Shah Bros. Inc. v. United States

• Decision Date: 17 May 2011
• Docket Number: Slip Op. 11–56.Court No. 10–00205.
• Citation: 770 F.Supp.2d 1367
• Parties: SHAH BROTHERS, INC., Plaintiff,v.UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

770 F.Supp.2d 1367

SHAH BROTHERS, INC., Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 11–56.Court No. 10–00205.

United States Court of International Trade.

May 17, 2011.

Stein Shostak Shostak Pollack & O'Hara (Elon A. Pollack, Bruce N. Shulman, and Juli C. Schwartz) for the Plaintiff.Tony West, Assistant Attorney General; Jeanne E. Davidson, Director; Barbara S. Williams, Attorney–in–Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice (Claudia Burke and Edward F. Kenny) for the Defendant.

OPINION

POGUE, Chief Judge.

This case concerns the U.S. Customs and Border Protection's (“Customs” or “CBP” or “the government”) classification of Plaintiff Shah Bros.' imported merchandise, a smokeless tobacco product called “gutkha,” that is subject to taxes as well as tariffs under the Harmonized Tariff Schedule of the United States (“HTS”) 2403.99.¹ The facts at issue here are similar to those in Shah Brothers v. United States, Slip Op. 10–115, Court No. 09–00180, issued on October 6, 2010, which involved different entries of the same merchandise. See Shah Brothers v. United States, ––– CIT ––––, 751 F.Supp.2d 1303 (2010)(“ Shah Bros. I ”).

The issues in the two cases are also almost identical. See Amend. Compl. ¶ 54 (alleging that the cases “involve[ ] identical issues”). In both cases, Plaintiff's complaints challenge CBP's classification and taxation of Plaintiff's gutkha (Counts 1 and 2), as well as the Alcohol and Tobacco Tax and Trade Bureau's (“TTB”) “erroneous administration and enforcement” in the classification and taxation of said goods (Counts 3 and 4).

In Shah Bros. I, the government confessed judgment with regard to the classification and taxation of the goods, and the court dismissed the action with regard to TTB, concluding that jurisdiction pursuant to 28 U.S.C. § 1581(a) provided the appropriate remedy where Customs, not TTB, both administers and enforces the classification and taxation of Plaintiff's goods. Shah Bros. I at 1314–15.

Following the analysis in Shah Bros. I, the government now asks the court to dismiss Counts 3 and 4 of Plaintiff's amended complaint in this action for lack of subject matter jurisdiction.

Plaintiff contends that, unlike the situation in Shah Bros. I, jurisdiction over Counts 3 and 4 exists in this action because a recent amendment to 19 U.S.C. § 1514 divests Customs of final authority regarding tax collection, rendering section 1581(a) unavailable.

Because the court concludes that the amendment at issue does not alter Customs' responsibility as the final agency decision-maker, the court grants the government's request.

BACKGROUND

Shah Bros. I ²

Gutkha, a “smokeless tobacco,” is subject both to import tariffs in accordance with the HTS and to federal Internal Revenue excise taxes in accordance with 26 U.S.C. § 5701(e). Title 26 defines “smokeless tobacco” as “any snuff or chewing tobacco.” 26 U.S.C. § 5702(m)(1).³ Although the tariff rate for snuff and chewing tobacco is the same, the excise tax for snuff is higher than that for chewing tobacco. See id. at § 5701(e).

Customs is responsible for collecting both the tariffs and the excise taxes. See 6 U.S.C. § 215(1); 27 C.F.R. § 41.62; Treas. Order 100–16 (May 15, 2003). Nonetheless, in classifying smokeless tobacco either as chewing tobacco or snuff, Customs considers determinations made by the TTB.

In Shah Bros. I, Shah Bros. classified its gutkha as “chewing tobacco” under HTSUS Subheading 2403.99.2030. Shah Bros. I at 1306. Customs changed the gutkha tariff classification and then liquidated the merchandise as “snuff,” under HTSUS 2403.99.2040. Id. In response, Shah Bros., after using the statutory protest procedures, filed an action in this court challenging the government's decision. The government confessed judgment, agreeing to re-liquidation of the entries as chewing tobacco under HTS Subheading 2403.99.2030, and the court, in January 2010, entered judgment and ordered the re-liquidation of the entries. Def.'s Partial Mot. to Dismiss 3 (“Def.'s Mot. to Dismiss”).

Following the court's entry of judgment, Shah Bros. then filed an amended complaint, alleging jurisdiction under 28 U.S.C. §§ 1581(i)(1) and (i)(4),⁴ and claiming economic harm as a result of TTB and CBP's actions. Specifically, Shah Bros. challenged TTB's administration and enforcement of the relevant regulations and procedures in determining the classification of imported gutkha, claiming that TTB and Customs acted arbitrarily and contrary to law. The court dismissed for lack of jurisdiction, concluding that CBP, not TTB, administers and enforces the taxes at issue here. Therefore, Plaintiff's proper relief followed the statutory protest procedures, and since jurisdiction under 28 U.S.C. § 1581(a) was available and adequate, the court lacked jurisdiction under section 1581(i).

