AutoAlliance International, Inc. v. United States

Slip Op. 02-137

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: GREGORY W. CARMAN, CHIEF JUDGE

AUTOALLIANCE

INTERNATIONAL, INC.

Plaintiff,

Court No. 01-01070

v.

UNITED STATES OF AMERICA,

Defendant.

[Defendant’s Motion to Dismiss for Lack of Subject Matter Jurisdiction is granted in part

and denied in part. Plaintiff’s claim for review regarding valuation is severed and dismissed for

lack of subject matter jurisdiction. Plaintiff’s claim for review regarding classification is limited

to the issue of classification of the subject merchandise as functional units. Plaintiff’s Motion for

Oral Argument, Or In The Alternative, Leave To File A Sur-Reply Memorandum is denied.]

Dated: November 22, 2002

Baker & Hostetler, LLP (Shelby F. Mitchell), Washington, D.C., for Plaintiff.

Robert D. McCallum, Jr., Assistant Attorney General; John J. Mahon, Acting Attorney in

Charge, International Trade Field Office; Harry A. Valetk, Trial Attorney, Commercial Litigation

Branch, Civil Division, U.S. Department of Justice; Yalena Slepak, Of Counsel, Office of

Assistant Chief Counsel, International Trade Litigation, U.S. Customs Service, for Defendant.

Court No. 01-01070 Page 2

OPINION

CARMAN , CHIEF JUDGE: Pursuant to U.S. CIT R. 12(b)(1), the defendant, the United

States, moves to dismiss this action for lack of subject matter jurisdiction. Defendant argues that

because the plaintiff, AutoAlliance International, Inc. (“AAI”), failed to file a summons in this

Court challenging the partial denial of the protests to the original liquidation, the original

liquidation of the subject merchandise has become final and conclusive. Plaintiff opposes

Defendant's motion asserting that this Court has subject matter jurisdiction under 28 U.S.C. §

1581(a) (2000). This Court has jurisdiction to resolve this question under 28 U.S.C. § 1581(a).

For the following reasons, Plaintiff’s valuation claim is severed and dismissed and Plaintiff’s

classification claim is limited to review of the United States Customs Service’s (“Customs”)

choices to classify the subject merchandise as functional units. Plaintiff’s Motion for Oral

Argument or in the Alternative, Leave to File a Sur Reply is denied.

BACKGROUND

In September and October 1991, AAI imported nine shipments of automobile production

machinery consisting of welding machines and related equipment. (Pl.’s Summons, Form 1-1.)

After extending the time for liquidation, Customs finally liquidated the subject entries on August

11, 1995. (Def.’s Mem. in Supp. of Mot. to Dismiss at 1 (“Def.’s Br.”); Pl.’s Opp. to Def.’s Mot.

to Dismiss at 3 (“Pl.s’ Br.”).) At liquidation, Customs classified the various pieces of imported

equipment as separate items of equipment. (Pl.’s Summons, Form 1-2.) Additionally, in

accordance with a 1995 Headquarters Ruling, 1 Customs applied a value advance for “design and

1

United States Customs Service Headquarters Ruling Letter No. 544694 (February 14,

1995) held that payments made to a foreign seller for design and development expenses

associated with automobiles manufactured in a Foreign Trade Subzone with imported

Court No. 01-01070 Page 3

development” costs (“Value Advance”) in the calculation of the dutiable value of items classified

under Subheading 8428.90 of the Harmonized Tariff Schedule of the United States (“HTSUS”)

and Subheading 7308.90 of the HTSUS. (Id.)

Following the liquidation, AAI filed two protests, Protest Nos. 1101/95-100680 and

1101/95-100704 (“Initial Protests”) (Pl.’s Compl. Ex. C and D.) The Initial Protests challenged

the original liquidation on two separate grounds. First, AAI challenged Customs’ classification

and presented two alternative classification approaches: 1) that all of the merchandise should

have been classified as a single “macro” functional unit of welding equipment; or 2) that the

merchandise should be classified by job numbers as multiple functional units of welding

equipment or functional units of material handling equipment. (Attachment B in Support of

Initial Protest No. 1101/95/100704, Pl.’s Compl. Ex. D at 2-4.) Second, AAI challenged the

application of the Value Advance to the subject merchandise. (Id. at 12-16.) Specifically, AAI

argued that the research and development costs associated with automobile parts, the subject of

the 1995 Headquarters Ruling, did not apply to the production machinery at issue. (Id.)

In response to the Initial Protests, Customs formally issued Headquarters Ruling Letter

No. 960755 (“HQ 960755”) on October 10, 2000. (Pl.’s Compl. Ex. E.) Customs ruled that

AAI’s classification arguments were:

“ALLOWED in PART and DENIED in PART; consistent with this ruling

(liquidated classification of article properly classifiable in another provision will

result in reliquidation only if the proper classification is at a rate lower of duty

than the liquidated classification; if the proper classification is at the same or

higher rate of duty than the liquidated classification, the liquidation rate of duty

may not be changed (19 U.S.C. 1515(a)).

