Avecia, Inc. v. United States ( 2007 )

Slip Op 07 - 41
UNITED STATES COURT OF INTERNATIONAL TRADE
:
AVECIA, INC. :
:
Plaintiff, :
:
v. : Before: MUSGRAVE, Judge
: Consol. Court No. 05-00183 and
UNITED STATES OF AMERICA, : Court No. 06-00140
:
Defendant. :
:
OPINION
[Defendant’s motion for “rehearing, modification, clarification, and/or reconsideration” granted as
to severance of three entries, otherwise denied.]
Decided: March 19, 2007
Buchanan Ingersoll PC (Steven E. Bizar, Jill W. Rogers); Crowell & Moring LLP (Alexander
Schaefer), for the plaintiff.
Peter D. Keisler, Assistant Attorney General, Barbara S. Williams, Attorney in Charge,
International Trade Field Office, Commercial Litigation Branch, Civil Division, United States
Department of Justice (Saul Davis); Office of Assistant Chief Counsel, International Trade
Litigation, U.S. Customs and Border Protection (Beth C. Brotman), of counsel, for the defendant.
As discussed in Slip Opinion 06-184, a certain protest sent to the director for the Port of
Philadelphia challenged three entry classifications for products imported through the ports of Newark
and Baltimore, in addition to the classification of several other entries through that port. See Avecia,
Inc. v. United States, 30 CIT ___, Slip Op. 06-184 at 23-25 (Dec. 19, 2006).1 After the protest’s
1
Available at http://www.cit.uscourts.gov/slip_op/Slip_op06/06-184.pdf (last visited the
date of this decision).
Consol. Court No. 05-00183 and Court No. 06-00140 Page 2
denial, Avecia included it in this suit. 28 U.S.C. § 1581(a) provides that this Court has “exclusive
jurisdiction of any civil action commenced to contest the denial of a protest, in whole or in part,
under section 515 of the Tariff Act of 1930.” The referenced section is codified at 19 U.S.C. § 1514.
Subsection (c)(1) requires that “[a] protest of a decision under subsection (a) of this section shall be
filed . . . in accordance with regulations prescribed by the Secretary.” 19 U.S.C. § 1514(c)(1). One
of those regulations, 19 C.F.R. § 174.12(d), provides that “[p]rotests shall be filed with the port
director whose decision is protested.” The government thus challenged the Court’s subject matter
jurisdiction over the three entries. After examining the law of this area, the court concluded that no
statute or regulation precluded the director for the Port of Philadelphia from rendering a substantive
decision with respect to entries from another port, that the director denied the protest “in full” per
the rationale of HQ 967005 (May 18, 2004), and since the decision of Customs had apparently been
to relax the place-of-filing regulation with respect to those three entries, the court concluded that it
possessed jurisdiction over the subject matter. Slip Op. 06-184 at 25.
The government now moves for “rehearing, modification, clarification, and/or
reconsideration” of that finding. Disposition of such a motion is within the Court’s discretion.
See USCIT Rule 59(a). See, e.g., Kerr-McGee Chem. Corp. v. United States, 14 CIT 582, 583
(1990); Union Camp Corp. v. United States, 21 CIT 371, 372, 963 F. Supp. 1212, 1213 (1997). The
purpose of reconsideration is to rectify “a significant flaw in the conduct of the original proceeding.”
W.J. Byrnes & Co. v. United States, 68 Cust. Ct. 358, 358 (1972) (footnote omitted). However, a
court should not disturb its prior decision unless it is “manifestly erroneous.” See, e.g., Starkey Labs,
Inc. v. United States, 24 CIT 504, 505, 110 F. Supp. 2d 945, 946-47 (2000); Volkswagen of Am., Inc.
Consol. Court No. 05-00183 and Court No. 06-00140 Page 3
v. United States, 22 CIT 280, 282, 4 F. Supp. 2d 1259, 1261 (1998). To the extent the government’s
motion raises a colorable “significant flaw” or “manifest error” in Slip Opinion 06-184, the matter
merits further discussion. See Starkey Labs.
