vessels and U.S. mariners.” Id. ¶ 70. In the absence of those letter rulings, therefore, Plaintiffs “would be able to obtain contracts to handle the work performed by these foreign-flagged vessels,” which they are “capable of handling” but often “do not receive” under CBP's current regime. Id. ¶¶ 77-78. Plaintiffs assert a similar harm for U.S. shipbuilders and mariners like Captain Radtke, who suffer from the reduced demand for their services caused by CBP's letter rulings permitting their replacement by foreign entities. Id. ¶¶ 79-80. These harms would be remedied, they argue, if the court granted them the relief they seek: a declaration that CBP violated the APA and an order that CBP implement Plaintiffs' reading of the Jones Act by revoking or issuing letter rulings as necessary. Id. at 31.

C. Procedural History

After CBP filed an answer, ECF No. 10, the court permitted American Petroleum Institute to intervene as a defendant, 4/3/2018 Minute Order. Defendants then moved for judgment on the pleadings, asserting that the Complaint should be dismissed because the court lacks jurisdiction, Plaintiffs lack standing, the first claim is not ripe, all three claims are moot, the first and third claims are not justiciable, the 2017 withdrawal was not a final agency action, the first claim is barred by the statute of limitations, all of CBP's challenged actions are discretionary and therefore unreviewable, and OMSA never brought a valid appeal under Section 1625(b). Def. MJP at 9-32. In addition, American Petroleum Institute contends that the 2017 withdrawal was legally required because the proposed modifications did not comply with Executive Order 13,771. Def. MJP at 33.

While Defendants' motion was pending, CBP again issued a Section 1625(c) proposal to modify or revoke some...