(HQ 960755, Pl.’s Compl. Ex. E at 15.)

components were part of the dutiable value of the imported components. (Pl.’s Compl. Ex. A.)

Court No. 01-01070 Page 4

Customs further ruled that,

Pursuant to [the 1995 Headquarters Ruling], the value advance for research and

development cost is proper. With regard to this issue, the protest is denied.

(Id.)

As to the classification issue, Customs rejected AAI’s claim that all of the merchandise

constituted one “macro” functional unit. (Id. at 6-7.) Customs agreed that most of the

merchandise was classifiable as functional units of welding equipment or functional units of

material handling equipment under HTSUS headings 8515 or 8428. (Id. at 7-14.) However,

Customs held that certain items, such as safety fences, material handling jigs, and gauges, did not

constitute parts of any functional unit and reaffirmed the original classification of these separate

items. (Id.) Customs rejected AAI’s entire argument as to the Value Advance issue and stated

that the 1995 Headquarters Ruling controlled. (Id. at 3-4.)

Accordingly, Customs reliquidated the entries on October 27, 2000. (Pl.’s Summons,

Form 1-1.) At reliquidation, Customs changed the classification of most of the subject

merchandise in accordance with AAI’s proposed multiple functional units classification approach

which resulted in a recalculation of the total duties owing. (Def.’s Br. at 4; Pl.’s Br. at 6.)

However, Customs did not change the classification of certain items, such as the safety fences,

material handling jigs, and gauges. (Def.’s Br. at 5; Pl.’s Br. at 5.) Further, Customs applied the

Value Advance as it had in the original liquidation. (Id.)

AAI filed a protest to the reliquidation (“Reliquidation Protest”) on January 25, 2001.

(Pl.’s Compl. Ex. F.) AAI argued in the Reliquidation Protest that Customs should have

classified all of the merchandise as a single functional unit or that Customs should have included

Court No. 01-01070 Page 5

the safety fences, gauges, material handling jigs, etc. in the classification as parts of functional

units of welding equipment or material handling equipment. (Attachment B in Support of

Reliquidation Protest No. 1101-01-100053 at 2-3, Pl.’s Compl. Ex. F at 8-9.) Further, AAI

reasserted its argument that Customs improperly applied the Value Advance to the entries. (Id. at

4-8, Pl.’s Compl. Ex. F at 10-14.)

Customs denied AAI’s Reliquidation Protest on June 12, 2001. (Pl.’s Summons, Form 1-

1.) Although filed within the requisite 90 days after reliquidation, Customs did not address the

merits of AAI’s Reliquidation Protest; rather, Customs denied the protest as “Untimely Filed.”

(Pl.’s Summons, Form 1-2.) AAI then filed a summons in this Court on December 6, 2001

challenging the denial of the Reliquidation Protests. The summons was filed within 180 days of

the denial of the Reliquidation Protests and almost 14 months after Customs issued its decision

on the Initial Protests.

STANDARD OF REVIEW

The burden of establishing jurisdiction lies with the party seeking to invoke this Court’s

jurisdiction. Old Republic Ins. Co. v. United States, 741 F. Supp. 1570, 1573 (Ct. Int’l Trade

1990) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189 (1936)). In this

case, AAI bears the burden of establishing jurisdiction. If a Rule 12(b)(1) motion to dismiss

challenges subject matter jurisdiction based on the sufficiency of a party’s pleadings, then those

pleadings are construed in a light most favorable to that party. Scheuer v. Rhodes, 416 U.S. 232,

236 (1974). However, if the Rule 12(b)(1) motion challenges the factual allegations of

jurisdiction in the party’s pleadings, the movant is deemed to be questioning the factual basis for

the court's subject matter jurisdiction. Trentacosta v. Frontier Pac. Aircraft Indus., Inc., 813

Court No. 01-01070 Page 6

F.2d 1553, 1558-59 (9th Cir. 1987) (referencing C HARLES A. WRIGHT & ARTHUR R. MILLER,

FEDERAL PRACTICE AND PROCEDURE § 1563, at 653-54 (1969)). In such a case, the allegations in

the complaint are not controlling and only the uncontroverted facts are accepted as true. Id.; see

also Power-One, Inc. v. United States, 83 F. Supp. 2d 1300, 1303 (Ct. Int’l Trade 1999) (quoting

Cedars-Sinai Med. Cntr. v. Walters, 11 F. 3d 1573, 1583-84 (Fed. Cir. 1993)). All other facts

underlying the controverted jurisdiction are in dispute and are subject to fact-finding by this

Court. Power-One, Inc., 83 F. Supp. at 1308.

In the present case, Defendant’s Rule 12(b)(1) motion to dismiss challenges the basis of

AAI’s allegations of jurisdiction. Specifically, Customs is questioning AAI’s assertion that this

action is timely and properly before this Court. Only the uncontroverted facts will be accepted as

true.

