Slip Op. 03 - 148
UNITED STATES COURT OF INTERNATIONAL TRADE
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KYOCERA INDUSTRIAL CERAMICS CORPORA- :
TION,
:
Plaintiff,
:
v. Court No. 02-00705
:
UNITED STATES, :
Defendant. :
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Memorandum & Order
[Defendant's motion for summary judgment
denied.]
Dated: November 7, 2003
DeKieffer & Horgan (J. Kevin Horgan and A. David Lafer) for
the plaintiff.
Peter D. Keisler, Assistant Attorney General; Barbara S.
Williams, Acting Attorney in Charge, International Trade Field
Office, Commercial Litigation Branch, Civil Division, U.S. Depart-
ment of Justice (Jack S. Rockafellow); and Office of Assistant
Chief Counsel, International Trade Litigation, U.S. Bureau of
Customs and Border Protection (Michael W. Heydrich), of counsel,
for the defendant.
AQUILINO, Judge: The amended complaint filed herein on
behalf of the above-encaptioned plaintiff, the corporate name of
which its counsel have compressed to "KICC", contests denial by the
U.S. Customs Service1 of classification of certain ceramic sub-
1
Now known as the Bureau of Customs and Border Protection per
the Homeland Security Act of 2002, §1502, Pub. L. No. 107-296, 116
Stat. 2135, 2308-09 (Nov. 25, 2002), and the Reorganization Plan
Modification for the Department of Homeland Security, H.R. Doc.
108-32, p. 4 (Feb. 4, 2003).
Court No. 02-00705 Page 2
strates for integrated circuits ("IC substrates") under subheading
8542.90.00 of the Harmonized Tariff Schedule of the United States
("HTSUS") ("Electronic integrated circuits and microassemblies;
parts thereof: . . . Parts"). The defendant interposed an answer
thereto, and its counsel have now filed a Motion to Dismiss
Plaintiff's Action for Lack of Subject Matter Jurisdiction
"[p]ursuant to Rule 12(b)(1) of the Rules of the United States
Court of International Trade".
I
Of course, those Rules do not contemplate such a motion
subsequent to joinder of issue. Rather, USCIT Rule 12(c) provides:
After the pleadings are closed but within such time
as not to delay the trial, any party may move for
judgment on the pleadings. If, on a motion for judgment
on the pleadings, matters outside the pleadings are pre-
sented to and not excluded by the court, the motion shall
be treated as one for summary judgment and disposed of as
provided in Rule 56, and all parties shall be given
reasonable opportunity to present all material made
pertinent to such a motion by Rule 56.2
2
Subsection (h) of that Rule 56 mandates annexation to
such a motion of
a separate, short and concise statement of the material
facts as to which the moving party contends there is no
genuine issue to be tried.
This the defendant has not done. Rather, it has filed a motion to
stay discovery pending resolution of its motion for judgment of
dismissal. According to this subsidiary motion, discovery has
commenced in accordance with the court's amended scheduling order
of August 27, 2003, but government counsel now take the position
that the filing of the "dispositive motion to dismiss . . . [makes]
discovery by either party . . . not required." Declaration of Jack
S. Rockafellow, para. 10.
The plaintiff opposes this motion for a stay on both
procedural and substantive grounds, including that defendant's
(footnote continued)
Court No. 02-00705 Page 3
Here, defendant's motion for such judgment has engendered
submissions outside the pleadings on both sides. Appended to
plaintiff's amended complaint is a schedule "A" of 21 enumerated
protests to Customs, encompassing many more, individual, listed
entries. The parties have produced copies of KICC's lengthy,
written entreaty to the Service Port Director in San Francisco in
support of its protests to the effect that the IC substrates are
classifiable under HTSUS subheading 8542.90.00 -- or, in the
alternative, under subheading 6909.11.40.3 In HQ 964811 (May 1,
responses to certain interrogatories may be relevant to the issue
of subject-matter jurisdiction. See, e.g., Plaintiff's Opposition
to Defendant's Motion to Stay Discovery, fourth, unnumbered page.
Both sides have also filed a consent motion for oral argument
on the issue of authority to order continuation of discovery in an
action not subject to the court's statutory jurisdiction.
