Slip Op 17-123
UNITED STATES COURT OF INTERNATIONAL TRADE
KENT INTERNATIONAL, INC.,
Plaintiff,
Before: Leo M. Gordon, Judge
v.
Court No. 15-00135
UNITED STATES,
Defendant.
OPINION and ORDER
[Defendant’s partial motion to dismiss denied.]
Dated: September 8, 2017
Philip Y. Simons and Jerry P. Wiskin, Simons & Wiskin, of So. Amboy, NJ for
Plaintiff Kent International, Inc.
Hardeep K. Josan, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of New York, NY, for Defendant United States. With her on
the brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E.
Davidson, Director, Amy M. Rubin, Assistant Director. Of counsel on the brief was
Yelena Slepak, Office of Assistant Chief Counsel, International Trade Litigation,
U.S. Customs and Border Protection of New York, NY.
Gordon, Judge: Before the court is Defendant United States’ partial motion to
dismiss the second and third causes of action (“Count 2” and “Count 3” respectively) of
Plaintiff’s complaint pursuant to USCIT Rule 12(b)(6)1. Defendant seeks to dismiss
Plaintiff’s Count 2, which alleges the existence of an established and uniform practice
1
The court renumbered a motion to dismiss for failure to state a claim from USCIT
Rule 12(b)(5) to 12(b)(6) in 2015 to bring the USCIT Rules into alignment with the
Federal Rules of Civil Procedure.
Court No. 15-00135 Page 2
under Section 315 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1315(d),2 and
Count 3, which alleges the existence of a treatment under 19 U.S.C. § 1625(c) and
19 C.F.R. § 177.12(c)(1)(i). See Def.’s Partial Mot. to Dismiss. at 1, ECF No. 16
(“Def.’s Mot.”); see also Compl. ¶¶ 49, 72-74, ECF No. 9. Plaintiff responded and cross-
moved to stay consideration of Defendant’s motion until the court resolved Plaintiff’s first
cause of action, a challenge to the classification of the imported merchandise. Pl.’s
Cross-Mot. to Stay Def’s. Partial Mot. to Dismiss & Pl.’s Opp. to Def.’s Partial Mot. to
Dismiss at 2, ECF No. 18. The court denied Plaintiff’s motion to stay and reserved
decision on Defendant’s motion to dismiss. See Kent Int’l Inc. v. United States, 40 CIT
____, 161 F. Supp. 3d 1340 (2016) (“Kent I”). For the reasons set forth below, the court
denies Defendant’s motion to dismiss Counts 2 and 3 of Plaintiff’s complaint.
I. Background
The background of this litigation is summarized briefly below and provided in
detail in Kent I. Plaintiff imported a product known as WeeRide Kangaroo child bicycle
seats that U.S. Customs and Border Protection (“Customs”) classified under HTSUS
subheading 8714.99.80, dutiable at 10% ad valorem. Plaintiff raises three claims in its
complaint: (1) that the subject merchandise is properly classifiable under HTSUS
subheading 9401.80.40, duty-free;3 (2) that Customs had an established and uniform
practice of classifying child bicycle seats under HTSUS subheading 9401.80; and
2
Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions
of Title 19, U.S. Code, 2012 edition.
3
If Plaintiff prevails on Count 1, its classification claim, the court may not have to reach
either Count 2, the established and uniform practice claim, or Count 3, the treatment
claim.
Court No. 15-00135 Page 3
(3) that the imported merchandise is classifiable under HTSUS subheading 9401.80
because Plaintiff is entitled to the same treatment afforded other importers of child
bicycle seats pursuant to 19 C.F.R. § 177.12. Compl.
II. Standard of Review
In deciding a USCIT Rule 12(b)(6) motion to dismiss for failure to state a claim
upon which relief can be granted, the court assumes all factual allegations to be true
and draws all reasonable inferences in the plaintiff's favor. Cedars-Sinai Med. Ctr. v.
Watkins, 11 F.3d 1573, 1583-84 & n.13 (Fed. Cir. 1993).
