Trans-Pacific Policing Agreement v. United States Customs Service

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 29, 1999 Decided June 1, 1999

No. 98-5253

Trans-Pacific Policing Agreement, et al.,

Appellants

v.

United States Customs Service,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 97cv02188)

Paul M. Tschirhart argued the cause for appellants. With

him on the briefs were

Jeffrey F. Lawrence, Heather Spring and R. Frederic Fisher.

Cindy G. Buys entered an appearance.

Kimberly Nelson Brown, Assistant U.S. Attorney, argued

the cause for appellee. With her on the brief were Wilma A.

Lewis, U.S. Attorney, and R. Craig Lawrence, Assistant U.S.

Attorney.

Before: Edwards, Chief Judge, Wald and Rogers, Circuit

Judges.

Opinion for the Court filed by Chief Judge Edwards.

Edwards, Chief Judge: Trans-Pacific Policing Agreement

("TPPA" or "appellants"), an association of registered ocean

common carriers, is charged by federal statute with policing

exporters who send shipments into the United States. One

principal function of TPPA is to investigate and take action to

prevent the mischaracterization of cargo in sealed marine

containers. Pursuant to the Freedom of Information Act

("FOIA"), 5 U.S.C. s 552, TPPA sought shipping code num-

bers from the United States Customs Service ("Customs") in

order to facilitate investigations of exporters' shipments.

Customs rejected TPPA's request, claiming that release of

the code numbers would result in serious competitive injury

to importers in the United States and, thus, that the informa-

tion sought was exempt from disclosure under FOIA Exemp-

tion 4, id. s 552(b)(4). TPPA filed suit in District Court, and

the court granted summary judgment in favor of Customs,

finding that Customs had met its burden under Exemption 4.

On appeal, TPPA claims that Customs could have disclosed

redacted portions of the code numbers without causing com-

petitive harm to United States importers, and that the Dis-

trict Court erred in not making a segregability finding.

Customs responds that, because TPPA made no request for

redaction before the District Court, the claims on appeal

should not be considered by this court and the judgment of

the District Court should be affirmed. Because the District

Court never considered the possibility of redaction, we believe

that a remand is warranted in this case.

There is no doubt that appellants could have helped to save

judicial resources by presenting the full theory of their case

as effectively before the trial court as it was presented during

the arguments before this panel. Nonetheless, we see no

point in dismissing this lawsuit. Both sides agree that appel-

lants could and would simply file a new lawsuit if the case

were dismissed. And counsel for Customs concedes that

there is really nothing of substance to be gained by requiring

appellants to file a new FOIA request at the administrative

level; it is also clear that a new lawsuit will be costly in terms

of additional time, expense, and wasted judicial resources. In

these circumstances, we believe that a remand is warranted.

I. Background

A. Factual Background

TPPA is an association of registered ocean common carri-

ers. Appellant Nippon Yusen Kaisha is an individual ocean

carrier, as well as a member of the association. The associa-

tion was formed pursuant to the Shipping Act of 1984, 46

U.S.C. app. ss 1701-1720, and is authorized under the Act to

investigate and take action to correct certain trade "malprac-

tices" prohibited by the Act. See id. s 1709(a)(1), (b)(1)-(4).

Among the prohibited malpractices, as relevant here, is the

mischaracterization of cargo in sealed marine containers,

which allows unscrupulous exporters to obtain freight rates

below the lawful filed tariff rate applicable to a particular

commodity. On some occasions the ocean carrier is an ac-

complice in violating the law and on other occasions the

carrier has been defrauded.

Many foreign exporters shipping goods into the United

States do so via ocean carrier. Using information provided

by the exporter, the carrier prepares an Inward Vessel

Manifest ("IVM"), which provides a general description of the

goods contained in each shipment. See 19 C.F.R.

s 103.31(e)(3) (1998). Customs requires the carrier to file the

IVM upon entry into the United States, but it is usually filed

before the vessel arrives in port. The information contained

in the IVM is regularly released for public distribution under

Customs regulations. See id. s 103.31(a)(3), (e). When the

carrier provides Customs with the IVM, Customs assigns the

shipped goods one or more entry numbers. Each individual

import transaction receives a unique entry number, which

Customs then uses for all official purposes.

