Best Key Textiles Co. Ltd. v. United States , 777 F.3d 1356 ( 2015 )

United States Court of Appeals
for the Federal Circuit
______________________
BEST KEY TEXTILES CO. LTD.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2014-1327
______________________
Appeal from the United States Court of International
Trade in No. 1:13-cv-00367-RKM, Senior Judge R. Kenton
Musgrave.
______________________
Decided: February 3, 2015
______________________
JOHN M. PETERSON, Neville Peterson LLP, of New
York, New York, argued for plaintiff-appellant. With him
on the brief were MARIA E. CELIS, RICHARD F. O’NEILL,
and RUSSELL A. SEMMEL.
BEVERLY A. FARRELL, Trial Attorney, Commercial Lit-
igation Branch, Civil Division, United States Department
of Justice, of Washington, DC, argued for defendant-
appellee. With her on the brief were STUART F. DELERY,
Assistant Attorney General, JEANNE E. DAVIDSON, Direc-
tor, and MARCELLA POWELL, Trial Attorney, of Washing-
ton, DC, and AMY M. RUBIN, Assistant Director,
2 BEST KEY TEXTILES CO. v. US
International Trade Field Office, of New York, New York.
Of counsel on the brief were CLAUDIA BURKE, Assistant
Director, United States Department of Justice, of Wash-
ington, DC, and PAULA S. SMITH, Office of Assistant Chief
Counsel, International Trade Litigation, United States
Customs and Border Protection, of Washington, DC.
PHILIP YALE SIMONS, Simons & Wiskin, of South Am-
boy, New Jersey, for amicus curiae. With him on the brief
was JERRY P. WISKIN.
______________________
Before DYK, O’MALLEY, and WALLACH, Circuit Judges.
WALLACH, Circuit Judge.
Appellant Best Key Textiles Co., Ltd. (“Best Key”) ap-
peals the decision of the United States Court of Interna-
tional Trade (“CIT”) denying its Motion for Judgment on
the Agency Record. Best Key Textiles Co. v. United States
(Best Key II), No. 13-00367, slip op. 14-22 (Ct. Int’l Trade
Feb. 25, 2014) (Appellant’s App. (“App.”) 1–27). Because
the CIT did not have jurisdiction over the case, this court
vacates and remands with instructions to dismiss for lack
of jurisdiction.
BACKGROUND
Best Key, a Hong Kong-based textile manufacturer,
produces “Best Key Metalized Yarn” (“Best Key’s yarn”),
which is produced from “polyester chips melted into a
slurry to which” metal nanopowders (usually zinc or
aluminum) and titanium dioxide are added. Id. at 7.
“The slurry is then ‘fired’ through a spinneret,” forming
monofilament yarns. 1 Id. The metal nanopowders “are
1 “A ‘monofilament’ is a single-stranded polymer fil-
ament whose dimension is determined at the time of
extrusion.” Appellant’s Br. 25–26.
BEST KEY TEXTILES CO. v. US 3
permanently and inseparably combined with the polyester
. . . at the moment of yarn formation.” Appellant’s Br. 4.
On October 3, 2011, Appellant sought a pre-
importation ruling from United States Customs and
Border Protection (“Customs”) pursuant to 19 C.F.R.
§ 177.2 (2011) concerning the proper tariff classification in
the Harmonized Tariff Schedule of the United States
(“HTSUS”) of Best Key’s yarn. With the request, Best
Key included a laboratory report describing the yarn as
having a fiber content of 100% polyester, with one type
containing 0.7% metal by weight and a second type con-
taining 0.74% metal by weight.
In Customs New York Ruling N187601 (Oct. 25, 2011)
(App. 41–42) (the “Yarn Ruling”), Customs classified Best
Key’s yarn as metalized yarn of HTSUS 5605.00.90
(2011), dutiable at 13.2% ad valorum, based on Best Key’s
laboratory reports and samples of the yarn submitted to
Customs. HTSUS 5605.00.90 covers: “Metalized yarn,
whether or not gimped, being textile yarn, or strip or the
like of heading 5404 or 5405, combined with metal in the
form of thread, strip or powder or covered with metal:
Other.” HTSUS 5404 and 5405, referenced by HTSUS
5605.00.90, cover “synthetic and artificial monofilament[,
respectively,] of 67 decitex[2] or more and of which no
cross-sectional dimension exceeds 1 mm; strip and the
like (for example, artificial straw) of [synthetic or artifi-
cial, respectively] textile materials of an apparent width
not exceeding 5 mm.” In the Yarn Ruling, Customs stated
“[f]or tariff purposes, a yarn combined with metal in the
form of powder is considered a metalized yarn.” App. 41.