If, after a review of the pleadings and extrinsic evidence, any doubt remains whether this

Court has jurisdiction to hear this action, the Court will refrain from granting Defendant’s motion

to dismiss. See Hamlet v. United States, 873 F.2d 1414, 1416 (Fed. Cir. 1989) (stating that a

complaint should only be dismissed if the plaintiff cannot prove any set of facts that would

entitle the plaintiff to relief (citing Conley v. Gibson, 355 U.S. 41, 45-46 (1957))).

PARTIES’ CONTENTIONS

A. Defendant’s Contentions

Defendant argues that this Court lacks subject matter jurisdiction under 28 U.S.C. §

1581(a) because AAI’s claim is untimely. (Def.’s Br. at 5.) Defendant asserts that this Court

lacks jurisdiction because AAI failed to commence an action within 180 days after Customs

Court No. 01-01070 Page 7

partially denied the Initial Protests in HQ 960755. (Id.) Defendant emphasizes the language in

28 U.S.C. § 2636(a)(1) which states that “[a] civil action contesting the denial, in whole or in

part, of a protest under section 515 of the Tariff Act of 1930” must be “commenced within one

hundred and eighty days after the date of mailing of notice of denial of a protest.” (Id. at 6-7.)

Defendant contends that Customs “denied in part” the Initial Protests on October 10, 2000. (Id.

at 7.) Therefore, Defendant argues, Plaintiff waived any objection to that partial denial because

Plaintiff did not file a summons with this Court within 180 after Customs ruled on the Initial

Protests. (Id.) Defendant concludes that because more than 180 days have elapsed since October

10, 2000, Customs’ decision in HQ 960755 is final and this Court is without jurisdiction to hear

Plaintiff’s claims. (Id.)

Additionally, Defendant argues that even if AAI properly waited until after reliquidation

to file an action with this Court, AAI’s Reliquidation Protest is invalid. (Id. at 11.) Defendant

asserts that without a valid protest, AAI has no basis upon which to file a summons to invoke this

Court’s jurisdiction. (Id. at 12.) Defendant asserts that AAI’s Reliquidation Protest is invalid

because: 1) the Reliquidation Protest constitutes an invalid re-protest of the same issues raised in

the Initial Protests; and 2) the Reliquidation Protest raises issues that were not involved in the

reliquidation. (Id. at 11-12.)

First, Defendant cites to 19 U.S.C. § 1514(c)(1) which states that “[o]nly one protest may

be filed for each entry of merchandise . . . .” Defendant alleges that Plaintiff violates §

1514(c)(1)’s one protest rule by reasserting the same arguments contained in the Initial Protests

in the Reliquidation Protest. (Id. at 7, 11.) Defendant contends that AAI’s Reliquidation Protest

merely repeats the same arguments that Customs denied in the Initial Protests and therefore, the

Court No. 01-01070 Page 8

Reliquidation Protest is invalid under § 1514(c)(1). (Id. at 13.)

Second, Defendant argues that the Reliquidation Protest raised issues that were not

involved in the reliquidation. (Id. at 7, 11.) Defendant contends that under 19 U.S.C. § 1514(d),

“[t]he reliquidation of an entry shall not open such entry so that a protest may be filed . . . upon

any question not involved in such reliquidation.” (Def.’s Br. at 7, 11.) Defendant also references

Customs Regulation § 174.16 which states that “a protest shall not be filed . . . on reliquidation

upon any question not involved in the reliquidation.” (Def.’s Br. at 7) (citing 19 C.F.R. § 174.16.

(2000).) According to Defendant, the reliquidation only involved the approved aspects of the

Initial Protests and left untouched the denied aspects of the Initial Protests. (Id. at 11.)

Defendant claims that under § 1514(d), a protest following the reliquidation could only raise

issues regarding the parts of the Initial Protests that were approved. (Id. at 11-12.) Defendant

insists that Plaintiff did just the opposite in the Reliquidation Protest and instead challenged the

parts of the Initial Protests that were denied. (Id. at 12.) Defendant maintains that AAI’s

Reliquidation Protest invalidly raised issues that were denied in the Initial Protests. (Id.)

Accordingly, Defendant argues, AAI’s Reliquidation Protest fails to meet the statutory and

regulatory requirements and is an invalid basis upon which AAI could file a summons in this

Court. (Id. at 11.)

Defendant also explains Customs’ rejection of the Reliquidation Protest as “untimely

filed.” (Id. at 12-13.) According to Defendant, Customs rejected the Reliquidation Protest as

untimely because the protest “only objected to the issues denied in [the] first protests.” (Id.)

Defendant reasons that since these issues were not involved in the reliquidation, AAI could not

timely raise them in a protest to the reliquidation. (Id. at 13.)