When the importer is notified that its goods have arrived,

Customs requires that the importer--not the carrier--com-

plete an Import Declaration. On this document, the importer

must provide detailed information about the shipment, in

order to enable Customs to, inter alia, assess properly the

duties that may be due on that shipment. As part of the

Import Declaration, the importer must include a Harmonized

Tariff Number ("HTS number") applicable to the goods. The

HTS number corresponds to a specific legal description with-

in the universe of imported merchandise. The complete list

of HTS numbers is set forth in the Harmonized Tariff Sched-

ule that the Government publishes each year. This published

Schedule is akin to a dictionary, in that it assigns a precise

definition to each ten-digit HTS number. The definitions are

highly specific, and may even include the value of the goods.

For example, Customs has over 1900 different HTS numbers

for goods that could generally be described as "ready made

garments." See, e.g., Appendix ("App.") 246-57. In general,

each digit in an HTS number adds an additional layer of

specificity to the description of the goods, in the same way

that biologists' use of phylum, order, genus, and species

identifies living organisms to increasing degrees of specificity.

Although the Schedule is published annually, Customs nor-

mally does not release information from Import Declarations,

which apply HTS numbers to specific shipments of goods.

The IVMs and the Import Declarations each contain similar

information--a description of the goods being shipped--but,

as the District Court noted, and as the parties agree, "they

are very different documents, prepared by different persons,

and prepared under different circumstances." Trans-Pacific

Policing Agreement v. United States Customs Serv., Civ. No.

97-2188, at 3 (D.D.C. May 14, 1998) (Memorandum Opinion)

("Memorandum"), reprinted in App. 273. The IVM is pre-

pared by the carrier, generally with details supplied by the

exporting shipper. As noted above, the description of the

goods contained in the IVM need only be of a general nature.

By contrast, it is the importer who must file the Import

Declaration, using the far more precise HTS numbers, which

provide a description of the shipment that is significantly

more detailed than the one found on the IVM. Moreover, an

importer completes the Import Declaration under penalty of

law and under the watchful eye of Customs. Therefore, it is

undisputed that Import Declarations generally contain a more

accurate description of the shipped goods than do IVMs--not

only because the HTS numbers are more precise, but also

because the importers filling out the Import Declarations

have less incentive and ability to mischaracterize the ship-

ment than do those filling out the IVMs.

TPPA enforces the Shipping Act by ensuring that export-

ers do not mischaracterize their cargoes in order to receive

lower tariff rates. It is indisputable that access to the HTS

numbers would greatly facilitate the work of TPPA officials.

According to appellants, use of those numbers is the easiest

and cheapest method of checking the accuracy of the descrip-

tions contained in the IVMs, and is therefore the most

efficient method of enforcing federal law and reducing com-

mercial fraud in the shipping industry. The alternative--

physically inspecting each shipment--is, according to appel-

lants, expensive, time-consuming, and unduly intrusive of

honest shippers and importers. See Appellants' Opening

Brief at 6-7.

B. Procedural Background

On September 25, 1996, appellants wrote to Customs, re-

questing disclosure of "Customs['s] harmonized numbers for

actual commodity description[s]" of 68 shipments, which ap-

pellants identified by their entry numbers. See Letter from

Jay Tolentino, NYK Line, Inc., to Audrey Adams, Customs

(Sept. 25, 1996), reprinted in App. 15-16. On October 8,

1996, Customs responded by refusing to release the request-

ed HTS numbers, claiming in only one sentence that such

information fell within FOIA Exemption 4, which exempts

from disclosure "trade secrets and commercial or financial

information obtained from a person and privileged or confi-

dential." 5 U.S.C. s 552(b)(4); see Letter from Adams to

Tolentino (Oct. 8, 1996), reprinted in App. 17.

