Hartford Fire Insurance v. United States

Slip Op. 07-132

UNITED STATES COURT OF INTERNATIONAL TRADE

HARTFORD FIRE INSURANCE CO.,

Plaintiff, Before: Pogue, Judge

v. Court No. 07-00101

UNITED STATES,

Defendant.

Decided: Aug. 29, 2007

OPINION

[Defendant’s motion to dismiss for lack of subject matter
jurisdiction granted.]

Barnes, Richardson & Colburn,(Daniel F. Shapiro, Eric W. Lander,
and Sandra L. Friedman)for the plaintiff.

Peter D. Keisler, Assistant Attorney General; David M. Cohen,
Director; Patricia M. McCarthy, Assistant Director, Commercial
Litigation Branch, Civil Division, U.S. Department of Justice
(Michael J. Dierberg), Edward Greenwald, Bureau of Customs and
Border Protection, of counsel, for the defendant.

Pogue, Judge: Faced with a demand by the United States Bureau

of Customs and Border Protection (“Customs”) for the payment of

antidumping duties pursuant to Plaintiff’s bond guaranteeing the

payment of such duties, Plaintiff, in this action, asks the court

to declare its bond unenforceable. Pursuant to USCIT R. 12(b)(1),

Defendant moves to dismiss, claiming a lack of subject matter

jurisdiction because of Plaintiff’s failure to utilize or exhaust

its administrative protest remedies. For the reasons stated herein,
Ct. No. 07-00101 Page 2

the court grants Defendant’s motion.

Background

This action involves three entries of merchandise imported

into the United States by Brother Packaging Inc. The merchandise

is subject to antidumping duties. Plaintiff, Hartford Fire

Insurance Company (“Plaintiff” or “Hartford”) guaranteed a basic

importation and entry bond for payment of duties, taxes and charges

on these entries.

In its three-count complaint, Plaintiff now asks the court to

declare its bond unenforceable, claiming that the Continued Dumping

and Subsidy Offset Act of 2000, Pub. L. No. 106-387, § 1003, 114

Stat. 1549, 1623 (2000) codified at 19 U.S.C. § 1675c1 (“CDSOA” or

“Byrd Amendment”), has rendered its bond inapplicable and invalid.

The Byrd Amendment altered the government’s use of antidumping

and countervailing duties (“ADD” and “CVD” respectively) collected

pursuant to ADD and CVD orders on subject merchandise. Customs

continues, as it did before the Byrd Amendment, to collect

antidumping and countervailing duties, but, pursuant to the Byrd

Amendment, rather than depositing those duties into the general

treasury of the United States, Customs now deposits all duties

collected into “special accounts” established within the U.S.

1
Except where otherwise noted, all references to the United
States Code (“U.S.C.”) are to the 2000 edition.
Ct. No. 07-00101 Page 3

Treasury for each antidumping and countervailing duty order. 19

U.S.C. § 1675c(e); 19 C.F.R. § 159.64.2,3 In addition, each year,

Customs distributes all monies contained in those special accounts,

plus interest, on a pro rata basis, to “affected domestic

producers,” i.e., domestic companies (who continue to produce the

subject merchandise under the ADD or CVD order) and worker groups

that supported the petition for the antidumping or countervailing

duty order. The funds distributed, known as the “continued dumping

and subsidy offset,” 19 U.S.C. § 1675c(a), 19 C.F.R. § 159.61(a)

(“Byrd Distributions”), are allocated based on “qualifying

expenditures,” i.e., certain enumerated business expenses such as

manufacturing facilities, equipment, input materials, health

benefits for employees, and “[w]orking capital or other funds

needed to maintain production,” paid by affected domestic

producers. 19 U.S.C. §§ 1675c(b)(4); 1675c(d)(2)-(3); 19 C.F.R.