Court No. 01-01070 Page 9

Defendant concludes by asserting that the 180-day time limit under § 2636(a)(1) began to

run when Customs issued its ruling on the Initial Protests. (Id. at 14.) Therefore, AAI’s waived

its right to judicial review by failing to commence an action within 180 days of Customs’ ruling

on the Initial Protests. (Id.) Customs asserts that because an action was not commenced within

that time period, under 19 U.S.C. § 1514(a), the liquidation of the entries has become final and

conclusive against AAI. (Id. at 11-12.) Customs maintains that because AAI failed to file a

summons after the original liquidation, this Court lacks subject matter jurisdiction to review the

valuation and classification of the subject entries. (Id.)

B. Plaintiff’s Contentions

Plaintiff argues that this Court has subject matter jurisdiction under 19 U.S.C. § 1581(a)

which grants exclusive jurisdiction to this Court over any civil action commenced to contest the

denial of a protest in whole or in part. (Pl.’s Br. at 8.)

First, AAI contends that case law requires an importer to file a protest to a reliquidation in

order to invoke this Court’s jurisdiction. (Id. at 1, 8.) Plaintiff reasons that the reliquidation

vacated the entire original liquidation and therefore the only Customs action from which AAI

was able to file a summons in this court was the denial of the Reliquidation Protest in June 2001.

(Id. at 10.) AAI asserts that under case law, an importer is required to file a protest to a

reliquidation before filing a summons in this Court. (Id. at 9.) According to Plaintiff, Customs

reliquidated the entries in their entirety and thus the reliquidation vacated and extinguished the

original liquidation of the subject merchandise and the reliquidation became the final protestable

action by Customs. (Id. at 10.) Plaintiff argues that the Reliquidation Protest was a

jurisdictional prerequisite to AAI’s filing a summons in this Court. (Id.)

Court No. 01-01070 Page 10

Secondly, AAI refutes Customs’ argument that the Reliquidation Protest is invalid under

19 U.S.C. § 1514(d). (Id. at 10.) Section 1514(d) states that “[t]he reliquidation of an entry shall

not open such entry so that a protest may be filed against the decision of the Customs Service

upon any question not involved in such reliquidation.” AAI argues that the defendant

misinterprets § 1514(d) and that the statute should not be applied to the facts of this case. (Id.)

Under Plaintiff’s interpretation, § 1514(d) only applies in cases of “serial protests.” (Id. at 11.)

In other words, AAI contends that § 1514(d) applies in cases where the importer is attempting to

use the reliquidation protest as a means to challenge a new aspect of the initial liquidation. (Id. at

11-12.) Plaintiff contends that § 1514(d) merely prevents importers from filing a protest to a

reliquidation that raises issues that should have been raised in the initial protests. (Id. at 12.)

AAI contends that § 1514(d) has no application because its Reliquidation Protest does not

attempt to raise any new issues that were not previously raised in the Initial Protests. (Id. at 14.)

Thus, § 1514(d) does not invalidate AAI’s claim. (Id.)

Plaintiff maintains that even if § 1514(d) applies to the present case, the reliquidation

“involved” the issues of classification and the Value Advance such that the entire entry was open

to re-protest. (Id. at 14-15.) Specifically, AAI notes that Customs reclassified almost all of the

subject merchandise and reapplied the Value Advance in the recalculation of the total amount of

duties owing on the entries. (Id. at 15.) AAI declares that Customs’ actions in the reliquidation

nullified every aspect of the original liquidation such that the Reliquidation Protest satisfies §

1514(d)’s requirement that a protest only raise questions “involved in such reliquidation.” (Id.)

Plaintiff asserts that as a matter of law, the Reliquidation Protest was necessary to vest subject

matter jurisdiction with this Court. (Id.)

Court No. 01-01070 Page 11

Lastly, Plaintiff argues that the notions of fairness and equity estop Customs from arguing

that this action is barred. (Id.) AAI contends that Customs purposefully delayed ruling on the

Reliquidation Protest allegedly making “it virtually impossible” for AAI to file a timely

summons in this case within 180 days of Customs’ ruling on the Initial Protests. (Id.) Although

Customs decided the Reliquidation Protest well within the 2-year recommended time frame, AAI

argues that Customs acted in an “arbitrary and unreasonable” manner by not ruling on the

Reliquidation Protest until the time for filing a summons on the Initial Protests had run. (Id. at

16.) AAI claims that filing a summons prior to Customs’ ruling on the Reliquidation Protest

would have been premature and a failure to exhaust its administrative remedies. (Id.)

AAI concludes that it was required to protest the reliquidation and based upon Customs’

allegedly dilatory conduct, AAI could not have invoked this Court’s jurisdiction within the 180-

day period the Government claims the suit should have been brought. (Id. at 16-17).

ANALYSIS

The issue before this Court is whether the Court has jurisdiction over this matter pursuant

to 28 U.S.C. § 1581(a). Under 28 U.S.C. § 1581(a), 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 Act].” Codified at 19 U.S.C. § 1515(a) (1994), section 515(a) of

the Act provides, “the appropriate customs officer, within two years from the date a protest was

filed in accordance with section 514 of this Act, shall review the protest and shall allow or deny

such protest in whole or in part.”