On November 12, 1996, appellants appealed Customs's

initial refusal to the Customs FOIA Appeals Officer. See

Letter from R. Frederic Fisher et al., Counsel for Appellants,

to FOIA Appeals Officer, Customs (Nov. 12, 1996), reprinted

in App. 20-26. They explained that the purpose of their

FOIA request is "to compare the commodity declaration

made ... to the ocean carrier (as subsequently filed with

Customs on the [IVM]) with the commodity declaration made

... directly to Customs [on the Import Declaration]." Id. at

2, reprinted in App. 21. They argued that the requested

information is no different in kind than the information

released to the public on the IVMs, but it is more likely to be

accurate. According to appellants, then, "[i]f the two com-

modity declarations for the same shipment differ, the only

... reason for according confidential treatment of the com-

modity declaration to Customs would be concealment of com-

mercial fraud and violations of the Shipping Act." Id. at 4,

reprinted in App. 23. Moreover, appellants noted that local

Customs field offices had, in the past, provided them with the

HTS numbers for certain shipments. See id. (citing Letter

from Alice M. Rigdon, Customs, to Dan Fetters, Hyundai

American Shipping Agency (Aug. 14, 1996), reprinted in App.

18-19).

On January 16, 1997, the Appeals Officer affirmed the

initial determination that the requested information fell with-

in Exemption 4, explaining that "Customs has long considered

information on entry documents to be confidential informa-

tion, exempt from disclosure." Letter from Marvin Amer-

nick, Customs, to R. Frederic Fisher et al. 2 (Jan. 16, 1997),

reprinted in App. 28.

Appellants subsequently filed suit in District Court, and the

parties filed cross motions for summary judgment. Without

acting on appellants' request for oral argument, the court

granted summary judgment in favor of Customs. See Memo-

randum at 10, reprinted in App. 280. The trial court deter-

mined that Customs, by the submission of detailed affidavits,

had carried its burden and demonstrated that the release of

the HTS numbers, when linked by an entry number to a

specific shipment of goods, presented a threat to the competi-

tive position of the importers who provide this information.

See id. The court also determined that the isolated release of

HTS numbers in the past by various Customs field offices did

not affect the disposition of the instant case. See id. at 9,

reprinted in App. 279 (citing Medina-Hincapie v. Depart-

ment of State, 700 F.2d 737, 742 n.20 (D.C. Cir. 1983) (holding

that unauthorized disclosure of documents does not constitute

a waiver of the applicable FOIA exemption)). This appeal

followed.

II. Analysis

A. FOIA Exemption 4

The Freedom of Information Act requires that federal

agencies comply with requests to make their records available

to the public, unless the requested records fall within at least

one of nine categories of exempt material. See 5 U.S.C.

s 552(a), (b). Pursuant to Exemption 4, FOIA exempts from

disclosure "trade secrets and commercial or financial informa-

tion obtained from a person and privileged or confidential." 5

U.S.C. s 552(b)(4). There is no dispute that the HTS num-

bers requested by appellants are "commercial" and are "ob-

tained from a person," i.e., the importer. The issue in this

case is whether the numbers are "confidential." Where, as

here, the information is supplied to the agency under compul-

sion, it is treated as "confidential" only if its disclosure is

likely "(1) to impair the Government's ability to obtain neces-

sary information in the future; or (2) to cause substantial

harm to the competitive position of the person from whom the

information was obtained." National Parks & Conservation

Ass'n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974) (footnote

omitted). Customs did not contend before the District Court,

nor did it argue on appeal, that disclosure of the numbers

would impair any Government functions. Therefore, both

parties agree that the HTS numbers are exempt from disclo-

sure only if Customs can establish that disclosure is likely to

cause substantial harm to the competitive position of the

importers who supplied the information. We review de novo

the District Court's grant of summary judgment in favor of

Customs. See Troy Corp. v. Browner, 120 F.3d 277, 281

(D.C. Cir. 1997).

B. The Merits

In their briefs to this court, appellants claim that they do

not need all ten digits of each HTS number in order to

evaluate the accuracy of the information contained in the

IVMs. Rather, they need only enough digits in each number

to compare, with the same degree of specificity, the informa-

tion provided by the exporters on the IVMs. In other words,

TPPA apparently would be satisfied if Customs disclosed

only, say, four or six digits of each HTS number, and segre-

gated out the remaining digits that provide the highly specif-

ic, confidential information about each shipment. Customs

responds that appellants waived this argument for redacted

disclosure by failing to raise it before the District Court, and

that, if appellants want to raise the issue of segregability,

they must do so in a new FOIA petition. Appellants acknowl-

edge that they did not expressly seek a segregability finding

in their District Court pleadings, but claim that it never

occurred to them that Customs was treating their request as

a request for all ten digits, when it is obvious (at least to

appellants) that only four or six digits would serve their

purpose. Regardless, they argue, both the agency and the

District Court had an affirmative obligation to consider seg-

regability sua sponte.

