Chemsol, LLC v. United States

SLIP OP 13 - 35

UNITED STATES COURT OF INTERNATIONAL TRADE

CHEMSOL, LLC,

Plaintiff,
Before: Donald C. Pogue,
v. Chief Judge
UNITED STATES, Court No. 11-00516
Defendant.

MC INTERNATIONAL, LLC,

Plaintiff,
Court No. 11-00517
v.

UNITED STATES,

Defendant.

OPINION

[Defendant’s motion to dismiss is GRANTED.]
Dated: March 20, 2013

George W. Thompson, and Russell A. Semmel, Neville Peterson
LLP, of New York, NY, for the Plaintiffs.

Justin R. Miller, Michael Panzera, Trial Attorney,
Commercial Litigation Branch, Civil Division, United States
Department of Justice, of Washington, DC, for the Defendant.
With him on the briefs were Stuart F. Delery, Acting Assistant
Attorney General; Jeanne E. Davidson, Director; and Reginald T.
Blades, Jr., Assistant Director. Of counsel on the briefs were,
Yelena Slepak, Office of the Assistant Chief Counsel,
Court Nos. 11-00516 and 11-00517 Page 2

International Trade Litigation, U.S. Customs and Border
Protection, and Michael Panzera, Office of the General Counsel,
United States Trade Representative.

Pogue, Chief Judge: In these actions, Plaintiffs MC

International, LLC (“MCI”) and Chemsol, LLC challenge the United

States Customs and Border Protection’s (“Customs”) extension of

the statutory liquidation period for their entries of citric

acid. Plaintiffs seek relief declaring the extensions unlawful

such that the entries have therefore been “deemed” liquidated by

operation of law. The Defendant moves to dismiss for lack of

subject matter jurisdiction under USCIT Rule 12(b)(1) or, in the

alternative, for failure to state a claim under USCIT Rule

12(b)(5). Defendant’s Memorandum in Support of Its Motion to

Dismiss - MCI, ECF No. 23, at 1 (“Def. Mem. Supp. Mot. Dismiss

MCI”); Defendant’s Memorandum in Support of Its Motion to Dismiss

- Chemsol, ECF No. 23, at 1 (“Def. Mem. Supp. Mot. Dismiss

Chemsol”).

Because the statutory review process for challenging

liquidation of Plaintiffs’ entries under sections 514 and 515 of

the Tariff Act of 1930, 19 U.S.C. § 1515-16,1 and 28 U.S.C.

1581(a), provides an adequate remedy for Plaintiffs claims, the

government’s motion to dismiss for lack of subject matter

1
All further citations to the Tariff Act of 1930, as
amended, are to Title 19 of the U.S. Code, 2006 edition.
Court Nos. 11-00516 and 11-00517 Page 3

jurisdiction is granted.

BACKGROUND

Under 19 U.S.C. § 1504(a), Customs generally has one

year within which to liquidate entries. If Customs fails to

liquidate the entries during that one year period, the entries

liquidate by force of law, that is, they are deemed liquidated.

Entries that are deemed liquidated are assessed at the duty rates

asserted by the importer of record at the time of entry. 19

U.S.C. § 1504(a). Before the one year time period elapses,

however, Customs may extend the time in which it may liquidate an

entry. Customs may only extend the time period for liquidating

an entry three times, resulting in a total of four potential

years before the entry will liquidate by operation of law. 19

U.S.C. § 1504(b);2 19 C.F.R. § 159.12(f).

The entries at issue in this proceeding were imported

by MCI and Chemsol (“Plaintiffs”). Specifically, during 2009-

2010, MCI made thirteen consumption entries consisting of citric

2
In relevant part, § 1504(b) provides that “[t]he Secretary
of the Treasury may extend the period in which to liquidate an
entry if . . . the information needed for the proper appraisement
or classification of the imported . . . merchandise, . . . or for
ensuring compliance with applicable law, is not available to the
Customs Service. . . .”
Court Nos. 11-00516 and 11-00517 Page 4

acid from India.3 During 2009, Chemsol made six consumption

entries consisting of citric acid from the Dominican Republic.4

Id. at ¶ 19.