Substantively, the government interprets Slip Opinion 06-184 as apparently agreeing “that
the combination of the statute and the pertinent regulations mandated, as a jurisdictional prerequisite,
the filing of the protest at the port at which the decision was made,” Def.’s Reply at 3, and it argues
that in addition to the requirements governing form and content under 19 U.S.C. § 1514(c), the place
of filing a protest is clearly apparent from 19 U.S.C. § 1515(a), which requires a protest’s review
within two years by “the appropriate customs officer.” The government argues that this “can only
be the officer designated for such review pursuant to § 1514(c) and the regulations” and that
therefore compliance with 19 C.F.R. § 174.12(d) is a mandatory condition of jurisdiction which the
director for the Port of Philadelphia had no authority to waive. Def.’s Mot. at 5-9 (referencing
Grover Piston Ring Co. v. United States, 752 F.2d 626 (Fed. Cir. 1985), Noury Chem. Corp. v.
United States, 4 CIT 68 (1982), Po Chien, Inc. v. United States, 3 CIT 17 (1982), and United States
v. Reliable Chem. Co., 66 CCPA 123, 605 F.2d 1179 (1979)); Def.’s Reply at 7-8 (referencing inter
alia DaimlerChrysler Corp. v. United States, 442 F.3d, 1313, 1319 (Fed. Cir. 2006), Autoalliance
Int’l, Inc. v. United States, 357 F.3d 1290, 1293-94 (Fed. Cir. 2004), and Ford Motor Co. v. United
States, 425 F. Supp. 2d 1324, 1332, n.12 (2006), reh’g den. 30 CIT __, Slip Op. 06-145 (Sep. 29,
2006)).
Avecia apparently disputes whether Slip Opinion 06-184 even addressed whether compliance
with 19 C.F.R. § 174.12(d) amounts to an unwaivable condition of subject matter jurisdiction. See
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Pl.’s Resp. at 2 & n.1 (referencing Arbaugh v. Y&H Corp., 546 U.S. 500, ___, 126 S.Ct. 1235, 1237
(2006) (“when Congress does not rank a statutory limitation on coverage as jurisdictional, courts
should treat the restriction as nonjurisdictional in character”)). See also Def.’s Br. passim; Def.’s
Reply passim (distinguishing Arbaugh on the authority of Federal Nat’l Mortg. Ass’n v. United
States, 469 F.3d 968 (2006)). Avecia is correct, but whether it arguably did, the conclusion must
again be that compliance with the regulation is not such as may not be waived by Customs.
The government elaborates in its motion that the proper interpretation of “the appropriate
customs officer” in 19 U.S.C. § 1515(a) mandates that protests only be decided by the port director
who made the original decisions affecting the entry or entries, and yet subsection 1515(a) simply
mandates that review of a protest be completed within two years from the date of filing by “the
appropriate customs officer.” It is a deadline for Customs. It also provides for further review by
“another appropriate customs officer.” Cf. 19 U.S.C. § 1515(a) (italics added). To the extent the
provision imposes a filing condition directed to the protestant, the phrase “the appropriate customs
officer” is vague. As implied by Slip Opinion 06-184, one cannot definitely conclude that the port
director of Philadelphia was an “inappropriate” customs officer to act with respect to entries
incorrectly included on an otherwise properly-filed protest at that port. Even if “appropriate customs
officer” may be clarified by reference to the place-of-filing regulation, 19 C.F.R. § 174.12(d), section
1515 does not control the Court’s jurisdiction, which is delimited in 28 U.S.C. § 1581(a) by
reference to the parameters of 19 U.S.C. § 1514. See, e.g., Volkswagen of Am., Inc. v. United States,
31 CIT __, Slip Op. 07-26 at 6 (Feb. 21, 2007) (“Section 1514 is not a jurisdiction-granting statute;
it defines the types of actions that are potentially reviewable under § 1581(a)” (citation omitted)).