It is well settled that the United States is immune from suit unless it consents to be sued.

Court No. 01-01070 Page 12

United States v. Mitchell, 445 U.S. 535, 538 (1980) (quoting United States v. Sherwood, 312

U.S. 584, 586 (1941)). Such a waiver of sovereign immunity “must be unequivocally expressed”

in the statute and will be “strictly construed . . . in favor of the sovereign.” Sherwood, 312 U.S.

at 590; see also Lane v. Pena, 518 U.S. 187, 192 (1996).

The United States’ sovereign immunity is abrogated under 28 U.S.C. § 2636(a)(1) to

provide this Court with jurisdiction over any “civil action contesting the denial, in whole or in

part, of a protest under section 515 of the Tariff Act of 1930” so long as the action is

“commenced . . . within one hundred and eighty days after the date of mailing of notice of denial

of a protest under section 515(a) of such Act.” In order to bring suit against the United States,

AAI must meet the terms of § 2636(a) and file a summons in this Court within 180 days of a

denial, in whole or in part, of their protest. The facts are uncontroverted as to the series of

protests and decisions that took place between AAI and Customs. There is no dispute between

the parties that AAI did not file a summons in this Court with respect to Customs’ ruling on the

Initial Protests. The argument centers around whether or not Customs’ ruling on the Initial

Protests was a denial “in whole, or in part” of AAI protests within the meaning of § 2636(a) such

that AAI should have filed a summons in this Court after the ruling. Applying the language of §

2636(a), if the Initial Protests were denied in whole or in part, AAI was required to commence

suit within 180 days after Customs’ ruling on those protests.

When determining jurisdiction under 28 U.S.C. § 1581(a) over “any civil action

commenced to contest the denial of a protest, whole or in part,” this Court has held that Customs’

response on the protest form is not dispositive and “[t]he court must look to what Customs

actually did.” Board of Trs. of Leland Stanford Junior Coll. v. United States, 948 F. Supp. 1072,

Court No. 01-01070 Page 13

1074 (Ct. Int’l Trade 1996). In order to determine if a protest has been denied or approved, the

Court must examine “the extent to which the protest has resulted in a change of the protested

decision.” Sanyo Elec., Inc. v. United States, 81 Cust. Ct. 114, 115 (1978). Additionally, this

Court has held that Customs leaves the substance of a protest open if Customs does not

specifically deny it. See Wolff Shoe Co. v. United States, 861 F. Supp. 133, 134 (Ct. Int’l Trade

1994). If a denied protest is not properly challenged in this Court, § 1514(a) states that the

decision of Customs including “the liquidation or reliquidation of an entry . . . shall be final and

conclusive upon all persons.” 19 U.S.C. § 1514(a).

This Court finds that AAI’s Initial Protests were denied in part as to the issues of the

Value Advance and the classification of the safety fences, material handling jigs, gauges, etc. as

parts of functional units. AAI failed to file a summons in this Court within 180 days after

Customs’ ruling on the Initial Protests, and thus, under the mandate of § 2636(a), AAI’s suit as to

the above issues is barred. However, this Court is not completely persuaded by Defendant’s

position. This Court finds that AAI’s protest to the reliquidation as to the alternative argument

for a single “macro” functional unit classification approach was proper. AAI is able to invoke

this Court’s jurisdiction to review Customs’ denial of the Reliquidation Protest as to AAI’s

alternative classification approach claim. Therefore, as to that limited issue, AAI’s suit is

properly before this Court.

For the purpose of analysis, this Court will examine Defendant’s Motion to Dismiss in

the context of the two issues raised by AAI in its protests: 1) the application of the Value

Advance; and 2) the classification of the subject merchandise. This approach is supported by the

fact that in the series of protests and decisions, both Customs and AAI treated each issue

Court No. 01-01070 Page 14

separately.

A. Value Advance

It is clear from the language of the Headquarters ruling accompanying Customs’ decision

on the Initial Protests that the Initial Protests were specifically denied as to the Value Advance

issue. Although Customs checked the APPROVED boxes on the forms, Customs added in

handwriting that the protests were “Denied in Part see att’d HQ ruling 960755.” In examining

the language that Customs used in HQ 960755, it is clear that Customs did not change any aspect

of its original decision to apply the Value Advance in the reliquidation. Customs specifically

stated, “[p]ursuant to [the 1995 Headquarters Ruling], the value advance for research and

development cost is proper. With regard to this issue, the protest is denied.” (HQ 960755, Pl.’s

Compl. Ex. E at 15.)