As an initial matter, we note that, in their briefs to this

court and at oral argument, appellants did not seriously

dispute the District Court's determination, based on detailed

affidavits submitted by experienced Customs officials, that

release of the unredacted ten-digit HTS numbers would likely

cause importers serious competitive harm. The affidavits

submitted by Customs explain precisely how a knowledgeable

person can, by linking HTS numbers to specific shipments,

uncover information concerning the nature, cost, profit mar-

gin, and origin of the shipments. As the District Court held,

a person could then "use the HTS numbers to unlock some of

the ambiguities and inaccuracies on the [IVM], and thereby

gain a picture of an importer's intentions, profit margin, and

other plans." Memorandum at 8, reprinted in App. 278.

Appellants have given us no reason to question the District

Court's judgment in this regard. We have no doubt that,

based on the record before the District Court, Customs met

its burden under Exemption 4, at least with respect to the

unredacted ten-digit HTS numbers.

The issue, then, is whether we should affirm the grant of

summary judgment and require appellants to file a new, more

specific FOIA request, or, instead, reverse and remand to the

District Court for a determination as to whether the HTS

numbers can be redacted in order to avoid application of

Exemption 4. We believe that the latter option is the more

appropriate disposition of this case.

FOIA specifically requires that, if a requested record con-

tains information that is exempt from disclosure under one of

the FOIA exemptions, "[a]ny reasonably segregable portion

of a record shall be provided to any person requesting such

record after deletion of the portions which are exempt." 5

U.S.C. s 552(b); see Oglesby v. United States Dep't of the

Army, 79 F.3d 1172, 1176 (D.C. Cir. 1996) ("If a document

contains exempt information, the agency must still release

'any reasonably segregable portion' after deletion of the

nondisclosable portions." (quoting 5 U.S.C. s 552(b)). "It has

long been a rule in this Circuit that non-exempt portions of a

document must be disclosed unless they are inextricably

intertwined with exempt portions." Mead Data Cent., Inc. v.

United States Dep't of the Air Force, 566 F.2d 242, 260 (D.C.

Cir. 1977).

In Board of Trade v. Commodity Futures Trading

Comm'n, 627 F.2d 392, 401 (D.C. Cir. 1980), this court

described the appropriate procedure for segregating exempt

material from non-exempt material:

Procedurally, when faced with a question of Exemption 4

coverage, the determining body--agency or court--must

first examine the requested documents, with details ...

not deleted, and ascertain whether they contain protect-

ed information. If, after applying the appropriate tests,

the body concludes that all or part of the sought-after

material is shielded by this exception to [FOIA], it must

then determine whether suitable deletions of identifying

or exempt matter may be made which will enable it to

reveal the remaining information. This technique, which

we have employed in numerous cases, derives from ex-

press provisions of [FOIA] and its legislative history as

well.

(citations, footnotes, brackets, and internal quotation marks

omitted). Appellants argue that, because the first four or six

digits of each HTS number contain a description of the

shipment that is no more specific than the description already

contained in the publicly-released IVMs, release of those

digits would not cause the importers any competitive harm.

However, because it is undisputed that the HTS number

descriptions are more accurate than the descriptions con-

tained in the IVMs, release of the redacted HTS numbers

would aid appellants in their public mission and duty to

combat ocean carrier fraud. Appellants therefore claim that

the District Court erred in not following the Board of Trade

procedure and in not ordering Customs to segregate out the

digits in each requested HTS number that would provide

appellants with a greater degree of specificity than they need.

Moreover, they assert, because Board of Trade places respon-

sibility for reasonable segregation on the agency as well as

the court, Customs violated FOIA when it did not release the

first four or six digits of the HTS numbers in the first

instance.

