United States Court of Appeals for the Federal Circuit
2008-1071
HARTFORD FIRE INSURANCE COMPANY,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
Frederic D. Van Arnam, Jr.,. Barnes, Richardson & Colburn, of New York, New
York, argued for plaintiff-appellant. With him on the brief was Eric W. Lander.
Michael J. Dierberg, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of Washington, DC, for defendant-appellee. With
him on the brief were Jeffrey S. Bucholtz, Acting Assistant Attorney General; Jeanne E.
Davidson, Director; and Franklin E. White, Jr., Assistant Director. Of counsel was Beth C.
Brotman, Office of the Assistant Chief Counsel, United States Customs and Border
Protection, of New York, New York.
Appealed from: United States Court of International Trade
Judge Donald C. Pogue
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
2008-1071
HARTFORD FIRE INSURANCE COMPANY,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
Appeal from the United States Court of International Trade in case no. 07-00101, Judge
Donald C. Pogue.
______________________
DECIDED: October 8, 2008
_______________________
Before MAYER, LOURIE, and PROST, Circuit Judges.
MAYER, Circuit Judge.
Hartford Fire Insurance Company appeals the judgment of the United States
Court of International Trade, finding no subject matter jurisdiction over its claim to find
its surety bonds unenforceable. Hartford Fire Ins. Co. v. United States, 507 F. Supp. 2d
1331 (Ct. Int’l Trade 2007). Because we agree that the true nature of the action is a
failure to file an administrative protest to a demand for payment on a surety bond, we
affirm.
BACKGROUND
In February 2004, importer Brother Packaging imported three entries of
polyethylene t-shirt bags into the United States pursuant to surety bonds covering
applicable duties. These bonds were executed in April 2002 and December 2004
naming appellant Hartford Fire Insurance Company (“Hartford”) as the surety. The
merchandise was subject to antidumping duties. Upon entry, the United States
Customs Service (“Customs”) classified the imported merchandise under Harmonized
Tariff Schedule of the United States subheading 3923.29, requiring a duty of 3% ad
valorem under a countervailing duty order. However, upon liquidation Customs
reclassified the imported goods under subheading 3923.21, dutiable at 84.78% ad
valorem under an antidumping duty order. In February 2006, Customs issued a formal
demand to Hartford to pay the duties.
Hartford alleged that its bond was unenforceable because the Continued
Dumping and Subsidy Offset Act of 2000 (“CDSOA” or “Byrd Amendment”), 19 U.S.C.
§ 1675c (repealed 2006), altered the distribution of collected duties, and because it was
not obligated to pay a subsidy to the U.S. domestic industry. Before the Byrd
Amendment, collected duties were placed into the general treasury. Pursuant to the Act
however, upon liquidation of the dutiable goods, collected duties were placed into
special accounts within the general treasury for disbursement on each antidumping duty
or countervailing duty order. 19 U.S.C. § 1675c(e); 19 C.F.R. § 159.64 (2008). These
funds would be distributed out of the accounts to affected domestic producers pro rata
as a “continued dumping and subsidy offset.” 19 U.S.C. § 1675c(a). Hartford claimed
that this change in the law materially altered its bond agreements, which it claims
2008-1071 2
required funds paid on the bonds to be distributed to the United States, and not to any
individual or company. Hartford therefore argued that jurisdiction resided in the United
States Court of International Trade pursuant to 28 U.S.C. § 1581(i) (2006) to determine
the common law surety issue of the enforceability of the bonds. 1
Hartford filed suit in the Court of International Trade in March 2007 asking the
court to declare the bonds unenforceable. The court held that because the true nature
of the action was a challenge to a customs charge protestable under 28 U.S.C.
§ 1581(a), 2 jurisdiction pursuant to 28 U.S.C. § 1581(i) was not available unless
Hartford showed that section 1581(a) was “manifestly inadequate.” The court
dismissed, finding that section 1581(a) was adequate, and that Hartford should have
timely pursued this administrative remedy. Hartford appealed to this court arguing that
the Court of International Trade erred as a matter of law in finding jurisdiction under
section 1581(a) and failing to find that section 1581(a) would have been manifestly
1
28 U.S.C. § 1581(i) provides in relevant part:
In 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;
(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.