A plaintiff's factual allegations must be “enough to raise a right to relief above the
speculative level on the assumption that all the allegations in the complaint are true
(even if doubtful in fact).” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim of relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
III. Discussion
Plaintiff alleges that, in 2005, Customs, through its New York Office (“New York
Customs”), issued a ruling letter NY L86862 (“2005 Ruling”) classifying Plaintiff’s
imported child bicycle seats under HTSUS heading 8417, dutiable at 10 % ad valorem.
Compl. ¶ 21. Plaintiff further alleges that between 2007 and 2011 New York Customs
issued other ruling letters to Bell Sports (“Bell Ruling”) (2007), Todson Inc. (“Todson
Ruling”) (2009), and Brix Child Safety Inc. (“Brix Ruling”) (2011) (collectively, “Child
Bicycle Seat Rulings”), classifying similar imported child bicycle seats under HTSUS
Court No. 15-00135 Page 4
heading 9401, duty free. Compl. ¶¶ 22, 29, 35. According to Plaintiff, from Fall 2007
through September 2014, various importers made numerous entries of child bicycle
seats, with “some of these entries . . . [occurring] at ports other than those utilized by
plaintiff,” and that Customs liquidated all of those entries under HTSUS subheading
9401.80, duty free. Id. ¶¶ 39-41, 46.
Plaintiff claims it made a series of entries of the subject merchandise at the Port
of Newark (“Newark Customs”) that Newark Customs classified under HTSUS
subheading 8417.99.00, which, in turn, Kent protested relying on the Bell and Todson
Rulings. Id. ¶¶ 23-27, 31-32, 58-63. In conjunction with its protests, Kent also filed two
Applications for Further Review (“AFRs”), seeking review by Customs Headquarters
(“Headquarters”) of its claim for duty free classification. Id. ¶¶ 24-26. Newark Customs
approved Kent’s first set of protests, but did not refer the first AFR to Headquarters
because it failed to meet the applicable criteria for an AFR. Id. ¶¶ 25, 59. Kent further
claims that, after approving Plaintiff’s first set of protests, Newark Customs agreed to
send Kent’s second set of protests to Headquarters for review in light of the Bell Ruling.
Id. ¶¶ 27-28, 30. Kent further alleges that Newark Customs subsequently advised
Plaintiff that its second AFR was sent to Headquarters. Id. ¶¶ 28, 30, 66. Kent also
claims that Newark Customs approved Plaintiff’s second set of protests, id. ¶ 31, but
that Headquarters did not act on the second AFR in light of the approval of the protests
by Newark Customs, id. ¶ 68.
Additionally, Plaintiff alleges that it made entries at the Port of Long Beach (“Long
Beach Customs”), seeking duty free classification for its subject merchandise. Long
Court No. 15-00135 Page 5
Beach Customs denied Kent’s claimed classification, which was protested in early 2011
(“Long Beach protests”). Id. ¶¶ 33-34, 69. In conjunction with its protests, Kent
maintains that it filed a third AFR in April 2011, followed by supplemental submissions in
2014, seeking Headquarters’ consideration of its duty free claim for the subject
merchandise. Id. Plaintiff claims that, in the course of considering the Long Beach
protests, Headquarters, in September 2011, advised Plaintiff that the Child Bicycle Seat
Rulings were “not correctly decided” and would be revoked in late 2011. Id. ¶ 37.
However, revocation did not occur for almost three years until July 2014, when
notification of the revocation was published. Id. ¶ 38 (citing 48 Cust. B. & Dec. 29
(July 23, 2014) (“Revocation Ruling”)). Thereafter, in February 2015, Customs denied
Plaintiff’s Long Beach protests and issued HQ Ruling H170637 (“2015 Ruling”),
confirming the 2005 Ruling that Kent’s child bicycle seats are classifiable under HTSUS
8417.99.00, dutiable at 10% ad valorem. Id. ¶ 69.