In 2010, U.S. Immigration and Customs Enforcement

(“ICE”)5 and Customs initiated an investigation to determine

whether Chinese citric acid was being transshipped through other

countries to evade antidumping and countervailing duties. Def.

Mem. Supp. Mot. Dismiss MCI at 2; Def. Mem. Supp. Mot. Dismiss

Chemsol at 2. Pursuant to this investigation, Customs issued

several requests to Plaintiffs for information (RFIs) for the

entries at issue and notices of action (NOAs) for certain of the

entries. MCI Compl. ¶¶ 14, 16; Chemsol Compl. ¶ 13; Def. Mem.

Supp. Mot. Dismiss MCI at 2; Def. Mem. Supp. Mot. Dismiss Chemsol

at 2. Plaintiffs allege that they provided a comprehensive

response to each RFI and NOA. MCI Compl. ¶¶ 28, 33, 35, 40, 42;

3
Port of Houston entries: 231-9117008-6 (“A”), 231-9117479-
9 (“B”), 231-9121489-2 (“C”), 231-9122919-7 (“D”), 231-9123057-5
(“E”), 231-9124127-5 (“F”), 231-9124712-4 (“G”), 231-9125025-0
(“H”), 231-9127234-6 (“I”), 231-9128716-1 (“J”); Port of Chicago
entries: 231-9124126-7 (“K”), 231-9126354-3 (“L”); Port of
Savannah entry: 231-9129043-9 (“M”).
4
Port of Houston entries: 791-6466126-0 (“A”), 791-6563184-
1 (“B”), 791-6628591-0 (“C”), 791-6669107-5 (“D”), 791-6720537-0
(“E”), 791-6975108-2 (“F”).
5
ICE is the enforcement division of the Department of
Homeland Security and is responsible for investigating, among
others, alleged customs fraud. See Pub.L. No. 107-296, § 1502,
2002 U.S.C.C.A.N. (116 Stat.) 2135, 2308, effective March 1,
2003; H.R. Rep. No. 37, 108th Cong. at 26, 1st Sess. 2003.
Court Nos. 11-00516 and 11-00517 Page 5

Chemsol Compl. ¶¶ 23, 24, 29. Nonetheless, citing the continuing

investigation, Customs extended the deadline for liquidation on

Plaintiffs’ entries, in some cases more than once.6

Faced with Customs’ extensions, MCI and Chemsol

commenced this suit claiming that the extensions were unlawful

and void under 19 U.S.C. § 1504(b) and seeking declaratory relief

stating that the entries have been deemed liquidated pursuant to

19 U.S.C. § 1504(a). MCI Compl. ¶ 3-4; Chemsol Compl. ¶ 3-4.

Plaintiffs assert that the court has jurisdiction under 28 U.S.C.

§ 1581(i)(4).7 As noted above, the government contends that the

6
Customs extended the deadline for liquidation once for all
of MCI’s entries, a second time for Entries A-K, and a third time
for Entry A. Def. Mem. Supp. Mot. Dismiss at “Exhibit A.”
Following the second set of extensions, Customs did not issue any
further RFIs or NOAs to MCI prior to extending the deadline for
liquidation for Entry A the third time. MCI Compl. ¶ 39. With
regards to Chemsol’s entries, Customs extended the time frame for
liquidation twice and Chemsol’s Entries A and B were extended a
third time. Chemsol Compl. ¶¶ 22, 25, 28, 30.

7
In relevant part, § 1581(i) provides that “[i]n addition
to the jurisdiction conferred upon the Court of International
Trade by subsections (a)-(h) of this section and subject to the
exception set forth in subsection (j) 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;
Court Nos. 11-00516 and 11-00517 Page 6

actions should be dismissed for lack of subject matter

jurisdiction or for failure to state a claim. Def. Mem. Supp.