2
28 U.S.C. § 1581(a) provides: “The Court of International Trade shall have
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.”
2008-1071 3
inadequate as a vehicle for relief, rendering section 1581(i) available. We have
jurisdiction pursuant to 28 U.S.C. § 1295(a)(5) (2006).
DISCUSSION
“As an appellate body, we have inherent jurisdiction to determine whether a
lower tribunal had jurisdiction.” Interspiro USA v. Figgie Int’l, Inc., 18 F.3d 927, 930
(Fed. Cir. 1994) (citing C.R. Bard, Inc. v. Schwartz, 716 F.2d 874, 877 (Fed. Cir. 1983)).
Because jurisdiction is an issue of law, our review is de novo. Xerox Corp. v. United
States, 289 F.3d 792, 793-94 (Fed. Cir. 2002).
The Court of International Trade has jurisdiction limited to specific cases
enumerated in 28 U.S.C. § 1581. In subsection 1581(a), Congress set out an express
scheme for administrative and judicial review of Customs’ actions. Int’l Custom Prods.,
Inc. v. United States, 467 F.3d 1324, 1326 (Fed. Cir. 2006). The system grants the
court exclusive jurisdiction to hear cases contesting a protest denial in an administrative
hearing before Customs pursuant to section 515 of the Tariff Act of 1930, 19 U.S.C.
§ 1515. Id. at 1326-27. Section 1581(i) grants the court exclusive, residual jurisdiction
to hear civil actions against the United States concerning importation revenues, tariffs
and duties, embargoes, and administration and enforcement of matters involving
section 515 of the Tariff Act and other matters not relevant to this case. While we have
previously labeled subsection 1581(i) as a “catch all provision”, see, e.g.,
Norcal/Crosetti Foods, Inc. v. United States, 963 F.2d 356, 359 (Fed. Cir. 1992), we
have also consistently held that to prevent circumvention of the administrative
processes crafted by Congress, jurisdiction under subsection 1581(i) may not be
invoked if jurisdiction under another subsection of section 1581 is or could have been
2008-1071 4
available, unless the other subsection is shown to be manifestly inadequate. Int’l
Custom Prods., 467 F.3d at 1327. Therefore, “where 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 by complying with all the relevant prerequisites
thereto. It cannot circumvent the prerequisites of 1581(a) by invoking jurisdiction under
1581(i)” unless such traditional means are manifestly inadequate. Am. Air Parcel
Forwarding Co. v. United States, 718 F.2d 1546, 1549 (Fed. Cir. 1983) (quoting Am. Air
Parcel Forwarding Co. v. United States, 557 F. Supp. 605, 607 (Ct. Int’l Trade 1983)).
Jurisdiction pursuant to subsection 1581(a) is available to litigants challenging
the denial of a protest under 19 U.S.C. § 1515 (2006). Protests against Customs
decisions can be filed against “any clerical error, mistake of fact, or other inadvertence,
whether or not resulting from or contained in an electronic transmission, adverse to the
importer, in any entry, liquidation, or reliquidation, and, decisions of the Customs
Service, including the legality of all orders and findings entering into the same”
concerning seven enumerated matters including “(3) all charges or exactions of
whatever character within the jurisdiction of the Secretary of the Treasury.” 19 U.S.C.
§ 1514(a) (2006) (emphasis added). Absent such a protest, the Customs decision is
final. Id. A protestant must file a protest of a decision, order, or finding described in
subsection 1514(a) within 180 days after but not before the date of liquidation or
reliquidation. Id. § 1514(c)(3).
The trial court found that Customs’ 2006 demand for payment was a charge
within the meaning of 19 U.S.C. § 1514(a) to which Hartford then had 180 days to
protest before the action became final. Hartford does not challenge that the demand for
2008-1071 5
payment was a charge. Therefore, if the claims had been timely, they could have been
asserted in a protest before Customs. The protest would have offered the opportunity
to present any defenses to the charge, and if the protest resulted in a denial, it would
have garnered jurisdiction in the Court of International Trade pursuant to subsection
1581(a). Because Hartford could have secured jurisdiction pursuant to subsection
1581(a), the court therefore does not have jurisdiction pursuant to subsection 1581(i) to
entertain a challenge to the charge without a showing that subsection 1581(a) was
manifestly inadequate.