AAI admits that “Customs denied the [Initial Protests] in their entirety as to the value

advance issue.” (Pl.’s Br. at 5.) Additionally, AAI concedes that Customs’ ruling on the Initial

Protests “allowed the protests in part and denied the protests in part.” (Pl.’s Mot. for Oral

Argument at 3.) Plaintiff remarks that in Customs’ decision on the Initial Protests, “with respect

to the application of the value advance, Customs denied the protests in their entirety, holding that

the 1995 Ruling governed this issue.” (Id.) AAI fails to reconcile its seemingly contradictory

positions. Although AAI admits in its briefs that Initial Protests were denied as to the Value

Advance, AAI also states that it was required to wait to file a summons until Customs had ruled

on the Reliquidation Protest.

AAI argues that an importer is required to protest a reliquidation as a jurisdictional

prerequisite to seeking review in this Court. (Pl.’s Br. at 7-10.) AAI’s interpretation of this

Court No. 01-01070 Page 15

Court’s precedent is too narrow. AAI cites to a series of cases to support its argument.2

However, the cases to which Plaintiff cites are factually distinguishable from the case at bar. In

the cited cases, the importers protested the original liquidation as to only one aspect:

classification. Therefore, when Customs reclassified the merchandise at reliquidation,

necessarily the entire original liquidation as to classification was nullified.3 In order to challenge

the classification in those cases, the importer was required to protest the reliquidation.

However, in the present case, AAI protested two aspects of the original liquidation:

valuation and classification. In this case, at reliquidation, Customs only changed the

classification of the merchandise under a functional units approach. Customs did not change the

application of the Value Advance in the reliquidation.

AAI argues that Customs nullified the entire original liquidation by changing the

classification of most of the entries. (Pl.’s Br. at 15.) However, this Court held that under §

1514(c), “the original liquidation [i]s nullified only as to the question with which the

reliquidation dealt . . . [a]s to all other matters, not the subject of reliquidation, the original

liquidation remain[s] in full effect.” Ataka Am. v. United States, 79 Cust. Ct. 135, 137 (1977)

2

The plaintiff cites to the following cases in support of its position: SSK Indus., Inc. v.

United States, 101 F. Supp. 2d 825 (Ct. Int’l Trade 2000); Mitsubishi Elec. Am., Inc. v. United

States, 865 F. Supp. 877 (Ct. Int’l Trade 1994); Transflock, Inc. v. United States, 765 F. Supp.

750 (Ct. Int’l Trade 1991).

3

In SSK Industries, the original liquidation was completely nullified when Customs

changed the classification of all of the subject merchandise from 8804.00.00 HTSUS to

8479.89.95. SSK Indus., 101 F. Supp. 2d at 826-827. In Mitsubishi, Customs completely

nullified the original liquidation when Customs ruled that the merchandise should be reclassified

from 8517.81.00 to 8541.40.95 HTSUS. Mitsubishi Elec. Am., 865 F. Supp. at 878-879. In

Transflock, Customs nullified all aspects of the original liquidation when it reclassified the

merchandise under item 256.87 of the Tariff Schedules of the United States. Transflock, 765 F.

Supp. at 751.

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(referencing H. Rep. No. 7, 71st Cong., 1st Sess. at p. 179 (1929)). Here, the reliquidation dealt

only with the question of classification. As to valuation, the original liquidation remained in full

effect. Therefore, Customs did not nullify the original liquidation as to the application of the

Value Advance. Because the original liquidation remained in full effect as to valuation, AAI was

required under § 1514(a) to file a summons in this Court within 180 days of Customs’ ruling on

the Initial Protests in order to obtain judicial review of Customs’ application of the Value

Advance.

AAI improperly re-protested its Value Advance claim in the Reliquidation Protest.

Subsection 1514(d) states that “[t]he reliquidation of an entry shall not open such entry so that a

protest may be filed against the decision of the Customs Service upon any question not involved

in such reliquidation.” As stated before, the question of the application of the Value Advance

was not involved in the reliquidation.

Statutes abrogating the United States’ sovereign immunity must be strictly construed.

Sherwood, 312 U.S. at 590. Subsection 2636(a)(1) states that if a protest is denied “in whole or

in part” the importer must file a summons with this Court within the required time limit. A strict

construction of the statute requires this Court to pay heed to the “in part” language. Customs’

partial denial of AAI’s protests, specifically as to the Value Advance issue, warrants a finding

that this Court lacks jurisdiction as to AAI’s Value Advance claim. Therefore, AAI’s valuation

claim is severed and dismissed.

B. Classification

In the Initial Protests, AAI presented two basic alternative classification arguments

against Customs’ original liquidation:

Court No. 01-01070 Page 17

1. All items should be classified as one “macro” functional unit of welding

machinery or apparatus. (Attachment B in Support of Initial Protest No.

1101/95/100704 at 2, Pl.’s Compl. Ex. D at 4.)

2. The items should be classified by groupings or job numbers as functional units of

welding equipment or functional units of material handling equipment. (Id. at 4,

Pl.’s Compl. Ex. D at 6.)

Customs did not accept either alternative approach completely. Rather, Customs

accepted most of the second alternative, but partially denied that approach as to certain items.