§ 159.61(c).4

2
Except where otherwise noted, all references the Code of Federal
Regulations (“C.F.R.”) are to the 2007 edition.
3
Customs deposits monies into special accounts only after the
entries of the goods have been liquidated, i.e., final duties
have been collected and deposited. Prior to liquidation,
Customs deposits all monies collected, i.e., cash deposits, in
clearing accounts. See 19 C.F.R. § 159.64(a). When goods are
liquidated, the money in the clearing accounts is transferred to
special accounts. See 19 C.F.R. § 159.64(b).
4
On February 8, 2006, President Bush signed the Deficit Reduction
Act of 2005 repealing the Byrd Amendment. See Deficit Reduction
Act of 2005, Pub. L. No. 109-171, § 7601(b), 120 Stat. 4, 154
(continued...)
Ct. No. 07-00101 Page 4

Plaintiff claims that, under contract and surety common law,

it is not obligated by the terms of its bond to pay what amounts to

a subsidy to the U.S. domestic industry. Rather, Plaintiff claims,

the Byrd Amendment constitutes a material alteration of its bond

that increased Plaintiff’s risk of loss, which material alteration

discharges Plaintiff from its obligation under the bond. Plaintiff

asserts that the court has jurisdiction of what Plaintiff styles a

common law dispute pursuant to 28 U.S.C. § 1581(i).5

4
(...continued)
(2006). As provided by this repeal: “[a]ll duties on entries of
goods made and filed before October 1, 2007, that would, but for
[the repeal], be distributed” will continue to be distributed
under the Byrd Amendment, 19 U.S.C. § 1675c. Id.
5
In relevant part, 28 U.S.C. § 1581(i) provides:
(i) In addition to the jurisdiction conferred upon the
Court of International Trade by subsections (a)-(h) of
this section . . ., the Court of International Trade
shall have exclusive jurisdiction of any civil action
commenced against the United States, its agencies, or
its officers, that arises out of any law of the United
States providing for--

(1) revenue from imports or tonnage;

(2) tariffs, duties, fees, or other taxes on the importation
of merchandise for reasons other than the raising of revenue;

(3) embargoes or other quantitative restrictions on the
importation of merchandise for reasons other than the
protection of the public health or safety; or
(4) administration and enforcement with respect to the
matters referred to in paragraphs (1)-(3) of this
subsection and subsections (a)-(h) of this section.
(continued...)
Ct. No. 07-00101 Page 5

Defendant moves to dismiss because Plaintiff has filed no

protest in response to Customs’ demand for payment of duties

guaranteed by Plaintiff’s bond. Defendant notes that Customs’

demand that Plaintiff pay antidumping duties and interest is a

“charge” within the plain meaning of 19 U.S.C. § 1514(a)6 and that

jurisdiction for a challenge to such a charge must be established

pursuant to 28 U.S.C. § 1581(a).7

Citing a long line of decisions from the Court of Appeals for

the Federal Circuit for the proposition that, when jurisdiction

under subsection (a) of § 1581 is or could have been available,

jurisdiction pursuant to section 1581(i) may not be invoked unless

relief under section 1581(a) would be “manifestly inadequate,” see

Am. Signature Inc. v. United States, 31 CIT ___, 477 Fed. Supp. 2d

1281, 1287 (2007), Defendant argues that Plaintiff may not, in this

matter, invoke jurisdiction under section 1581(i), but must first

utilize its protest remedy and obtain jurisdiction pursuant to

section 1581(a). Defendant also relies on 28 U.S.C. § 2637(d)

which states that “the Court of International Trade shall, where

5
(...continued)
28 U.S.C. § 1581(i).
6
In relevant part, 19 U.S.C. § 1514(a) provides that “decisions
of the Customs Service . . . as to . . . charges or exactions...
shall be final and conclusive upon all persons . . . unless a
protest is filed in accordance with this section . . . .”
7
In relevant part, 28 U.S.C. § 1581(a) provides that the court
“shall have exclusive jurisdiction of any civil action commenced
to contest the denial of a protest, in whole or in part . . . .”
Ct. No. 07-00101 Page 6

appropriate, require the exhaustion of administrative remedies.”8

Finally, Defendant notes that under the rule announced in the

court’s decision in American Motorists Ins. Co. v. United States,

14 CIT 298, 737 F. Supp. 648 (1990), Plaintiff’s complaint is

8
28 U.S.C. § 2637 provides:

(a) A civil action contesting the denial of a protest
under section 515 of the Tariff Act of 1930 may be
commenced in the Court of International Trade only if
all liquidated duties, charges, or exactions have been
paid at the time the action is commenced, except that a
surety's obligation to pay such liquidated duties,
charges, or exactions is limited to the sum of any bond
related to each entry included in the denied protest.