In addition to the entries in the prior lawsuit and the entries at issue here, other of Plaintiff's gutkha entries are currently subject to seizure and judicial forfeiture. Amend. Compl. ¶ 56.

Shah Bros. II

The merchandise at issue in this matter was entered in 2009 under Entry No. BGG–5253247–6. CBP classified this entry as “snuff” under HTS Subheading 2403.99.2040, assessing a tax of $1.51/lb. Plaintiff timely protested Customs' decision and the protest was denied. Amend. Compl. ¶ 57. Plaintiff then filed its complaint in this action, alleging jurisdiction under both section 1581(a) and 1581(i), and again challenging both CBP's denial of the protest as well as TTB's alleged actions. In its amended complaint,⁵ Plaintiff claimed that an amendment to 19 U.S.C. § 1514 now requires the court to review TTB's decisions, thus rendering Shah. Bros. I inapplicable as of April 2009, when the amendment was enacted. Amend. Compl. ¶ 9.

Plaintiff alleges that the statute, as amended, excludes tax assessment decisions from review by protest, thus precluding Plaintiff from exercising jurisdiction under 1581(a), and leaving 1581(i) jurisdiction as the only remaining avenue for judicial relief.

STANDARD OF REVIEW

Whether jurisdiction exists is a question of law. Sky Techs. LLC v. SAP AG, 576 F.3d 1374, 1378 (Fed.Cir.2009). In resolving such a question, where the Defendant has moved to dismiss part of Plaintiff's action for lack of jurisdiction, the court accepts as true all factual allegations Plaintiff asserts, construing all material facts in the complaint in Plaintiff's favor. Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975); Ritchie v. Simpson, 170 F.3d 1092, 1097 (Fed.Cir.1999). Nonetheless, Shah Bros., “[the] party seeking the exercise of jurisdiction in its favor[,] has the burden of establishing that [ ] jurisdiction exists.” Rocovich v. United States, 933 F.2d 991, 993 (Fed.Cir.1991) (citing KVOS, Inc. v. Associated Press, 299 U.S. 269, 278, 57 S.Ct. 197, 81 L.Ed. 183 (1936)).⁶

DISCUSSION

Shah Bros. I controls the result here. Here, as in Shah Bros. I, CBP's actions are reviewable under section 1581(a), which provides an available and adequate remedy.

As noted above, while Plaintiff concedes that the issues here are “identical” to those in Shah Bros. I, it contends that a 2009 amendment to 19 U.S.C. § 1514 divests Customs of final authority regarding tax collection, rendering section 1581(a) unavailable by impairing the court's ability to review TTB's “substantive” decisions. Amend. Compl. ¶¶ 9, 28. The court disagrees.

The 2009 amendment does not alter CBP's authority to assess and collect taxes; rather, the amendment only affects the statute of limitations regarding tax collection. 19 U.S.C. § 1514 itself concerns protests of Customs' decisions, including classification and taxation. As the government correctly explains, the Children's Health Insurance Program Reauthorization Act of 2009 (“CHIPRA”), which, in February 2009 amended 19 U.S.C. § 1514, “did not change the substance of the types of protestable actions.” Def.'s Reply in Supp. of Partial Mot. to Dismiss 2. Rather, the amendment changed only the statute of limitations for the assessment and collection of taxes for tobacco products. The relevant portion of the statute currently reads:

Except as provided in subsection (b) of this section, section 1501 of this title (relating to voluntary reliquidations), section 1516 of this title (relating to petitions by domestic interested parties), section 1520 of this title (relating to refunds), and section 6501 of title 26 (but only with respect to taxes imposed under chapters 51 and 52 of such title) ... decisions of the Customs Service ... shall be final and conclusive upon all persons (including the United States and any officer thereof) unless a protest is filed in accordance with this section ...

19 U.S.C. § 1514(a)(emphasis added to reflect the amended section). ⁷

The exception added to the statute, for “section 6501,” refers to 26 U.S.C. § 6501, concerning limitations on assessment and collection of taxes under the Internal Revenue Code (“IRC”). Under section 6501, taxes must be assessed within three years after a return is filed. 26 U.S.C. § 6501(a). The exception is limited to Chapter 52 of the IRC, which concerns tobacco products, and thus, after the 2009 amendment, these tobacco products, along with the distilled spirits delineated under chapter 51 of the IRC, are now subject to section 6501. This change allows for a three-year statute of limitations for the assessment of taxes on such tobacco products.

The plain language of Section 6501—which provides, in relevant part, that “any tax imposed by this title shall be assessed within 3 years after the return was filed....” 26 U.S.C. § 6501(a)—does not alter the protestability of Customs' assessment.

The legislative history confirms that the amendment changes only time limitations. Previously, there was a one-year time limit regarding these tobacco taxes; the 2009 amendment replaces the one-year limit with a three-year...