For ease of reference, set forth below is a timeline of the key rulings and actions
taken by Customs in this action:
Court No. 15-00135 Page 7
absence of notice that a change in classification will occur,” to reasonably expect
adherence to that classification. Heraeus-Amersil, Inc. v. United States, 9 CIT 412, 416,
617 F. Supp. 89, 93 (1985), aff’d, 795 F.2d 1575 (Fed. Cir. 1986). Factors that suggest
the existence of a “de facto” EUP include: (1) a high number of entries resulting in the
alleged uniform classifications, (2) a high number of ports at which the merchandise
was entered, (3) an extended period of time over which the alleged uniform
classifications took place, and (4) a lack of uncertainty regarding the classification over
time. Id., 9 CIT at 415-16, 617 F. Supp. at 93.
Turning to these four factors, Kent alleges that Customs classified numerous
entries of child bicycle seats, duty free, under HTSUS subheading 9401.80 for multiple
importers at multiple ports, other than the ports utilized by the Plaintiff. Compl. ¶¶ 39-41,
46. Plaintiff further alleges that over a seven year period—between 2007 and 2014—
Customs classified child bicycle seats for Bell, Todson, and Brix under HTSUS heading
9401, duty free. Id. ¶¶ 22, 29, 35, 47. Kent also claims that, despite the 2005 Ruling,
Customs granted Kent’s protests for duty free classification for the Newark entries of its
imported merchandise, but failed to grant Kent the same classification for its Long
Beach entries. Id. ¶¶ 48, 58, 60, 69. It is true that Plaintiff has not alleged a specific
number of entries and has not identified a specific number of ports, other than Newark
and Long Beach. Nevertheless, the court can reasonably infer from these allegations
that there were more than a small number of entries of child bicycle seats imported by
Kent and others at more than two ports over a more than just a few years. As to the final
Court No. 15-00135 Page 8
factor, it appears that Plaintiff has alleged the existence of a series of rulings and
actions by Customs on protests that reflect uncertainty as to the correct classification of
imported child bicycle seats.
Therefore, Plaintiff’s allegations set forth in Count 2 contain sufficient factual
matter, taken as true, of the plausibility of a claim for an established and uniform
practice. Whether Plaintiff can prove the existence of the EUP is a different matter.
B. Count 3 - Treatment
In Count 3, Plaintiff claims that Customs established a “treatment” with regard to
imports by Bell, Todson, and Brix, liquidating their entries duty-free under HTSUS
subheading 9401.80. Plaintiff further alleges that because of that “treatment” Customs
should have liquidated Plaintiff’s entries in the exact same manner—duty free. Compl.
¶ 74.
The concept of a “treatment” is found in 19 U.S.C. § 1625(c), which provides, in
relevant part:
A proposed interpretive ruling or decision which would—
(2) have the effect of modifying the treatment previously accorded
by the Customs Service to substantially identical transactions;
shall be published in the Customs Bulletin. The Secretary shall give
interested parties an opportunity to submit, during not less than the 30-day period
after the date of such publication, comments on the correctness of the proposed
ruling or decision. After consideration of any comments received, the Secretary
shall publish a final ruling or decision in the Customs Bulletin within 30 days after
the closing of the comment period. The final ruling or decision shall become
effective 60 days after the date of its publication.
19 U.S.C. § 1625(c)(2).
Court No. 15-00135 Page 9
While the term ”treatment” is not defined in § 1625, the implementing regulation
provides guidance on what constitutes a “treatment:”
(c) Treatment previously accorded to substantially identical transactions -
(1) General. The issuance of an interpretive ruling that has the effect of
modifying or revoking the treatment previously accorded by Customs to
substantially identical transactions must be in accordance with the
procedures set forth in paragraph (c)(2) of this section. The following rules
will apply for purposes of determining under this section whether a
treatment was previously accorded by Customs to substantially identical
transactions of a person:
(i) There must be evidence to establish that:
(A) There was an actual determination by a Customs officer regarding
the facts and issues involved in the claimed treatment;
(B) The Customs officer making the actual determination was
responsible for the subject matter on which the determination was made;
and
(C) Over a 2-year period immediately preceding the claim of treatment,
Customs consistently applied that determination on a national basis as
reflected in liquidations of entries or reconciliations or other Customs
actions with respect to all or substantially all of that person's Customs
transactions involving materially identical facts and issues;
(ii) . . .
(iii) . . .
(iv) . . .