(b) A civil action contesting the denial of a petition
under section 516 of the Tariff Act of 1930 may be
commenced in the Court of International Trade only by a
person who has first exhausted the procedures set forth
in such section.

(c) A civil action described in section 1581(h) of this
title may be commenced in the Court of International
Trade prior to the exhaustion of administrative
remedies if the person commencing the action makes the
demonstration required by such section.

(d) In any civil action not specified in this section,
the Court of International Trade shall, where
appropriate, require the exhaustion of administrative
remedies.
28 U.S.C. § 2637.

It is somewhat unclear why the government is relying on 28 U.S.C.
§ 2637(d) in support of its USCIT R. 12(b)(1)motion, as section
2637(d) is discretionary, not jurisdictional. See Carpenter
Tech. Corp. v. United States, 30 CIT ___, 452 F.Supp.2d 1344,
1345, (2006) (“Carpenter I”)(explaining that the exhaustion
requirement is not jurisdictional); see also Carpenter Tech.
Corp. v. United States, 30 CIT ___, 464 F.Supp.2d 1347 (CIT
2006)(“Carpenter II”).
Ct. No. 07-00101 Page 7

untimely because a protest denying liability under an import bond

must be filed within the 180-day period of the Customs decision

challenged thereby. 19 U.S.C. § 1514(c) (2004). Nor has Plaintiff

paid the duties required by 28 U.S.C. § 2637(a) as a condition for

assertion of protest jurisdiction.

Plaintiff concedes that Customs’ demand for payment under the

bond is a charge. Plaintiff argues, however, that it “is not

challenging the charge itself.” Rather, Plaintiff claims that the

issue is whether the surety bond is valid, or whether the bond

covers the charge.

Plaintiff argues that its contract and surety claims are not

claims identified as protestable pursuant to 19 U.S.C. § 1514(a).

Consequently, Plaintiff claims, “[l]ike the plaintiff in Old

Republic,” it had only the options of (1) not paying the duties

demanded, and waiting until Customs brought an action against it,

at which time it could assert its contract claim, or (2) proceeding

with its claim under 1581(i). See, Old Republic Ins. Co. v. United

States, 10 CIT 589, 599, 645 F. Supp. 943, 952 (1986). It chose

“proactively to seek the court’s assistance” by invoking 1581(i)

jurisdiction.

Jurisdiction and Standard of Review

A jurisdictional challenge to the court’s consideration of

Plaintiff’s action raises a threshold inquiry. Ruhrgas AG v.
Ct. No. 07-00101 Page 8

Marathon Oil Co., 526 U.S. 574, 577-78 (1999); Steel Co. v.

Citizens for a Better Env’t, 523 U.S. 83, 94-102 (1998). The court

must therefore address Defendant’s motion to dismiss for lack of

subject matter jurisdiction and make an initial determination that

jurisdiction exists before it may reach the merits of Plaintiff’s

claim.

In deciding a USCIT R. 12 (b)(1) motion that does not

challenge the factual basis for the complainant’s allegations, the

court assumes “all factual allegations [contained in the complaint]

to be true and [draws] all reasonable inferences in plaintiff’s

favor.” Henke v. United States, 60 F.3d 795, 797 (Fed. Cir. 1995).

Nonetheless, as the Federal Circuit explained in Norsk Hydro

Canada, Inc. v. United States, the “‘mere recitation of a basis for

jurisdiction . . . cannot be controlling[;]’” rather, analysis of

jurisdiction requires determination of the “‘true nature of the

action . . . .’” Norsk Hydro Canada, Inc. v. United States, 472

F.3d 1347, 1355 (Fed. Cir. 2006)(quoting Williams v. Sec’y of Navy,

787 F.2d 552, 557 (Fed. Cir. 1986)).

Having determined the true nature of the action, the court

then applies the provisions of the various paragraphs of section

1581 to determine the appropriate treatment of a plaintiff’s claim.