Hartford, however, argues that it is not challenging the charge in the 2006
demand for payment, but rather is asking the court to find the bonds unenforceable.
Couching its claim as a contract dispute between principal, surety, and the government,
it claims therefore that jurisdiction under subsection 1581(a) is not available because
adjudicating the enforceability of surety bonds is outside the scope of Customs
decisions protestable under to 19 U.S.C. § 1514(a). 3 Instead it alleges that its claims
sound in common law state suretyship and contract law, outside of Customs’ authority
3
Hartford refers to the entire list in 19 U.S.C. § 1514(a) in alleging that their
claim is included in none of the enumerated categories:
(1) the appraised value of merchandise;
(2) the classification and rate and amount of duties chargeable;
(3) all charges or exactions of whatever character within the jurisdiction of the
Secretary of the Treasury;
(4) the exclusion of merchandise from entry or delivery or a demand for redelivery to
customs custody under any provision of the customs laws, except a
determination appealable under section 1337 of this title;
(5) the liquidation or reliquidation of an entry, or reconciliation as to the issues
contained therein, or any modification thereof, including the liquidation of an
entry, pursuant to either section 1500 or section 1504 of this title;
(6) the refusal to pay a claim for drawback; or
(7) the refusal to reliquidate an entry under subsection (d) of section 1520 of this
title.
2008-1071 6
to determine. Accordingly, it argues, this contract dispute lies solely within the broad
grant of residual jurisdiction under subsection 1581(i). This argument fails for a number
of reasons.
While this court has described subsection 1581(i) as a “broad residual
jurisdictional provision,” we have in the same breath said that “the unambiguous
precedents of this court make clear that its scope is strictly limited, and that the protest
procedure cannot be easily circumvented.” Int’l Custom Prods., 467 F.3d at 1327
(internal quotations omitted). To prevent usurpation of the protest scheme Congress
has crafted, it is of utmost importance that mere recitation of a basis for jurisdiction not
be controlling. Norsk Hydro Can., Inc. v. United States, 472 F.3d 1347, 1355 (Fed. Cir.
2006). Just as we must look to the true nature of the action in a district court in
determining jurisdiction on appeal, the trial court was correct to look to the true nature of
the action in determining jurisdiction at the outset. See id. The true nature of the action
is that Hartford seeks to avoid the payment of the demand. The unenforceability of the
bonds it alleges in its complaint is merely a theory of defense upon which Customs may
grant the relief of cancelling the charge. In other words, despite alleging otherwise,
Hartford is challenging a charge. As described supra, the proper mechanism to
challenge a charge is via a protest before Customs pursuant to 19 U.S.C. § 1514(a)(3).
Re-casting the case as a request to declare the bonds unenforceable is merely “artful
pleading.” Cf. Norsk Hydro, 472 F.3d at 1355. Hartford could have brought its claim
through the protest mechanism, the denial of which would have triggered review
pursuant to subsection 1581(a). Its failure to do so renders subsection 1581(i)
unavailable.
2008-1071 7
Hartford’s argument that determining the enforceability of the bonds is outside
the scope of Customs’ powers is also without merit. Again couching its claim as a
contract issue concerning private rights, it relies on Bank One Chic., N.A. v. Midwest
Bank & Trust Co., 516 U.S. 264 (1995), to support its premise that agencies generally
do not have the authority to adjudicate private claims. This is a false premise, however,
because here the United States is a party to the action as the obligee on the bond, just
as Hartford named the United States as the defendant. The situations described in
Bank One Chic. concerned a bank attempting to sue another bank for dishonoring a
check before the Federal Reserve Board, a creditor attempting to sue an insolvent
savings and loan association before the Federal Savings and Loan Insurance Corp.,
and frequent flyers attempting to sue an airline before the Department of Transportation.
Bank One Chic., 516 U.S. at 274-75; see also Coit Independence Joint Venture v.