Suffice it to state, as discussed hereinabove and after, that
the court's conclusion that it does indeed have such jurisdiction
over this action obviates the need to grant either oral argument or
a stay of discovery in connection therewith other than to extend
the deadlines for discovery set forth in the August scheduling
order by the number of days defendant's motion for judgment may
have interrupted that pretrial process, and they hereby are.
3
See, e.g., Memorandum in Support of Defendant's Motion to
Stay Discovery, Attachment B. KICC's entries were of both IC sub-
strates and those
produced from alumina combined with titanium carbide that
is harder than 9 on the Mohs scale and is used as a
substrate for a magnetic head slider in the manufacture
of disc drives for automatic data processing machines
("MH substrates").
Id., first numbered page. Customs had classified the ICs under
HTSUS subheading 6914.10.80 and the MHs under subheading
6914.90.80.
While KICC protested both classifications, the court does not
read plaintiff's amended complaint as contesting now the classifi-
cation of the MH substrates.
Court No. 02-00705 Page 4
2002), the Service issued the following holding (as to KICC protest
280900-100735):
The protest should be GRANTED as to the alternative
classification claimed. The blank ceramic substrates
referred to as IC substrates are classified in subheading
6909.11.40, which provides for, "Ceramic wares for labor-
atory, chemical, or other uses . . .: ceramic wares for
laboratory, chemical or other uses: of porcelain or
china: other.". . .4
Whereupon the first affirmative defense pleaded by the government
is that this court
lacks jurisdiction over . . . this action[] because the
alternative relief sought in the protests which are the
subject of this action was granted.
Defendant's Answer to Complaint, p. 3. And it moves for judgment
on this ground.
A
The plaintiff pleads jurisdiction pursuant to 28 U.S.C.
§1581(a), which states:
The Court of International Trade shall have exclus-
ive 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.
This statute further provides:
A civil action contesting the denial of a protest,
in whole or in part, under section 515 of the Tariff Act
of 1930 may be commenced in the Court of International
Trade by the person who filed the protest pursuant to
section 514 of such Act . . ..
4
Memorandum in Support of Defendant's Motion to Stay
Discovery, Attachment C, p. 7 (capitalization in original).
Court No. 02-00705 Page 5
28 U.S.C. §2631(a). On its face, this enactment reflects the
intent of Congress that a partial denial of a protest by Customs be
subject to judicial review. Nonetheless, the defendant denies that
this action can sustain such review. It refers to Sanyo Electric,
Inc. v. United States, 81 Cust.Ct. 114, 115, C.D. 4775 (1978),
which held that
the proper measure of the extent to which a protest has
been denied or granted is the extent to which the protest
has resulted in a change of the protested decision. When
the decision is entirely changed to conform to a decision
sought by the protest, that protest has been completely
granted. 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.
In that matter, the importer had protested Customs clas-
sification of its goods under one item (685.50) of the Tariff
Schedules of the United States as opposed to preceding item 685.30
in the same tariff schedule 6 and part thereof or, in the alterna-
tive, under an item (678.50) in the preceding part (4) of that same
schedule. The Service granted the protest and reliquidated the
merchandise under the first-claimed item 685.30. The importer
brought suit, which was dismissed upon the court's conclusion that
the
proper procedure would be for the party to advance its
preferred alternative claim in a new protest against the
revised decision following reliquidation of the entry.
81 Cust.Ct. at 115.
Court No. 02-00705 Page 6
Assuming, as the defendant urges, that KICC could have so
proceeded with this matter, the question remains whether it was re-
quired to do so. See, e.g., Bd. of Trustees of Leland Stanford
Junior Univ. v. United States, 20 CIT 1422, 1424, 948 F.Supp. 1072,
1074 (1996) ("The court must look to what Customs actually did").