Consol. Court No. 05-00183 and Court No. 06-00140 Page 5
There, in contrast to the statutory particulars for the content of a protest, Congress did not
specify in section 1514 that a protest had to be in a particular form, or that it had to be filed in a
particular place. See Slip Op. 06-184 at 25. Cf. 28 U.S.C. § 1581(a) & 19 U.S.C. § 1514(c)(1) with
19 U.S.C. § 1515(a). Rather, Congress merely required that protests need to be “filed in writing . . .
in accordance with regulations prescribed by the Secretary.” 19 U.S.C. § 1514(c)(1). Since the place
of filing is not a plain and specific statutory condition of invoking the jurisdiction of this Court,
compliance with 19 C.F.R. § 174.12(d) is not a condition of subject matter jurisdiction but rather is
an element of a putative plaintiff’s claim. See, e.g., Arbaugh. It is also noteworthy that in section
1514 Congress specifically deleted all references to “the appropriate customs officer” or substituted
“the Customs Service” therefor when enacting the North American Free Trade Agreement
Implementation Act, see Pub. L. 103-182 § 645(1)(A), (E), (2) (Dec. 8, 1993).
Fundamentally, the government’s argument, that subject matter jurisdiction at this Court is
lacking because no port director other than the port director who rendered the decision on the
original classification has the authority to render a decision on a protest, depends for its validity upon
the government’s interpretation of the place-of-filing regulation, which is to say that the argument
grafts a meaning onto that regulation that the regulation does not currently possess. Cf. 19 C.F.R.
§ 174.12(d) (“[p]rotests shall be filed with the port director whose decision is protested”). Even if
the regulation possessed such meaning, the condition that a protest be filed at a particular place is
beyond the metes and bounds of the subject matter jurisdiction established for this Court by statute
by Congress. See 28 U.S.C. § 1581(a) & 19 U.S.C. 1514. The government argues that “the
requirements of the regulations promulgated pursuant to the delegation authority in § 1514(c) are
Consol. Court No. 05-00183 and Court No. 06-00140 Page 6
jurisdictional[,]” Def.’s Reply at 4 (referencing Grover Piston Ring, Noury Chemical, and Po Chien),
but that is not a proper interpretation of residual delegation. Congress may delegate certain
legislative policy determinations to the executive branch, see, e.g., Marshall Field & Co. v. Clark,
143 U.S. 649, 693-94 (1892), Star-Kist Foods, Inc. v. United States, 47 CCPA 52, 60, 275 F.2d 472,
480 (1959), but only Congress may delimit federal court subject matter jurisdiction. See U.S. Const.,
Art. III, § 1. See, e.g., Kontrick v. Ryan, 540 U.S. 443, 453 (2004); Cary v. Curtis, 44 U.S. 236, 244
(1845). Cf. 19 U.S.C. § 1514(c)(1)(D) (a protest must be “filed . . . in accordance with regulations
prescribed by the Secretary”). And for this court to construe 19 C.F.R. § 174.12(d) with the meaning
the government here advocates would effectively amount to legislating the Court’s own subject
matter jurisdiction. Plainly, it is inappropriate for the court, or Customs, to do so. Moreover, to
construe the regulation in the manner advocated by the government would theoretically preclude
subject matter jurisdiction over any protest not perfectly “filed . . . in accordance with regulations
prescribed by the Secretary,” even if only slightly flawed, and thus would contradict the inherent
authority of agencies to interpret their own regulatory requirements as appropriate and necessary.
See, e.g., PAM S.p.A. v. United States, 463 F.3d 1345, 1349 (Fed. Cir. 2006) (agency has discretion
to relax compliance with notice regulation where no substantial prejudice results); National Customs
Brokers and Forwarders Ass’n of Am., Inc. v. United States, 18 CIT 754, 762, 861 F. Supp. 121, 130
(1994) (defendant argued in favor of “Customs’ longstanding practice” to allow certain duty-free
shipments entry “under relaxed entry procedures without the requirement of a broker”); Lee Yuen
Fund Trading Co., Inc. v. Dep’t of Treasury, 18 CIT 139, 141 (1994) (Customs recognizing that non-
complying submission was timely and informing plaintiff to file preferred Protest Form 19); Sachs
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Auto. Prods. Co. v. United States, 17 CIT 290, 294 n.3 (1993) (compliance with regulation waived
by agency); accord, American Farm Lines v. Black Ball Freight Serv., 397 U.S. 532, 539 (1970).