See Parkdale Intern. Ltd. v. United States, 31 CIT ___, 491 F.

Supp. 2d 1262 (2007)(“Parkdale I”); see also Parkdale Int’l. Ltd.

v. United States, Slip Op. 07-122, 31 CIT___ (Aug. 8,
Ct. No. 07-00101 Page 9

2007)(“Parkdale II”). In Parkdale I, the court recently reviewed

the meaning of the Federal Circuit’s “manifest inadequacy”

jurisprudence for articulating the scope of the court’s

jurisdiction under Section 1581(i). The court noted that in the

harbor maintenance tax (“HMT”) litigation, the Federal Circuit

recognized that a party may assert § 1581(i) jurisdiction even

where jurisdiction under § 1581(a) could have been exercised. Cf.

U.S. Shoe Corp. v. United States, 114 F.3d 1564, 1570 (Fed. Cir.

1997), aff’d, 523 U.S. 360 (1998) with Swisher Int’l., Inc. v.

United States, 205 F.3d 1358, 1369 (Fed. Cir. 2000). The court

concluded that “where the core of a dispute is within § 1581(i),

i.e., it relates to a general issue of administration and

enforcement policy as to the matters listed in § 1581(i)(1)-(3), §

1581(i) should function according to its terms, unless it is clear

that another provision of § 1581 applies.” Parkdale I, 31 CIT at

__, 491 F. Supp. 2d at 1268 (emphasis omitted).

The “manifest inadequacy” rubric was also recently discussed

in Abitibi Consol., Inc. v. United States, 30 CIT ___,___ 437 F.

Supp. 2d 1352, 1357 (2006) (noting that Section 702 of the

Administrative Procedure Act (which provides that “[a]gency action

made reviewable by statute and final agency action for which there

is no other adequate remedy in a court are subject to judicial

review”, 5 U.S.C. § 704 (2000)) “is mirrored in the court’s

residual jurisdiction case law, which . . . prescribes that section
Ct. No. 07-00101 Page 10

1581(i) supplies jurisdiction only if a remedy under another

section of 1581 is unavailable or manifestly inadequate.”) In

Abitibi, the court declined to accept jurisdiction over

interlocutory agency determinations made in an antidumping

proceeding where a remedy under subsection 1581(c) was available,

adequate and reviewable.

Discussion

Plaintiff’s complaint in this action seeks to challenge

Customs’ demand for payment of antidumping duties. At its core,

Plaintiff’s complaint is a challenge to a Customs’ “charge” that is

protestable pursuant to section 1581(a). Thus, using the test

articulated by the court in Parkdale I, section 1581(a) “applies.”

Moreover, section 1581(a) was also an available, adequate and

reviewable avenue for Plaintiff’s assertion of the court’s

jurisdiction over its claim.9

Plaintiff’s argument that its claim is a defense to Customs’

charge, rather than a dispute of the charge itself, does not

persuade. Customs’ charge required that Plaintiff make payment

under its bond; Plaintiff objects, and thus the true nature of its

complaint is to avoid making the requested payment.

9
Plaintiff does not contend that it was unaware of the legal
basis for its claim or of its protest remedy at the time Customs
demanded payment under its bond. Cf. St. Paul Fire & Marine Ins.
v. United States, 959 F.2d 960, 963-4 (Fed. Cir. 1992).
Ct. No. 07-00101 Page 11

The court’s decision in Old Republic, upon which Plaintiff

relies, is consistent with this result. In Old Republic, the court

permitted a surety’s contract challenge to the collection of duties

to proceed under section 1581(i) where the claims could not have

been made under section 1581(a) because, despite Plaintiff’s

protest and payment of the duties involved, Customs had

legitimately extended the time for liquidation of the goods at

issue. Consequently, the Old Republic court assumed that section

1581(a) jurisdiction was not available. Old Republic, 10 CIT at

597, 645 F. Supp. at 951.