19 C.F.R. § 177.12(c)(1) (2014). For Customs to modify a “treatment” previously
accorded to substantially identical transactions, it must subject the modifying
interpretive ruling or decision to the notice and comment process. Id. § 177.12(c)(2).
Court No. 15-00135 Page 10
To ultimately prevail on its claim of a treatment, Kent must establish, at least, the
following: (1) that there was a treatment previously accorded by Customs, meaning it
must show what specific entries of the subject merchandise were previously classified
under the desired tariff provision; (2) that the subject entries are “‘substantially identical
transaction[s]’” to the previous treatment; (3) that Customs has made a “‘proposed
interpretive ruling or decision’” that would have the effect of modifying the previous
treatment with respect to the entries in question; and (4) that the proposed interpretive
ruling or decision violated the notice and comment requirements of this statute.
Kahrs Int’l, Inc. v. United States, 33 CIT 1316, 1354, 645 F. Supp. 2d 1251, 1286 (2009)
(quoting 19 U.S.C. § 1625(c)(2)).
Again, in order for Count 3 to survive a motion to dismiss, Plaintiff must make
sufficient factual allegations to plausibly establish on its face each element of a claim of
treatment. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal,
556 U.S. 662 (2009) (“A claim has facial plausibility when the pleaded content allows
the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.”). Accordingly, the court will examine Plaintiff’s allegations in light
of each of those elements.
i. The Existence of a Treatment
“[Plaintiff] must demonstrate there was a ‘treatment previously accorded by . . .
Customs . . . .’ [19 U.S.C.] § 1625(c)(2). That is, it must show what specific entries of
[Plaintiff’s] products were previously classified under the desired tariff subheading . . . .”
Court No. 15-00135 Page 11
Kahrs Int’l, 33 CIT at 1354, 645 F. Supp. 2d at 1286. Therefore, to survive Defendant’s
motion to dismiss, the court must find that Plaintiff has pled sufficient facts to plausibly
claim that the duty-free rate accorded to other child bicycle seats resulted from an
actual determination by Customs, and that this determination was consistently applied
on a national basis over a two-year period immediately preceding the claim of
treatment. 19 C.F.R. § 177.12(c)(1)(i).
Plaintiff alleges that Customs liquidated the entries of three other importers of
substantially identical child bicycle seats at a duty-free rate for years, between
September 21, 2007 and September 22, 2014. Compl. ¶¶ 52-57. The alleged treatment
ended on September 22, 2014, the effective date of Customs’ Revocation Ruling.
Plaintiff alleges that Bell, Todson, and Brix made entries “at ports other than those
utilized by Plaintiff.” Id. ¶¶ 39-41. Plaintiff also alleges that, while it was "required to
enter its child bicycle seats under HTSUS subheading 8714.99.00, because it had to
follow . . . [the 2005 Ruling],” it successfully protested those decisions with Newark
Customs. Id. ¶¶ 53, 58, 60.
Therefore, although the factual allegations in Count 3 are not perfectly clear, it
appears that Plaintiff is claiming that Customs accorded duty-free treatment to children’s
bicycle seats between September 21, 2007 (at the latest), and September 22, 2014, as
evidenced by the Child Bicycle Seat Rulings and subsequent liquidation of duty free
entries for Plaintiff by Newark Customs, and for Bell, Todson, and Brix at other ports. It
also appears that Plaintiff’s requested relief is the duty-free reliquidation for its entries
Court No. 15-00135 Page 12
from (at the latest) September 21, 2007 through September 22, 2014 by Long Beach
Customs.
Defendant does not dispute that the Child Bicycle Seat Rulings constituted actual
determinations by Customs. Rather, Defendant argues that “Kent simply cannot
produce [sufficient] evidence” to prove that Customs made an actual determination and
consistently applied that determination on a national basis over the two-year period
immediately preceding the claim of treatment. Def.’s Mot. at 9. Defendant’s argument is
premature. Kent, as the non-moving party in a motion to dismiss, does not have to
produce any evidence. Factual allegations that state a claim that is facially plausible are
sufficient. Here, Plaintiff has pled that multiple entries (those of the three other
companies plus Plaintiff’s Newark entries) were liquidated duty-free, at a number of
ports, for a number of years, and that a fifth set (Plaintiff’s Long Beach entries) was not
accorded the same treatment.