And it should go without saying that the Court’s subject matter jurisdiction must encompass hearing
whether there has been compliance with a relevant rule or regulation, if jurisdiction is otherwise
satisfied. See, e.g., Kyocera Indus. Ceramics Corp. v. United States, 30 CIT __, Slip Op. 06-187
(Dec. 21, 2006); Carolina Tobacco Co. v. U.S. Customs Serv., 28 CIT __, Slip Op. 04-20 (Mar. 4,
2004); see also Indianapolis Mach. & Exp. Co., Inc. v. United States, 42 Cust. Ct. 137 (1959).
Since the function of the Court is to find the narrowest resolution, Slip Opinion 06-184
sought to avoid a specific finding on whether the place of filing a protest amounts to a
“jurisdictional” prerequisite, because whether it is, or is not, it is solely a regulatory requirement, and
as such may be waived. The government attempts to force the issue again, but the primary support
for its motion is United States v. Reliable Chemical Co., 66 CCPA 123, 605 F.2d 1179 (1979), a case
that considered Customs’s attempted waiver of an explicit statutory jurisdictional requirement. See
Def.’s Br. at 9; Def.’s Reply at 11. The circumstances of this matter are not analogous to that
situation but are rather akin to those of Angelus Milling Co. v. Commissioner of Internal Revenue,
325 U.S. 293 (1946), which involved the Commissioner’s waiver of compliance with regulatory
filing requirements promulgated by its agency pursuant to the same type of authority granted by
Congress that this action presently confronts vis à vis 19 U.S.C. § 1514(c)(1) and subsection
(c)(1)(D) (“any other matter required by the Secretary by regulation”). Cf. 325 U.S. at 295 n.1
(“Section 903 of Title VII of the 1936 Revenue Act, 49 Stat. 1648, 1747 . . . requires that no refund
be made or allowed ‘unless . . . a claim for refund has been filed . . . in accordance with regulations
Consol. Court No. 05-00183 and Court No. 06-00140 Page 8
prescribed by the Commissioner with the approval of the Secretary’”) with 19 U.S.C. § 1514(c)(1).
The Supreme Court’s observation in that case appears equally apt to the circumstances at bar:
Congress has given the Treasury this rule-making power for self-protection
and not for self-imprisonment. If the Commissioner chooses not to stand on
his own formal or detailed requirements, it would be making an empty
abstraction, and not a practical safeguard, of a regulation to allow the
Commissioner to invoke technical objections after he has investigated the
merits of a claim and taken action upon it. Even tax administration does not
as a matter of principle preclude considerations of fairness.
325 U.S. at 397.
To summarize, neither 19 U.S.C. § 1514(c)(1), § 1515(a), nor 19 C.F.R. § 174.12(d)
precludes a port director from ruling on entries from a different port. Cf. also 19 C.F.R. 174.13(b)
(regarding “multiple entries”: “[a] single protest may be filed with respect to more than one entry
at any port if all such entries involve the same category of merchandise and a decision or decisions
common to all entries [is/]are the subject of the protest”) (italics added). The court has considered
the government’s other propositions, from DaimlerChrysler, Autoalliance, Ford, etc., and finds them
unavailing in the circumstances of this matter. The court therefore remains unpersuaded that there
is manifest error in its prior conclusion that it possesses jurisdiction over the disputed subject matter.
See Slip Op. 06-184 at 25 (quoting American Farm Lines, 397 U.S. at 539). As an aside, although
all three entries were encompassed by the protest originally summonsed to this action, two of the
entries have since been encompassed by Court No. 06-00140. The Judgment on 06-184 could only
encompass the remaining entry, of course, but the government represents that it would prefer to
separate the jurisdictional issue from the other entries covered by this action, and the parties have
conferred and agree that a preferable procedural posture is to sever those entries and make them the
Consol. Court No. 05-00183 and Court No. 06-00140 Page 9
res of a new, separate civil action which shall then abide the Judgment of this action. The court
concludes that the motions to sever and amend must be granted and will enter orders to that effect
after any necessary consultations with the parties.
/s/ R. Kenton Musgrave
R. KENTON MUSGRAVE, JUDGE
Dated: March 19, 2007
New York, New York