Taking such a look herein, this court cannot conclude that the
plaintiff was so required. The complaint in Sanyo apparently pray-
ed for a further, modest shift from item 685.30, the basis of the
reliquidation, to the second, proposed alternative classification
(item 678.50). Here, the gravamen of the controversy is an
allegedly-precipitous switch by Customs from one distinct chapter
of the HTSUS, 85 (Electrical Machinery and Equipment and Parts
Thereof), to another, 69 (Ceramic Products). Paragraph 7 of the
amended complaint avers:
Prior to March 10, 1999, blank IC substrates im-
ported by KICC were classified under HTSUS subheading
8542.90, as parts of integrated circuits, based on HQ
088157 (July 2, 1992), i.e., the "Diacon Ruling," which
classified ceramic pieces used as bases for integrated
circuits under HTSUS 8542.90, a duty-free classification.
The classification determination made in the Diacon
Ruling was followed by KICC and Customs until Customs
issued NY D88010 (March 10, 1999), which classified blank
IC substrates of porcelain under HTSUS 6914.10.8000 as
"Other ceramic articles: Of porcelain or china: . . .
Other," dutiable at 9% ad valorem.5
The first two, numbered protests covered by this pleading encom-
pass entries prior to that day in 1999. Moreover, the plaintiff
5
The court reads defendant's answer to this averment as a
denial, but there is, as yet, no substantiation thereof developed
on the record.
Court No. 02-00705 Page 7
has produced a copy of the following declaration to the Customs
Service sworn to soon thereafter by KICC's erstwhile import/export
specialist:
2. In 1992, I became aware of a new ruling, HQ
088157 (July 2, 1992) (i.e., the "Diacon Ruling"), which
affected the tariff classification of blank ceramic sub-
strates imported by KICC. The Diacon Ruling held that
"ceramic pieces" used as mounting bases for electronic
integrated circuits were properly classified under sub-
heading 8542.90 of the . . . HTSUS[] as parts of inte-
grated circuits.
3. Upon learning of the Diacon Ruling, I transmit-
ted a copy . . . to all of KICC's customs brokers in the
ports then being used by KICC to import ceramic sub-
strates. I instructed the brokers to classify all of
KICC's ceramic substrates for integrated circuits in
accordance with the Diacon Ruling.
4. At the same time I advised KICC's customs
brokers to attach a copy of the Diacon Ruling to each
ceramic substrates entry packet submitted to USCS.
5. When KICC underwent a National Customs Survey
Audit by the USCS in 1993-95, the auditors reviewed the
tariff classification of KICC's imports, including the
tariff classification of blank ceramic substrates. The
auditors did not object to any of KICC's classifications.
6. On several occasions during my tenure with
KICC, I discussed with employees of USCS the implications
of the Diacon Ruling for the tariff classification of
ceramic substrates imported by KICC. During these con-
versations, the USCS employees never objected to the
classification of ceramic substrates in accordance with
the Diacon Ruling.6
Given this background of entry of KICC merchandise under
HTSUS subheading 8542.90, it is understandable that the primary
thrust of its protest of the Bureau's shift to subheading
6
Plaintiff's Opposition to Defendant's Motion to Dismiss,
Exhibit C. The acronym "USCS" refers to the Customs Service.
Court No. 02-00705 Page 8
6914.10.80 was reversion to the antecedent classification. Of
course, it is also understandable that, as an alternative prong and
within the realm of HTSUS chapter 69, that protest would propose
more correct classification. But the grant by Customs of that
proposed alternative did not affirmatively satisfy the Sanyo test
of whether the KICC protest "has been completely granted." 81
Cust.Ct. at 115. To repeat,
[t]he 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.
Id. Here, half of the duties of the protested decision remain in
effect (under HTSUS chapter 69) in lieu of chapter 85, "a classifi-
cation necessarily rejected by Customs when it granted Kyocera's
alternative classification claims." Defendant's Reply to Plain-
tiff's Opposition to Defendant's Motion to Dismiss, p. 4. See also
id. at 5. Ergo, this action contests the denial of a protest in
part within the meaning of 28 U.S.C. §§ 1581(a), 2631(a), supra.
Cf. Atari Caribe, Inc. v. United States, 16 CIT 588, 591-92, 799
F.Supp. 99, 104 (1992).
II
In view of the foregoing, defendant's motion for summary
judgment, dismissing this action for lack of subject-matter juris-
diction, must be, and it hereby is, denied.
So ordered.
Dated: New York, New York
November 7, 2003
________________________________
Judge