While metalized yarns of heading 5605 carry a higher
duty rate than non-metalized yarns, metalized yarns can
2 “Decitex refers to the articles’ linear mass density,
or fineness.” Best Key II, at 7.
4 BEST KEY TEXTILES CO. v. US
be used to make apparel products that carry a much lower
duty rate than garments made from non-metalized yarns.
On December 5, 2011, Best Key requested a Customs
Ruling regarding the proper classification of a sample
“Johnny Collar” men’s knit pullover garment made of
Best Key’s yarn. Citing the Yarn Ruling, Appellant
asserted the pullover was classifiable under HTSUS
6105.90.8030 as a men’s shirt of other textile materials
with a duty rate of 5.6% ad valorem, as opposed to
HTSUS 6110.30.3053 for men’s shirts made of polyester,
which carries a duty rate of 32% ad valorem. Customs
conducted its own laboratory report, finding trace
amounts of metal in the shirt. Based on this small
amount of metal and the sample’s label that stated “100%
polyester,” Customs classified the sample as a pullover of
man-made non-metalized fibers under HTSUS
6110.30.3053 in Customs New York Ruling N196161 (Apr.
13, 2012) (“the Johnny Collar Ruling”) (App. 94–95).
Appellant requested a reconsideration of the Johnny
Collar Ruling. In response, Customs Headquarters re-
viewed both the Yarn Ruling and the Johnny Collar
Ruling, along with additional submissions from Best Key.
On April 24, 2013, Customs published notices of proposed
revocation of both rulings, providing for a thirty-day
period for public comment. Proposed Revocation of Ruling
Letter & Proposed Revocation of Treatment Relating to the
Tariff Classification of a “Johnny Collar” Pullover Gar-
ment, 47 Cust. B. & Dec. No. 18, at 26 (Apr. 24, 2013)
(App. 126–28); Proposed Revocation of Ruling Letter &
Proposed Revocation of Treatment Relating to the Tariff
Classification of a Polyester Monofilament Yarn, 47 Cust.
B. & Dec. No. 18, at 33 (Apr. 24, 2013) (App. 129–31).
Customs received comments from Best Key and one other
commenter on the proposed Yarn Ruling Revocation, but
received no comments on the proposed Johnny Collar
Ruling Revocation.
BEST KEY TEXTILES CO. v. US 5
Subsequently, pursuant to 19 U.S.C. § 1625(c) (2006),
Customs revoked the Yarn Ruling, replacing it with
Customs Headquarters Ruling H202560 (Sept. 17, 2013).
Revocation of Ruling Letter & Revocation of Treatment
Relating to the Tariff Classification of a Polyester Mono-
filament Yarn, 47 Cust. B. & Dec. No. 41, at 20 (Oct. 2,
2013) (App. 48–59) (the “Revocation”). In the Revocation,
Customs reclassified Best Key’s yarn as a polyester yarn
(instead of a metalized yarn) under HTSUS 5402.47.90
with a duty rate of 8% ad valorum, which is lower than
the 13.2% ad valorem duty rate that applies to HTSUS
5605. Id. HTSUS 5402.47.90 covers “Synthetic filament
yarn (other than sewing thread), not put up for retail sale,
including synthetic monofilament of less than 67 decitex:
Other, of polyester: Other.”
Customs also revoked the Johnny Collar Ruling be-
cause it conflicted with the Yarn Ruling and replaced it
with Customs Headquarters Ruling H226262 (Sept. 17,
2013), which continued to classify the Johnny Collar
pullover under HTSUS 6110.30.30 (men’s shirts made of
polyester). Revocation of Ruling Letter & Revocation of
Treatment Relating to the Tariff Classification of a “John-
ny Collar” Pullover Garment, 47 Cust. B. & Dec. No. 41,
at 15 (Oct. 2, 2013) (App. 43–48).
Appellant challenged the Yarn Ruling Revocation, but
not the revocation of the Johnny Collar Ruling, before the
CIT, but the court dismissed the action for lack of subject
matter jurisdiction. Best Key Textiles Co. v. United States
(Best Key I), No. 13-00367, slip op. 13-148, at 1 (Ct. Int’l
Trade Dec. 13, 2013) (Appellee’s App. 81–88). The CIT
subsequently granted Best Key’s Motion for Reconsidera-
tion, and reversed its prior jurisdictional holding, finding
jurisdiction existed under 28 U.S.C. § 1581(i)(4) (2012).