Customs approved most of AAI’s alternative argument that the subject merchandise should be

classified as functional units of welding equipment or material handling equipment. However,

Customs specifically stated that certain items such as safety fences, gauges, etc. did not constitute

parts of functional units and as to these items, AAI’s alternative classification argument was

denied. (HQ 960744, Pl.’s Ex. E at 8-14.)

In applying the standard set forth in Sanyo Electric, “the only logically consistent way to

determine whether a protest has been denied in part is to see whether any part of the protested

decision remains in effect.” 81 Cust. Ct. at 115. If any part of the protested decision remains in

effect, then the protest has been denied in part. Here, the original classification of the safety

fences, material handling jigs, gauges, etc. remained in effect and thus, the protest was denied in

part.

Customs stated in HQ 960755 that the classification arguments in the Initial Protest were

“ALLOWED in PART and DENIED in PART.” (HQ 960755 at 15, Pl.’s Compl. Ex. E at 15.)

Customs specifically detailed which aspects of AAI’s proposed classifications were accepted and

Court No. 01-01070 Page 18

which aspects were denied. When denied, Customs stated that the classification was to remain

“unchanged” from the classification in the original liquidation. (Id. at 4-15, Pl.’s Compl. Ex. E

at 4-15.)

In the Reliquidation Protest, AAI challenged Customs’ refusal to include safety fences,

gauges, etc. as parts of functional units: “all items not classified as functional units under the

Customs approach as enunciated in [HQ 960755], should be reclassified as either parts of

welding equipment or parts of material handling equipment.” (Attachment B in Support of

Reliquidation Protest No. 1101-01-100053 at 4, Pl.’s Compl. Ex. F at 10.) The classification of

these items was unchanged in reliquidation from the original classification. As § 1514(d) states,

“[t]he reliquidation of an entry shall not open such entry so that a protest may be filed against the

decision of the Customs Service upon any question not involved in such reliquidation.” The

question of including these items in a functional units approach was not involved in the

reliquidation. If AAI wanted to challenge Customs refusal to classify the safety fences, gauges,

etc. under the functional units approach, AAI’s remedy was to file a summons in this Court after

Customs’ decision on the Initial Protests. AAI failed to do this. Therefore, this Court lacks

subject matter jurisdiction to review Customs’ denial to include such items as parts of functional

units of welding equipment or material handling equipment.

However, AAI was correct to wait to file its Reliquidation Protest as to the argument that

Customs should have classified the subject merchandise as a single macro functional unit. As set

forth earlier, AAI presented two alternative classification arguments to Customs in the Initial

Protests. This Court has held that when Customs accepts one of an importer’s proposed

alternative classifications, that acceptance is an approval of the protested classification that must

Court No. 01-01070 Page 19

be protested after reliquidation. See Sanyo Elec., 81 Cust. Ct. at 115; see also Bd. of Trs. Of

Leland Stanford Junior Coll., 948 F. Supp. at 1075; Transflock, 765 F. Supp. at 751. As an

approval, the importer must protest the reliquidation and wait for Customs to deny its

reliquidation protest before the importer can seek judicial review. See Sanyo Elec., 81 Cust. Ct.

at 115.

As this Court reasoned in Sanyo Electric, “[i]f a party’s preference for a rejected

alternative claim is so strong that it wishes to pursue the claim even following the granting of

another alternative claim, then . . . [t]he proper procedure would be for the party to advance its

preferred alternative claim in a new protest . . . following the reliquidation of the entry.” Sanyo

Elec., 81 Cust. Ct. at 115.

In HQ 960755, Customs rejected AAI’s proposed alternative classification of the subject

merchandise as a single macro functional unit. (HQ 960755 at 7, Pl.’s Compl. Ex. E at 7.) At

the same time, Customs accepted, with limitations, AAI’s other alternative approach to treat the

subject merchandise as multiple functional units. (Id.) Customs’ acceptance of this alternative

approach was an approval of the protested classification. This Court agrees with Customs’

statement that “the reliquidation concerned only that part of the ruling which allowed the

protests.” (Def.’s Reply to Pl.’s Br. at 2.) However, Customs argues that AAI’s Reliquidation

Protest is invalid because it protests the denied aspects of the Initial Protests. (Def.’s Br. at 7.)

Customs is incorrect in its analysis. As stated above, Customs’ approval of one alternative

classification argument is an approval of the classification claim that must be protested after

reliquidation.

In the Reliquidation Protest, AAI argued that it is “logically and legally appropriate to

Court No. 01-01070 Page 20

treat everything imported as a single functional unit.” (Attachment B in Support of Reliquidation

Protest No. 1101-01-100053 at 3, Pl.’s Compl. Ex. F at 9.) Further, AAI argued that “the entire

imported merchandise is a body assembly line kit” and should be classified as a single functional

unit. (Id.) Under this Court’s precedent, it was proper for AAI to protest the reliquidation and

wait for Customs to deny the Reliquidation Protest before filing a summons in this Court seeking

review of Customs’ chosen classification approach. The Court finds that AAI properly filed a

protest to the reliquidation as to Customs’ choice between AAI’s proposed alternative

classification approaches. Therefore, this Court has jurisdiction to decide if Customs properly

classified the subject merchandise as functional units.