Mot. Dismiss MCI at 1; Def. Mem. Supp. Mot. Dismiss Chemsol at 1.

Specifically, in its motion, Defendant claims that Plaintiffs

cannot assert § 1581(i) jurisdiction but rather must wait until

Customs affirmatively liquidates the entries and then file a

protest and subsequently seek review of any denial of the protest

pursuant to 28 U.S.C. § 1581(a) (2006).8 Def. Mem. Supp. Mot.

Dismiss MCI at 6; Def. Mem. Supp. Mot. Dismiss Chemsol at 6.

Defendant additionally contends that the actions should be

dismissed for failure to state a claim under USCIT Rule 12(b)(5)

because affirmative liquidation is an element of a claim under 19

U.S.C. § 1514(a) and that element has not yet been satisfied.

Def. Mem. Supp. Mot. Dismiss MCI at 16; Def. Mem. Supp. Mot.

Dismiss Chemsol at 16.

In the time that has elapsed since the commencement of

(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. . . .”
8
Section 1581(a) provides exclusive jurisdiction for this
court to review civil actions commenced to “contest the denial of
a protest” which is filed with Customs pursuant to 19 U.S.C.
§ 1514 and § 1515.
Court Nos. 11-00516 and 11-00517 Page 7

this action, ICE has completed its investigation and, but for

Plaintiffs’ suit, Customs could complete its administrative

process and liquidate Plaintiffs’ remaining entries. Def.’s

Resp. to the Court’s Feb. 28, 2013 Inquiry, ECF No. 49 at 1-2.

In addition, a few of Plaintiffs’ entries auto-liquidated duty

free in Plaintiffs’ favor and are therefore moot. Id.

STANDARD OF REVIEW

Plaintiffs bear the burden of establishing

jurisdiction. Rocovich v. United States, 933 F.2d 991, 993 (Fed.

Cir. 1991) (“[the] party seeking the exercise of jurisdiction in

its favor[,] has the burden of establishing that [ ] jurisdiction

exists.”) (citing KVOS, Inc. v. Associated Press, 299 U.S. 269,

278 (1936)). Specifically, the party seeking jurisdiction under

1581(i) has the burden of showing that jurisdiction under any

other section of 1581 is manifestly inadequate. Am. Air Parcel

Forwarding Co. v. United States, 718 F.2d 1546, 1549-51 (Fed.

Cir. 1983); 5 U.S.C. § 704 (“[F]inal agency action . . . for

which there is no other adequate remedy” is subject to judicial

review).

Unless jurisdictional facts are in dispute, the basis

of the court's determination is limited to the facts stated on

the face of the complaint, documents appended to the complaint,

and documents incorporated in the complaint by reference. See
Court Nos. 11-00516 and 11-00517 Page 8

Asahi Seiko Co. v. United States, Slip Op. 09-131, 2009 WL

3824745 at *4 (CIT Nov. 16, 2009) (citing Allen v.

WestPoint–Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991)).

When reviewing a motion to dismiss for failure to state

a claim, the court “must accept as true the complaint's

undisputed factual allegations and should construe them in a

light most favorable to the plaintiff.” Bank of Guam v. United

States, 578 F.3d 1318, 1326 (Fed. Cir. 2009) (quoting Cambridge

v. United States, 558 F.3d 1331, 1335 (Fed. Cir. 2009)).

To survive a motion to dismiss for failure to state a

claim, “a complaint must contain sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible

on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

To be plausible, the complaint need not show a probability of

plaintiff's success, but it must evidence more than a mere

possibility of a right to relief. Id. at 678.

DISCUSSION

This court’s jurisdiction is set forth in 28 U.S.C.

§§ 1581(a)-(i). The provision under which Plaintiffs have

brought their claim, § 1581(i), is considered the “residual

jurisdictional provision” and while it is “broad” in scope, it is

well settled that Congress did not intend for it to be used if
Court Nos. 11-00516 and 11-00517 Page 9

jurisdiction has been, is, or could be available under another

sub-section of § 1581. See Hartford Fire Ins. Co. v. United

States, 544 F.3d 1289 (Fed. Cir. 2008) (citing Int’l Custom

Prods. v. United States, 467 F.3d 1324, 1327 (Fed. Cir. 2006)).