Customs responds that the District Court's silence on the

issue of segregability is perfectly appropriate: because appel-

lants never raised the prospect of redacted HTS numbers, the

court had no reason to raise it sua sponte, and this court

should not consider it now. See Brief for Appellee at 12-13.

Customs argues that Board of Trade and s 552(b) do not

create an affirmative duty on the part of the agency or the

court to come up with segregability proposals that the FOIA

plaintiff never even asked for. Customs also suggests that

the HTS numbers are not reasonably segregable and that it

would be unduly burdensome for the agency to do what

TPPA seeks.

Customs concedes that each digit in an HTS number

represents a greater degree of specificity with respect to the

description of the commodity being imported. Agency coun-

sel further conceded at oral argument that, if the HTS

numbers were simply translated into words, they undoubtedly

would be "records" subject to the normal FOIA rules--

including s 552(b), which requires reasonable segregation.

Thus, appellants have raised a plausible claim that the HTS

numbers themselves are also "records" subject to segregabili-

ty under FOIA. The question is whether appellants were

required to expressly suggest to the agency or the District

Court that the agency segregate out the exempt portions of

these "records."

In hindsight, under Board of Trade and other circuit

precedent, and pursuant to s 552(b), we believe that the

District Court had an affirmative duty to consider the segreg-

ability issue sua sponte. This court has remanded in numer-

ous cases in which the district court failed to make such a

finding, although we have never squarely held that the court

must make a segregability finding even if the issue has not

been specifically raised by the FOIA plaintiff. See, e.g.,

Kimberlin v. Department of Justice, 139 F.3d 944, 949-50

(D.C. Cir. 1998) (remanding to district court, because court

had not made segregability finding); PHE, Inc. v. Depart-

ment of Justice, 983 F.2d 248, 252 (D.C. Cir. 1993) ("[A]

district court clearly errs when it approves the government's

withholding of information under [FOIA] without making an

express finding on segregability."); Schiller v. NLRB, 964

F.2d 1205, 1209-10 (D.C. Cir. 1992) (remanding to district

court, where "[b]oth the [agency] and the district court

appear to have overlooked the segregability requirement,"

and where the "district court did not hold the [agency] to its

obligation to disclose reasonably segregable information"); cf.

Powell v. United States Bureau of Prisons, 927 F.2d 1239,

1242 n.4 (D.C. Cir. 1991) (" '[I]t is error for a district court to

simply approve the withholding of an entire document without

entering a finding on segregability, or the lack thereof.' "

(quoting Church of Scientology v. Department of the Army,

611 F.2d 738, 744 (9th Cir. 1979)). Moreover, appellants'

failure to raise segregability certainly was not a knowing

waiver of that argument. At most, it raised the possibility of

a mere forfeiture. See University of the Dist. of Columbia

Faculty Ass'n/NEA v. District of Columbia Fin. Responsibil-

ity and Management Assistance Auth., 163 F.3d 616, 625

(D.C. Cir. 1998) (citing United States v. Olano, 507 U.S. 725,

733 (1993)). In short, a remand in this case is consistent with

s 552(b) and the aforecited cases.

Furthermore, Customs concedes that, if the case were

dismissed, appellants could file another, more specific FOIA

request, asking for as many digits in the HTS numbers as

Customs could release without risking competitive harm. If

the agency chose to challenge this hypothetical new request

under Exemption 4, the issue would then be presented to the

district court (and possibly this court). Agency counsel con-

ceded at oral argument that Customs had nothing of sub-

stance to gain by requiring appellants to file a new FOIA

request at the administrative level. Thus, as a matter of

judicial economy and pursuant to our very broad remedial

authority, see 28 U.S.C. s 2106, it makes sense to remand so

that the District Court--which is already familiar with the

record in this case--can supplement the record and make

factual findings in the first instance on appellants' claims.

See Senate of the Commonwealth of Puerto Rico v. United

States Dep't of Justice, 823 F.2d 574, 580 (D.C. Cir. 1987)

("[T]he interests of judicial finality and economy have special

force in the FOIA context....") (citation and internal quota-

tion marks omitted); Marks v. CIA, 590 F.2d 997, 1004 n.5

(D.C. Cir. 1978) (Wright, C.J., concurring and dissenting)

(noting that "[d]elay ... is particularly inappropriate in a

FOIA suit"). This reasoning holds especially true where the

agency gives us no good reason not to remand.