Defendant argues that “a prior interpretive ruling cannot constitute a treatment.”
Id. at 10. This misses the mark because Plaintiff’s claim is about the treatment that was
afforded to other importers after the 2005 Ruling. Likewise, Defendant’s argument that
the 2005 Ruling was “affirmed” in 2015, id., is unavailing because Plaintiff’s claim is that
duty-free treatment of children’s bicycle seats came into being on or before
September 21, 2007 and ended on September 22, 2014. Notwithstanding either the
2005 or the 2015 Ruling, Plaintiff has pled sufficient facts to have the opportunity to
prove that a treatment existed for some period of time within that 10-year period.
Court No. 15-00135 Page 13
ii. Substantially Identical Transactions
For the second element, “Plaintiff must prove that the subject entries . . . are
substantially identical transaction[s] to the previous treatment.” Kahrs Int’l, 33 CIT at
1354, 645 F. Supp. 2d at 1286 (citation omitted). Plaintiff details the exact nature of the
child bicycle seats it imports, and alleges that its “child bicycle seats are substantially
identical in all material aspects to those imported by Bell Sports, Todson Inc., and Brix
Child Safety Inc.,” the importers who received the treatment Plaintiff now claims. Compl.
¶ 57. Defendant does not contest this. Therefore, Plaintiff has pled sufficient facts to
plausibly raise a claim of substantial similarity.
iii. Modification of Treatment
Regarding the third element, “Plaintiff must prove that Customs has made a
proposed interpretive ruling or decision that would have the effect of modifying the
previous treatment with respect to the entries in question.” Kahrs Int’l, 33 CIT at 1354,
645 F. Supp. 2d at 1286 (citation omitted). Plaintiff alleges that “[f]rom September 21,
2007 to September 22, 2014, Plaintiff was not given the same treatment as other
importers of child bicycle seats.” Compl. ¶ 52. Again, Defendant does not contest this
allegation. Accordingly, Plaintiff’s complaint contains sufficient allegations to plausibly
raise the claim that its entries were not accorded the benefit of that treatment.
iv. Violation of Notice and Comment Requirements
As to the fourth element, “Plaintiff must demonstrate that the proposed
interpretive ruling or decision violated the notice and comment requirements of this
statute.” Kahrs Int’l, 33 CIT at 1354, 645 F. Supp. 2d at 1286 (citation omitted).
Court No. 15-00135 Page 14
The notice and comment requirement is triggered whenever Customs issues
“interpretive rulings, ruling letters, internal advice memoranda, protest review decisions,
or decisions that are the functional equivalent of interpretive rulings or decisions.” Id.,
33 CIT at 1353, 645 F. Supp. 2d at 1285. Neither party specifically addresses this
element in their memoranda on the motion to dismiss. And although Plaintiff’s complaint
is not a paragon of clarity, Count 3 contains sufficient factual allegations to permit the
court to infer that Plaintiff’s Long Beach entries, which occurred during the existence of
the alleged treatment, were treated differently, without the benefit of the notice and
comment process as required by 19 C.F.R. § 177.12(c)(2). See Compl. ¶¶ 72-74.
Taking Plaintiff’s claims as true and drawing all reasonable inferences in
Plaintiff’s favor, the court concludes that Plaintiff’s complaint contains sufficient factual
allegations to entitle it to proceed to the court’s consideration of the merits of Count 3.
It remains to be seen whether Plaintiff can prove the existence of a treatment under
19 U.S.C § 1625(c).
Accordingly, it is hereby
ORDERED that Defendant’s motion to dismiss Counts 2 and 3 of Plaintiff’s
complaint is denied; it is further
ORDERED that Defendant shall file its answer to Plaintiff’s complaint on or
before November 7, 2017; and it is further
Court No. 15-00135 Page 15
ORDERED that the parties shall file a proposed scheduling order for the taking of
discovery and the disposition of this action on the merits on or before November 21,
2017.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: September 8, 2017
New York, New York