Faced with the availability of the review process specified in

Sections 1581(a)-(h), the party seeking judicial review must

establish a reason to avoid use of those provisions, such as

futility or the inadequacy of the available administrative

remedy. See CHARLES H. KOCH, JR., ADMIN. L. & PRAC. § 12.22 (3d

ed.). As a result, to repeat, this court will not entertain a

claim under § 1581(i) where “another subsection of 1581 is or

could have been available, unless the other subsection is shown

to be manifestly inadequate.” Hartford Fire Ins. Co. v. United

States, 544 Fd.3d at 1292; Int’l Custom Prods. Inc. v. United

States, 467 F.3d at 1327.

In addition, when considering whether to assert

jurisdiction under § 1581(i), the Court of Appeals has instructed

this Court to look to “the true nature of the action” at the

outset of a proceeding in order to determine which avenue of

review is appropriate. Norsk Hydro Can., Inc. v. United States,

472 F.3d 1347, 1355 (Fed. Cir. 2006) (citation omitted).

Here, the true nature of Plaintiffs’ action is a

challenge to Customs’ extensions of the time for liquidation.

But Customs’ actions, as alleged in Plaintiffs’ complaints, are
Court Nos. 11-00516 and 11-00517 Page 10

well within the four-year period allowed for extensions; Customs

continues to actively investigate the appropriate liquidation for

the entries. Upon conclusion of that process and liquidation of

the entries, the importers will have ample opportunity to raise

any issues through the protest and judicial review process that

culminates in § 1581(a). Section 1514(a) lists the decisions of

Customs that may be the subject of protests. Included are

decisions relating to “the liquidation or reliquidation of an

entry.” 19 U.S.C. § 1514(a)(5). It is therefore clear that the

Plaintiffs’ challenge to Customs’ extensions of the time for

liquidation may be brought, after liquidation, by filing a

protest and obtaining jurisdiction in this court under Section

1581(a). Hilsea Investment Ltd. v. Brown, 18 CIT 1068, 1071

(1994) (“the court can review interlocutory decisions subsumed in

the final determination, including those related to methodology

or procedure”); 19 U.S.C. § 1514(a)(5) (permitting review of any

order or finding upon challenge to liquidation); 5 U.S.C. § 704

(“A preliminary, procedural, or intermediate agency action . . .

not directly reviewable is subject to review on the review of the

final agency action”). Thus § 1581(a) provides a complete and

adequate remedy for any challenge to Customs’ extensions after

liquidation is complete.

Arguing that this Court must entertain their complaint

in this case under § 1581(i), Plaintiffs claim that their case is
Court Nos. 11-00516 and 11-00517 Page 11

controlled by Ford Motor Co. v. United States, 688 F.3d 1319

(Fed. Cir. 2012) (“Ford”). In Ford, the Court of Appeals for the

Federal Circuit held 1581(i) jurisdiction appropriate for a

deemed liquidation claim in which agency inaction was at issue.

The Plaintiff had filed reconciliation entries with Customs,

claiming a refund on overpayment of duties on its imports of

Jaguar brand automobiles. Customs had not liquidated Ford’s

entries at the time the complaint was filed in the CIT and the

initial one year time period for liquidation had passed. Ford

sought a declaratory judgment that its entries were deemed

liquidated by operation of law. The CIT declined to take

jurisdiction under § 1581(i), stating that the entries must be

liquidated and protests filed pursuant to § 1581(a). Ford Motor

Co. v. United States, __ CIT __, __, 716 F. Supp. 2d 1302, 1311

(2010). The Court of Appeals reversed the CIT’s holding that

jurisdiction was not available under § 1581(i) on the basis that

§ 1581(a) jurisdiction was inadequate to address Customs’ failure

to act. The appeals court noted that at the time the lawsuit was

initiated, none of the liquidations had yet occurred, Ford, 688

F.3d at 1323-24, and the § 1581(a) remedy was therefore not

available. Ford, 688 F.3d at 1328.