In support of its position that appellants should be required

to file a new FOIA request, the agency cites only American

Federation of Government Employees, Local 2782 v. United

States Department of Commerce, 907 F.2d 203 (D.C. Cir.

1990) ("AFGE"). In that case, appellants, for the first time

on appeal, offered to narrow their FOIA request. We de-

clined to evaluate the newly-narrowed request de novo, be-

cause

[i]t is our office ... to review the decision of the district

court in the case that the appellants, having duly ex-

hausted their administrative remedies, there presented

for decision; it is distinctly not our role to pass de novo

upon a request for disclosure that is narrower than the

request that was presented to the agency.

Id. at 208. Our decision to remand in this case is in no way

inconsistent with the court's disposition in AFGE, because

appellants here are not asking this court to decide de novo

whether redacted HTS numbers fall within Exemption 4. As

the court stated in AFGE, we are in no position to evaluate a

claim for which no record has been established in the district

court. For example, we have no way of knowing whether the

disclosure to appellants of only four digits would cause sub-

stantial harm to the competitive position of the importers. It

is perfectly within our remedial authority, however, to re-

mand to the District Court so that a record can be made on

this issue, particularly when agency counsel conceded that

nobody's interests would be served by forcing appellants to

pursue their request again at the administrative level.

As noted above, our disposition in this case is fully consis-

tent with previous FOIA cases in which this court has re-

manded for further development of the record in light of

matters that did not arise until the case was in this court on

appeal. See, e.g., Sinito v. United States Dep't of Justice, No.

98-5227, slip op. at 6, 8 (D.C. Cir. May 18, 1999) (holding that

a cause of action under FOIA survives the death of the

original requestor, as long as the substitute requestor is

found to be the original requestor's legal representative un-

der Rule 25 of the Federal Rules of Civil Procedure). In

Sinito the court noted

the government's acknowledgment in oral argument that

Rule 25 substitution would not create extra work on the

government's part or otherwise impede its interests.

Indeed, it would seem to us more expeditious from the

government's point of view to allow the appeal to be

pursued on the record already made than to begin the

process all over again with a new requestor.

Id. at 9. Similarly, in National Parks, after conclusively

defining for the first time the term "confidential" as used in

Exemption 4, we remanded to the district court for a determi-

nation as to whether the requested information fell within this

newly-minted definition. See 498 F.2d at 770-71; see also

Lepelletier v. FDIC, 164 F.3d 37, 48-49 (D.C. Cir. 1999)

(refining test for nondisclosure under Exemption 6, and re-

manding to district court for factual determination in accor-

dance with reformulated test); cf. Lehrfeld v. Richardson, 132

F.3d 1463, 1467 (D.C. Cir. 1998) (upholding agency's nondis-

closure where plaintiff had failed to expressly invoke FOIA in

his initial request, and holding that "it would be futile to

require [plaintiff] to file a new request expressly invoking

[FOIA]" where it was clear that the documents sought were

exempt from disclosure).

In short, the decision in AFGE does not state a binding

rule of law that forecloses remand in a case of this sort.

Quite the contrary, as the case law shows, and as s 552(b)

requires, this court has not hesitated to order further pro-

ceedings before the district court on remand to fairly resolve

claims under FOIA. There is certainly no doubt that the

validity of Exemption 4 to block release of the HTS numbers

was the issue before the District Court. Understandably, due

to the somewhat peculiar nature of the information sought--a

numerical code in which the numbers represent increasing

degrees of specificity--the District Court did not make a

segregability finding, as s 552(b) and Board of Trade require.

In any event, pursuant to s 552(b) and Board of Trade, we

exercise our authority to remand.

III. Conclusion

For the reasons stated above, the judgment on appeal is

reversed and the matter is remanded to the District Court for

the purpose of determining whether disclosure of redacted

HTS numbers poses a likelihood of substantial harm to the

competitive position of the importers from whom the numbers

were obtained.

So ordered.