Best Key II, at 2. On the merits, however, the CIT denied
Best Key’s Motion for Judgment on the Agency Record,
thereby sustaining the Revocation. Id. at 27.
6 BEST KEY TEXTILES CO. v. US
Best Key appeals. This court has jurisdiction pursu-
ant to 28 U.S.C. § 1295(a)(5).
DISCUSSION
The Government claims the CIT lacked jurisdiction
over Best Key’s claim, and therefore this action should be
dismissed. The CIT’s limited jurisdiction is articulated in
28 U.S.C. § 1581(a) through (i). While subsection (a) vests
the CIT with “exclusive jurisdiction of any civil action
commenced to contest the denial of a protest [by Cus-
toms],” subsections (b) through (h) delineate other specific
grants of jurisdiction. Under § 1581(h), the CIT has
exclusive jurisdiction of any civil action com-
menced to review, prior to the importation of the
goods involved, a ruling issued by the Secretary of
the Treasury, or a refusal to issue or change such
a ruling, relating to classification, valuation, rate
of duty, marking, restricted merchandise, entry
requirements, drawbacks, vessel repairs, or simi-
lar matters, but only if the party commencing the
civil action demonstrates to the court that he
would be irreparably harmed unless given an op-
portunity to obtain judicial review prior to such
importation.
28 U.S.C. § 1581(h). In addition, an action under
§ 1581(h) may only be commenced “by the person who
would have standing to bring a civil action under
[§] 1581(a) . . . if he imported the goods involved and filed
a protest which was denied.” Id. § 2631(h). Accordingly,
this court has articulated four requirements to invoke
jurisdiction under § 1581(h):
(1) judicial review must be sought prior to impor-
tation of goods;
(2) review must be sought of a ruling, a refusal to
issue a ruling or a refusal to change such ruling;
BEST KEY TEXTILES CO. v. US 7
(3) the ruling must relate to certain subject mat-
ter; and
(4) irreparable harm must be shown unless judi-
cial review is obtained prior to importation.
Am. Air Parcel Forwarding Co. v. United States, 718 F.2d
1546, 1551–52 (Fed. Cir. 1983).
The statute also contains a “residual jurisdiction” pro-
vision under § 1581(i), which provides:
(i) In addition to the jurisdiction conferred upon
the [CIT] by subsections (a)–(h) of this section
. . . , the [CIT] shall have exclusive jurisdiction of
any civil action commenced against the United
States, its agencies, or its officers, that arises out
of any law of the United States providing for—
(1) revenue from imports or tonnage;
(2) tariffs, duties, fees, or other taxes on
the importation of merchandise for rea-
sons other than the raising of revenue;
(3) embargoes or other quantitative re-
strictions on the importation of merchan-
dise for reasons other than the protection
of the public health or safety; or
(4) administration and enforcement with
respect to the matters referred to in para-
graphs (1)–(3) of this subsection and sub-
sections (a)–(h) of this section.
28 U.S.C. § 1581(i) (emphasis added).
As this court has noted, “[w]hile the residual jurisdic-
tion provision is a ‘catch all provision,’ ‘[a]n overly broad
interpretation of this provision . . . would threaten to
swallow the specific grants of jurisdiction contained
within the other subsections and their corresponding
requirements.’” Chemsol, LLC v. United States, 755 F.3d
8 BEST KEY TEXTILES CO. v. US
1345, 1349 (Fed. Cir. 2014) (quoting Norman G. Jensen,
Inc. v. United States, 687 F.3d 1325, 1329 (Fed. Cir.
2012)). For this reason, “this court has repeatedly held
that subsection (i) ‘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.’” Id. (quoting
Ford Motor Co. v. United States, 688 F.3d 1319, 1323
(Fed. Cir. 2012) (internal quotation marks omitted)). In
other words, if a litigant has access to the CIT under
subsections (a) through (h), “‘it must avail itself of this
avenue of approach by complying with all the relevant
prerequisites thereto’” unless the remedy available under
another subsection is “manifestly inadequate.” Hartford
Fire Ins. Co. v. United States, 544 F.3d 1289, 1292 (Fed.
Cir. 2008) (quoting Am. Air Parcel, 718 F.2d at 1549).