FSLIC, 489 U.S. 561 (1989); Am. Airlines, Inc. v. Wolens, 513 U.S. 219 (1995). Those
cases are not analogous.
To the contrary, Customs does have broad authority over the administration and
forms of bonds, including determining their validity and enforceability and a surety’s
liability pursuant to the bonds. Am. Pillowcase & Lace Co. v. United States, 20 Cust. Ct.
53, 61 (1948); see also 19 U.S.C. §§ 66, 1623 (2006). It has congressional
authorization to “prescribe the conditions and form” of bonds. 19 U.S.C. § 1623(b).
Customs has the authority that Hartford seeks to cancel any bond or a charge against a
bond “in the event of a breach of any condition of the bond, upon the payment of such
lesser amount or penalty or upon such other terms and conditions as [Customs] may
deem sufficient.” Id. § 1623(c) (emphasis added); see also 19 C.F.R. § 113.51 (2008).
2008-1071 8
This broad language clearly shows the ability of Customs to cancel a bond or a charge
completely if a breach that should render the bond unenforceable occurs.
In St. Paul Fire & Marine Insurance Co. v. United States, 959 F.2d 960 (Fed. Cir.
1992), a surety sought to invoke jurisdiction in the Court of International Trade to nullify
its bond obligations. It argued that the bonds should not be enforceable because the
government had breached its duties by failing to disclose its investigations into the
principal’s fraudulent conduct, causing it to insure a risk it would not otherwise have
insured. Id. at 961. The trial court held that the demand on the bond was protestable
as a charge within the meaning of 19 U.S.C. § 1514(a)(3), and we agreed stating, “there
is . . . no question that a surety may protest the government’s demand for payment on
its bond” provided it files such protest within the allowable time, now 180 days. Id. at
963; 4 see also 19 U.S.C. § 1514(c).
Hartford alleges that the protest remedy would have been manifestly inadequate
under subsection 1581(a) because interpretation of surety and contract law are outside
the authority and competency of Customs. To be manifestly inadequate, the protest
must be an exercise in futility, or “incapable of producing any result; failing utterly of the
desired end through intrinsic defect; useless, ineffectual, vain.” Oxford English
Dictionary (2d ed. 1989); cf. Int’l Custom Prods., 467 F.3d at 1328 (discussing the futility
of a protest). Hartford claims that it is not challenging the statutory or regulatory terms
of the bond, but rather that the contract between the importer, the government, and
4
We did conclude in that case that jurisdiction was proper under subsection
1581(i) however, because the surety’s claim did not accrue, that is, the investigation into
the principal’s fraudulent activity did not surface, until after the protest allowance period
had expired. Therefore, the surety was not circumventing the protest procedure
required of subsection 1581(a). St. Paul Fire & Marine Ins. Co., 959 F.2d at 964.
2008-1071 9
itself has been materially altered, thus releasing it from its obligations under common
law suretyship and contract principles. It then argues that pursuing a remedy through a
protest would have been futile. But Customs has the authority to cancel a bond or a
charge against a bond in the event of the breach of any condition of the bond, the
ultimate remedy Hartford seeks. 19 U.S.C. § 1623(c).
Hartford never filed a protest to the charge. As we said in United States v.
Uniroyal, Inc., 687 F.2d 467, 475 (C.C.P.A. 1982), a belief that it had no remedy under
subsection 1581(a) would not make that remedy inadequate. Hartford simply made no
attempt to use it. We are also not persuaded by Hartford’s unsupported suspicion that
because Customs is financially interested in the result of the protest, it may be biased
towards denying the remedy it seeks. Its reliance on McCarthy v. Madigan, 503 U.S.
140 (1992), is misplaced because there, the Court stated that such a protest may be
inadequate where “the administrative body is shown to be biased or has otherwise
predetermined the issue before it.” Id. at 148 (emphasis added). Hartford has made no
such showing. “Plaintiff cannot take it upon itself to determine whether it would be futile
to protest or not. In order to protect itself, a protest should have been filed . . . .” Int’l
Custom Prods., 467 F.3d at 1328.
CONCLUSION
Accordingly, the judgment of the United States Court of International Trade is
affirmed.
AFFIRMED
2008-1071 10