The Court’s holding today is consistent with the Court’s holding in Novell, Inc. v. United

States, 985 F. Supp. 121 (Ct. Int’l Trade 1997). In Novell, the importer protested Customs’

original liquidation on two grounds: appraisement and duty-free treatment. Id. at 122. The

importer presented two alternative appraisement approaches to Customs in the protest. Id.

Customs “granted in part and denied in part” the importer’s protest. Id. at 122. Customs agreed

that the merchandise should be reappraised under one of the importer’s alternative appraisement

approaches but refused duty-free treatment. Id. Before reliquidation, the importer filed a

summons in this Court reasserting its original arguments as to appraisement and duty-free

treatment. Id. at 123. Customs argued that this Court lacked subject matter jurisdiction because

the importer failed to protest the reliquidation. Id. The Court held that the duty-free claim was

properly within the Court’s jurisdiction because that claim had been denied by Customs decision

on the importer’s initial protest. Id. However, the Court determined that it lacked subject matter

jurisdiction over the appraisement claim. Id. at 124. The Court held that because the importer

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offered Customs two alternative appraisement approaches in its protest and Customs granted one

of the alternative approaches, the protest was considered approved as to appraisement. Id.

Therefore, the importer should have waited to file a protest to the reliquidation as to the

appraisement approach used and then the importer should have filed a summons in the Court. Id.

at 123-125.

Novell is analogous to the present case. Here, AAI protested the original liquidation on

two grounds: classification and valuation. In its protest, AAI offered alternative classification

approaches. Customs clearly denied AAI’s protest as to valuation, just as Customs denied the

duty-free claim in Novell. Likewise, AAI should have filed a summons in this Court as to the

valuation issue after Customs’ ruling on the Initial Protests as the importer did in Novell.

Further, as the Court reasoned in Novell, when Customs approved one alternative classification

approach, as to that issue, the protests were approved and thus AAI was correct to wait to file a

summons until after it had protested the reliquidation.

Lastly, AAI argues in its briefs that the principles of equity require the Court to exercise

jurisdiction over the reliquidation entries. (Pl.’s Br. at 15-17.) The Court is unable to consider

AAI’s equity argument. In suits against the United States, “jurisdictional statutory requirements

cannot be waived or subjected to excuse or remedy based equitable principles.” Mitsubishi Elec.

Am., 865 F. Supp. at 880 (citing NEC Corp. v. United States, 806 F.2d 247, 249 (1986)).

However, AAI rightly draws this Court’s attention to the fact that our ruling today

mandates a complex issue-splitting job for the importer in determining the proper administrative

or legal action to take in response to Customs’ decisions. To assure that its claim can be heard

by this Court, the importer is forced to examine its protests to the original liquidation and

Court No. 01-01070 Page 22

examine even closer Customs’ ruling on those protests in order to decipher what has been denied

and what has been approved. Although there are simple boxes on the Customs protest forms

indicating DENIED, DENIED IN PART, APPROVED, etc., the importer cannot take Customs at

its word (or box as it may be) and must look beyond what Customs has checked and examine

what Customs actually did in its ruling. Customs does a disservice to the importers when it does

not follow its own regulations that mandate that notice of denial of a protest “shall include a

statement of the reasons for the denial, as well as a statement informing the protesting party of

the right to file a civil action contesting the denial of the protest.” 19 C.F.R. § 174.30(a) (2000)

(emphasis added). In the present case, this Court found no indication that Customs, in its ruling

on the Initial Protests, informed AAI of its right to file such an action contesting the partial denial

of the protests.

The Court invites Congress, Commerce, and Customs to reexamine protest, protest

denial, liquidation, and reliquidation procedures in order to modify those procedures by statute

and or regulation with a view toward the elimination of hyper-technical traps for unwary

importers that impose unproductive, improper, and unnecessary burdens on the free flow of

commerce.

This Court denies Plaintiff’s Motion for Oral Argument because the facts and legal

contentions are adequately presented in the materials before the Court and oral argument would

not aid the Court’s decisional process.

CONCLUSION

Upon consideration of Defendant’s Motion to Dismiss for Lack of Subject Matter

Jurisdiction, Plaintiff’s Memoranda in Opposition thereto, and Defendant’s Reply Memorandum,

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Plaintiff’s valuation claim is severed and dismissed and Plaintiff’s claim as to classification is

limited to consideration of Customs’ classification of the subject merchandise as functional units.

Upon consideration of Plaintiff’s Motion for Oral Argument, or in the Alternative, Leave to File

a Sur-Reply and Defendant’s Memoranda in Opposition thereto, and other pertinent papers,

Plaintiff’s motion is denied.

______________________________

Gregory W. Carman,

Chief Judge

Dated: November , 2002

New York, New York