In Best Key I, the CIT “conclude[d] there is no Article
III case or controversy over this matter as contemplated
under 28 U.S.C. § 1581(h), nor does jurisdiction alterna-
tively lie in 28 U.S.C. § 1581(i)(4).” Best Key I, at 8. As to
jurisdiction under § 1581(h), the CIT stated that Best Key
satisfied requirements (1) and (2) for (h) jurisdiction, “but
with regard to (3), [Best Key] conflates the Johnny Collar
ruling with the Yarn Ruling when it avers, with respect to
(4), that it suffered irreparable harm as a result of the
Johnny Collar ruling by experiencing an immediate and
negative impact upon its business.” Id. at 4. The CIT
explained, “[u]nder the current status quo resulting from
the Revocation Ruling, if [Best Key] were to import the
yarn into the United States, the yarn would benefit from
the lower duty rate resulting from the Revocation Ruling,”
and “[i]t is therefore plain that the importance to [Best
Key] here is not the U.S. duty rate on the yarn, but the
duty rate on garments made of it.” Id. at 6. Therefore,
the CIT concluded, Best Key “implies that an Article Ill
‘case or controversy’ exists over the classification of the
yarn, but the harm that it pleads is not the type of cog-
BEST KEY TEXTILES CO. v. US 9
nizable injury that relief pursuant to [§] 1581(h) was
intended to address.” Id.; see also id. at 5 (Best Key
“contends that the Revocation Ruling, which resulted in a
lower tariff for the yarn at issue in this action, has caused
it harm because strangers to this action—garment manu-
facturers—may no longer purchase its yarn unless the
garments they make from it can be imported under the
‘favorable’ duty rate accorded to importations of garments
made of ‘metalized’ yarn by other strangers to this ac-
tion—garment importers.”).
As to jurisdiction under § 1581(i)(4), the residual ju-
risdiction section’s “administration and enforcement”
provision, the CIT first noted that “typically, ‘if jurisdic-
tion does not lie under § 1581(h), a plaintiff must import
the merchandise in question, file a protest with Customs
regarding the classification decision, and fully exhaust its
administrative remedies.’” Id. at 7 (quoting Connor v.
United States, 24 CIT 195, 200 (2000)). The CIT found
Best Key failed to show that the “traditional approach”
under § 1581(a) would provide a manifestly inadequate
remedy, and that Best Key’s actual injury amounts to
garment makers not buying its yarn “because importers of
those garments will not get a more favorable duty rate for
items made of [Best Key’s] yarn. But the duty rate
charged to those importers is beyond any of [Best Key’s]
interests that the provisions of [§] 1581 are meant to
protect.” Id. at 8. Accordingly, the CIT concluded, “[t]he
essence of the argument [Best Key] attempts to put forth
amounts to a request for the protection of others’ inter-
ests, namely those of importers of garments manufactured
by purchasers of [Best Key’s] yarn.” Id. The court also
found, “[e]ven if [Best Key] is protecting its own financial
interests by extension, it has no authority or standing to
assert the claims of those remote parties under [§] 1581(i)
in its action here, as that statute [is] to be strictly con-
strued.” Id.
10 BEST KEY TEXTILES CO. v. US
On rehearing, however, the CIT reversed its jurisdic-
tional holding. In Best Key II, the CIT stated “it is highly
questionable whether a Customs’ ruling that lowers the
rate of duty on a product the plaintiff has no expressed
intention of importing can result in aggrievement or
adverse effect to the plaintiff.” Best Key II, at 2 (internal
quotation marks and citation omitted). Nevertheless, the
CIT concluded, without further explanation:
While the court stands by its prior ruling in gen-
eral, it is, nonetheless, [Best Key’s] product that is
the subject of the ruling at issue, and the court
has undoubted exclusive jurisdiction over the gen-
eral administration and enforcement of this type
of matter in 28 U.S.C. § 1581(i)(4). The court will
therefore presume Customs’ ruling “reviewable,”
and the complaint’s allegation of “aggrievement”
sufficient to invoke jurisdiction under
[§] 1581(i)(4).
Id. (citation omitted) (emphasis added). The CIT there-
fore proceeded to the merits under the presumption it had
jurisdiction under § 1581(i)(4).
On appeal, the Government argues the CIT improper-
ly proceeded under § 1581(i) and that its original jurisdic-
tional holding in Best Key I was correct. In support, the
Government notes “Best Key does not import its yarn and
the Revocation Ruling actually lowered the duty rate on
that product.” Appellee’s Br. 13. Therefore, “the true
nature of Best Key’s action is not the classification of the
yarn in the Revocation Ruling but the classification of
garments made of its yarn that would be imported into
the United States by others.” Id. In addition, the Gov-
ernment argues that another jurisdictional avenue exists
under § 1581(a) for those injured by the Revocation,
thereby rendering jurisdiction under the residual provi-
sion inappropriate. In particular, the Government points
out “Best Key could import another Johnny Collar pullo-
BEST KEY TEXTILES CO. v. US 11
ver made of its yarn, wait for the entry to be liquidated,
protest the classification of the garment, and, if the pro-
test is denied, bring a [§] 1581(a) action in the [CIT] to
obtain the classification it seeks.” Id. at 14 n.5. Using
this approach, Best Key could even seek accelerated
disposition of its protest under § 1515(b). Id. Further,
the Government argues, § 1581(i) “was not intended to
create new causes of action, nor was it meant to supersede
more specific jurisdictional provisions . . . , [and] should
not be used to hear issues such as a business harm occur-
ring exclusively overseas which flows from a Customs
decision.” Id. at 14 (citations omitted).