Plaintiffs claim that Ford is controlling because the

CIT acknowledged, albeit in dicta, that Customs attempted to

extend the liquidation period and the CAFC did not overrule that
Court Nos. 11-00516 and 11-00517 Page 12

portion of the CIT’s opinion. But this reliance is unavailing.

In Ford, the true nature of the Plaintiff’s claim was a challenge

seeking a declaration that Customs’ inaction had caused the

entries to be deemed liquidated. Notably, the Plaintiff’s

Complaint in Ford alleges that Customs did not extend the

liquidation period whereas here, both Plaintiffs acknowledge that

Customs acted to extend the liquidation period. Ford Second

Amend. Compl., Court No. 09-00151, ECF 19 ¶ 68; MCI Compl. ¶ 3,

and Chemsol Compl. ¶ 3.

The Court of Appeals, in Ford, did not face a scenario

such as that presented here, where Plaintiffs acknowledge that

Customs has taken affirmative action to extend the liquidation

time period. Here, Customs has not extended liquidation beyond

the four-year period and then failed to respond to importer

inquiries about the status of entries. Rather, Customs’ act of

extending the liquidation period – and the administrative protest

that Plaintiffs may file once its entries have liquidated – is

precisely the type of agency action that is remediable by

§ 1581(a). See United States v. Utex Int’l, Inc., 857 F.2d 1408,

1409-10 (Fed. Cir. 1988) (“All findings involved in a district

director’s decision merge in the liquidation. It is the

liquidation which is final and subject to protest, not the

preliminary findings or decisions of customs officers.”)

(internal quotation marks and citation omitted); Dal-Tile Corp.
Court Nos. 11-00516 and 11-00517 Page 13

v. United States, 24 CIT 939, 945 n.12, 116 F. Supp. 2d 1309,

1314-15 (2000).

It is therefore apparent that this Court should not

entertain Plaintiffs’ complaint here under § 1581(i). Final

agency action has not occurred and the record shows that Customs’

investigation continues to be active and has not lapsed into

inactivity as it did in Ford. The matter can be brought under

§ 1581(a) after the Plaintiffs’ entries have liquidated and

Plaintiff has filed an administrative protest, should it continue

to feel at that point in time that it has been injured. See

Hartford Fire, 544 Fd.3d at 1292. In this context, Plaintiffs

cannot claim that the § 1581(a) remedy is manifestly inadequate

as there is no meaningful assertion of harm in letting Customs

process and liquidate their entries.

Plaintiffs asserted during oral arguments that Customs’

demonstrated inactivity was sufficient to bring their case under

§ 1581(i) when it failed to request further information upon the

second and third extensions. This argument is unavailing. The

governing statute merely states that Customs “may extend the

period in which to liquidate an entry if [] the information

needed . . . is not available.” 19 U.S.C. § 1504(b)(1). It does

not specify from whom Customs must obtain the information.

Because the statute does not limit Customs’ sources of

information, it therefore should be construed as encompassing
Court Nos. 11-00516 and 11-00517 Page 14

whatever data is “reasonably necessary for proper appraisement or

classification” and not limited solely to information from the

Plaintiffs. See Detroit Zoological Soc.’y v. United States, 10

CIT 133, 138, 630 F. Supp. 1350, 1356 (1986); see also, St. Paul

Fire & Marine Ins. Co. v. United States, 6 F.3d 763, 768 (Fed.

Cir. 1993) (Customs’ decisions carry a presumption of correctness

which Plaintiffs may rebut with a preponderance of the evidence).