Also, unlike the plaintiff in Old Republic, Plaintiff here has

failed to utilize its administrative protest remedy. See Woodford

v. Ngo, ___ U.S. ___, 126 S. Ct. 2378, 2385 (2006)(citing United

States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37 (1952)

(“[A]s a general rule [] courts should not topple over

administrative decisions unless the administrative body not only

has erred but has erred against objection made at the time

appropriate under its practice.”); see also, Am. Air Parcel

Forwarding Co. v. United States, 718 F.2d 1546, 1549 (Fed. Cir.

1983) (“[w]here a litigant has access to [the Court of

International Trade] under traditional means, such as 28 U.S.C.

§ 1581(a), it must avail itself of this avenue of approach

complying with all the relevant prerequisites thereto. It cannot

circumvent the prerequisites of 1581(a) by invoking jurisdiction
Ct. No. 07-00101 Page 12

under 1581(i) . . . .” (quoting Am. Air Parcel Forwarding Co. v.

United States, 5 CIT 8, 10, 150, 557 F. Supp. 605, 607 (1983) with

approval))(citations omitted).

In the case at issue here, Plaintiff’s failure to utilize the

administrative protest remedy deprived Customs of the opportunity

to conduct a timely consideration of its authority to prescribe the

conditions for importation bonds, in the context of its Byrd

Amendment functions, and to address Plaintiff’s claim at the

administrative level. Importantly, Plaintiff’s failure to invoke

section 1581(a) also deprived the court of a clear and timely path

for review.

Finally, though not relevant here, to the extent that

Plaintiff invokes equitable considerations, arguing that it should

be rewarded for “proactively” bringing its action to court, we note

that, while the court is not divested of jurisdiction by the

liquidation of the entries at issue, see Shinyei Corp. of America.

v. United States, 355 F.3d 1297, 1310 (Fed. Cir. 2004), the court

will not reward a party who sleeps on its rights. Cf. Mitsubishi

Elecs. Am., Inc. v. United States, 18 CIT 167, 180, 848 F.Supp.

193, 203 (1994) (holding that “failure to seek injunctive relief

against liquidation before commencing [an] action . . . precludes

[the] Court from exercising jurisdiction under 28 U.S.C.

§ 1581(i)”), aff'd on alternative grounds, 44 F.3d 973, 977 (Fed.

Cir. 1994); see also Mukand Int’l., Ltd. v. United States, 29
Ct. No. 07-00101 Page 13

CIT___,___, 412 F. Supp. 2d 1312, 1318-9 (2005).

Conclusion

Accordingly, Defendant’s motion will be granted, and

Plaintiff’s complaint is hereby DISMISSED. Judgment will be entered

for Defendant.

It is so ORDERED.

/s/ Donald C. Pogue
Donald C. Pogue, Judge

Dated: Aug. 29, 2007
New York, New York
 Slip Op. 07-132

UNITED STATES COURT OF INTERNATIONAL TRADE

HARTFORD FIRE INSURANCE CO.,

Plaintiff, Before: Pogue, Judge
Court No. 07-00101
v.

UNITED STATES,

Defendant.

JUDGMENT

This action having been duly submitted for decision, and

this court, after due deliberation having rendered a decision

herein; now, in conformity with that decision, it is hereby

ORDERED that Plaintiff’s complaint is dismissed.

Dated: New York, New York
Aug. 29, 2007

/S/Donald C. Pogue
Donald C. Pogue, Judge
 ERRATA

Slip Op. 07-132, issued August 29, 2007

Hartford Fire Insurance Co. v. United States

Please make the following changes:

1. First page: In the attorney and party names, in place of
“for the plaintiff”, substitute “for the Plaintiff.” In
place of “Edward Greenwald,” please substitute “Beth C.
Brotman,” and in place of “for the defendant”, substitute
“for the Defendant.”

2. Page 9, last paragraph, line 3: Section 702 should read
Section 704.

September 5, 2007