In response, Best Key says the protest remedy under
§ 1581(a) is neither available nor adequate. As an initial
matter, Best Key concedes it “does not import its yarn and
the Revocation lowered the duty thereon, meaning a
protest remedy involving the yarn is not available.” Reply
Br. 4 (citation omitted). At the same time, Best Key
continues to argue the remedy it seeks is a reversal of the
Revocation of the Yarn Ruling, even though this would
result in a higher duty rate on Best Key’s yarn, because
the Revocation “caused Best Key’s customers to cancel
orders en masse.” Id. Thus, to Best Key, “a § 1581(a)
action that does not directly challenge the Revocation is
‘manifestly inadequate’ to vindicate the status that Best
Key enjoyed as a ruling holder.” Id. at 7. Allowing a
challenge to the Revocation is the only way, according to
Best Key, to remedy the harm it has suffered: “harm via
curtailment of contemplated orders for [Best Key’s] yarn.”
Id. (internal quotation marks and citation omitted) (em-
phasis added).
The CIT erred in reversing itself and “presum[ing]”
jurisdiction under § 1581(i)(4). See Best Key II, at 2. The
CIT itself did not appear fully convinced jurisdiction was
proper because Best Key is attempting to litigate on
behalf of its customers who might be injured by the revo-
cation of the Johnny Collar Ruling in an action challeng-
12 BEST KEY TEXTILES CO. v. US
ing the Revocation of the Yarn Ruling. Best Key
acknowledges the remedy it seeks is a reversal of the
Yarn Ruling Revocation, which resulted in a more favora-
ble duty rate for Best Key. Indeed, Best Key concedes it
is attempting to vindicate its “entitlement to maintenance
of the Yarn Ruling, which was revoked.” Reply Br. 5.
However, the harm caused by the Yarn Ruling Revocation
flowed to potential customers of Best Key who produce
Johnny Collar pullovers, which might be subject to a
lower duty rate if the Yarn Ruling had remained in effect.
It is worth noting, however, that Customs classified the
Johnny Collar pullover under HTSUS 6110.30.30 for
men’s shirts made of polyester in both the Johnny Collar
Ruling and the subsequent revocation of that ruling.
The proper “avenue of approach” to redress this harm
is a challenge under § 1581(a). See Hartford Fire, 544
F.3d at 1292. That is, any producer who imports items
made from Best Key’s yarn and believes the merchandise
should be subject to a lower duty rate should protest the
classification and challenge any denial of its protest
before the CIT. The present action, where Best Key seeks
to undo an administrative decision made in its favor so
that its customers might benefit from a lower duty rate,
contemplates the creation of a new cause of action under
§ 1581(i), but § 1581(i) “was not intended to create new
causes of action nor was it meant to supersede more
specific jurisdictional provisions.” Asociacion Colombiana
de Exportadores de Flores (Asocoflores) v. United States,
717 F. Supp. 847, 849 (Ct. Int’l Trade 1989) (internal
quotation marks omitted), aff’d, 903 F.2d 1555 (Fed. Cir.
1990) (quoting H. Rep. No. 1235, 96th Cong., 2d Sess. 47,
reprinted in 1980 U.S.C.C.A.N. 3729, 3759).
Here, Best Key sought to have the CIT reverse the
Revocation, favorable to Best Key, the effect of which
would be to increase Best Key’s own duty rate while
benefiting manufacturers of products made from Best
Key’s yarn. The statute does not provide jurisdiction over
BEST KEY TEXTILES CO. v. US 13
such requests. Indeed, as the CIT observed, it was “una-
ware of any other suit brought against the government on
the claim that the plaintiff or its property should be
assessed a higher rate of tax or duty,” Best Key II, at 2
n.1, and Best Key points to none.
Accordingly, the CIT erred in exercising jurisdiction
over this case and should have upheld its initial ruling
that jurisdiction did not exist over this action.
CONCLUSION
For the foregoing reasons, the decision of the United
States Court of International Trade is
VACATED AND REMANDED