It is also important that, here, Customs’ reason for

extending the liquidation period for Plaintiffs’ imports is to

allow ICE time to conclude its investigation of possible

transshipment of goods. To allow Plaintiffs to interrupt the

administrative process currently underway by providing

declarative relief would severely undermine Customs and ICE’s

ability to conduct meaningful investigations into possible

fraudulent activity. Therefore, the court declines to entertain

Plaintiffs’ case under § 1581(i) and holds that Plaintiffs must

wait until Customs concludes the investigation currently underway

and file a protest before refiling this case under § 1581(a).

See Hartford Fire, 544 F.3d at 1292.

The court does not rely solely on the nature of

Customs’ investigation, but rather on Customs’ broad discretion

concerning whether a liquidation extension is warranted and the

presumption that its decisions are proper. St. Paul Marine &

Fire Ins., 6 F.3d at 768. At this point in the proceedings,
Court Nos. 11-00516 and 11-00517 Page 15

before discovery has taken place and, indeed, when the record is

not yet fully developed because Customs has not completed its

decision-making process, the court finds no basis to accept

Plaintiffs’ conclusory claims that Customs’ extensions are

invalid and an abuse of discretion.

Other decisions of this Court do not require a contrary

result. In Ford Motor Co. v. United States, __ CIT __, 806 F.

Supp. 2d 1328 (2011) (“Ford II”), the Court of International

Trade permitted an importer to bring a deemed liquidation claim

in an action for declaratory judgment under 28 U.S.C. § 1581(i).

But there Customs had also lapsed into inaction and failed to

affirmatively liquidate the drawback entries at issue, some of

which were nearly 15 years old. The plaintiff therefore

continued to face liabilities of uncertain magnitude and

duration. Ford II, 806 F. Supp. 2d at 1334. In those

circumstances, the court held that requiring the plaintiff to

wait for affirmative liquidation and then protest the liquidation

under 19 U.S.C. § 1514, and, if Customs denied the protest,

challenge that denial under 28 U.S.C. § 1581(a), would not

provide an adequate remedy. Id. at 1336. Clearly, Ford II did

not involve the kind of on-going administrative dispute about

extensions that is at issue here.

Similarly in Fujitsu Gen. Am., Inc. v. United States,

24 CIT 733, 110 F. Supp. 2d 1061 (2000), aff’d 283 F.3d 1364
Court Nos. 11-00516 and 11-00517 Page 16

(Fed. Cir. 2002), the court stated in dicta that where an

importer believes its entries were deemed liquidated under

§ 1504(d), and Customs has not actively liquidated the entries,

the importer’s only remedy is to seek a declaratory judgment

confirming that there was a deemed liquidation under 28 U.S.C.

§ 1581(i). Id. at 739, 110 F. Supp. 2d at 1069. But the court

in Fujitsu was considering whether jurisdiction would be

appropriate after the administrative process had been completed

for entries which were initially suspended from liquidation and

then liquidated over a year after the suspension was lifted in

violation of the timing requirement under § 1504(d). Id. at 737-

9, 110 F. Supp. 2d at 1067-68. This situation is also unlike

that at issue here.

Finally, the court observes that in prior cases where

the court has heard challenges to Customs’ extensions of

liquidation due to ongoing fraud investigations, it has done so

under 1581(a). See Ford Motor Co. v. United States, 286 F.3d

1335, 1343 (Fed. Cir. 2002) (finding that Customs abused its

discretion in extending the liquidation period when the record

showed that the 44 month investigation period contained 36 months

of inactivity). This case is therefore dismissed to allow

Customs to complete the liquidation process and for Plaintiffs to
Court Nos. 11-00516 and 11-00517 Page 17

file an administrative protest, should they so choose.9

CONCLUSION

For the reasons stated above, Defendant’s motion to

dismiss is GRANTED. Plaintiffs’ complaints are dismissed.

Judgment will be entered accordingly.

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

Dated: March 20, 2013
New York, New York

9
Because this case is dismissed pursuant to USCIT Rule
12(b)(1), the court does not reach the Defendant’s motion to
dismiss under USCIT Rule 12(b)(5).