Slip Op. 02-137 UNITED STATES COURT OF INTERNATIONAL TRADE BEFORE: GREGO RY W. CARMAN, CH IEF JUDGE

AUTOALLIAN CE INTERNATIONAL, INC. Plai ntiff,

v. UNITED STATES OF AMERICA, Defendant. Court No. 01-01070

[Defendant’s Motion to Dismiss for Lack of Subject Matter Jurisdiction is grante d in part and denied in part. Plaintiff’s claim for review reg arding valuation is severed and dismissed for lack of subject matter jurisdiction. Plaintiff’s claim for review reg arding classification is limited to the issue of classification of the subject merchandise as functional units. Plaintiff’s Motion for Oral Argument, Or I

n The Alternative, Lea

ve To File A Sur-Reply

Memorandum is denied.] Dated: November 22, 2002

Baker & Hostetle r, LLP ( Shelby F

. Mitche ll), Washington, D.C., for Plaintiff. Robert D. McCallum

, Jr. , Assistan

t Attorne y G eneral ; John J. Mahon , Acting Attorney in Charge , Inte

rnationa l Trade F ield Off

ice; Harry A. V

aletk , Trial Attorney, Commerc ial Litigation Branch, Civil Divi sion, U.S. D epartme nt of Justice ; Yalena Slepak , Of Counsel, Office of Assistant Chief Coun sel, I

nternat ional Tra de Li tigation , U.S. Custo ms Servic e, for D efenda nt.Court No. 01-01070 Page 2

1 United States Customs Service Headquarters Ruling L etter No. 544694 (February 14, 1995) held that payments made to a foreign seller for desig n and development expenses associated with automobiles manufactured in a Foreig n Trade Subzone with imported O PINI ON C ARMAN , C HIEF J UDGE : Pursuant to U.S. CIT R. 12(b)(1), the defendant, the U nited States, moves to dismiss this action for lack of subject matter jurisdiction. Defendant argue s that because the plain tiff, Aut oAllianc e In

ternational, I

nc. (“A AI” ), faile d to file a

summons in th

is Court challenging the partial denial of the pr otests to the original liquidation, the original liquidation of the subject merchandise has become final and conc lusive. Plaintiff opposes Defendant's motion asserting that this Court has subject matter jurisdiction under 28 U .S.C. § 1581(a) (2000). This Court has jurisdiction to resolve this question under 28 U.S.C. § 1581(a). For the following reasons, Plaintiff’s valuation claim is severe d and dismissed and Plaintiff’s classification claim is limited to review of the United States Customs Service’s (“Customs”) choices to classify

the subject merchandise as functional units. Plaintiff’s Motion for Oral Argument or in the Alternative, L eave to File a Sur Reply is denied.

B ACKGROUND In September and Octobe r 1991, AAI imported nine shipments of automobile production machinery c onsisting of welding machines and related e quipment. (Pl.’s Summons, Form 1-1.) After extending t

he time for liquidat

ion, Customs

finally liquidate d the subje ct entrie s on Augu st 11, 1995. (

Def.’s M em. in Supp. of Mot. to D ismiss at 1 ( “Def.’ s Br.”) ; Pl.’s Opp. to Def.’ s Mot. to Dismiss at 3 (“Pl.s’ Br.”).) At liquidation, Customs classified the various pieces of imported equipmen t as sepa rate ite ms of equi

pment. (Pl .’s Summons , Form 1- 2.) Additi onally , in accord ance wi th a 19 95 Head quart ers Ru ling, 1 Customs applied a value advance for “desig n andCourt No. 01-01070 Page 3

components were part of the dutiable value of the imported c omponents. (Pl.’s Compl. Ex. A.) development” costs (“Value Advance” ) in the calculation of the dutiable value of items classified under Subheading 8428.90 of the Harmonized Tariff Sche dule of the United States (“HTSUS”) and Subheading 7308.90 of the HTSUS. ( Id .) Following the liquidation, AAI filed two prote sts, Protest Nos. 1101/95-100680 and 1101/95-100704 (“Initial Protests”) (Pl.’s Compl. Ex. C and D.) The I nitial Protests challenged the original liquidation on two separate grounds. First, AAI challeng ed Customs’ classification and pres ented two

alterna tive clas sificati on appro aches: 1 ) that all of the me

rchandi se should have been classified as a single “ macro” functional unit of welding equipment; or 2) that the merchandise should be classified by job numbers as multiple functional units of welding equipment or functional units of material handling equipment. ( Attachment B in Support of Initial Protest No. 1101/95/100704 , Pl.’s Compl. Ex. D at 2-4.) Second, AAI challenge d the application of the Value Advance to the subject merc handise. (

Id . at 12-16.) Specifically , AAI argued that the researc

h and development costs associated with automobile parts, the subject of the 1995 Headquarters Ruling, did not apply to the production machinery at issue. (

Id .) In response to the I

nitial Protests, Customs formally issued Headquarters Ruling Letter No. 960755 (“HQ 960755”) on October 10, 2000. (Pl.’s Compl. Ex. E.) Customs ruled that AAI ’s classi fication

argume nts were : “ALL OWED in PART and DENIED in PART; consistent with this ruling (liquidat ed class ification of artic le prope rly classifi able in a

nother pr ovision wil l result in r eliquida tion only if the pro per cla ssificat

ion is at a r

ate lowe r of duty than the liquidated classification; if the proper classification is at the same or higher rate of duty than the l iquidate d classif ication, the liquida

tion rate of duty may not be cha

nged (19 U.S.C. 1515(a)). (HQ 960755, Pl.’s Compl. Ex. E at 15.)Court No. 01-01070 Page 4

Customs further ruled that, Pursuant to [the 1995 Headquarters Ruling], the value advance for r esearch and development cost is proper. With regard to this issue, the protest is denied. ( Id .) As to the c lassific ation issue , Customs re jected A AI’ s claim tha

t all of the

mercha ndise constituted one “macro” functional unit. ( Id . at 6-7.) Customs agreed that most of the merchandise was classifiable as functional units of welding equipment or functional units of material handling equipment under HTSUS headings 8515 or 8428. ( Id . at 7-14.) However, Customs held that certain items, such as safety fences, material handling jigs, and gauges, did not constitute parts of any functional unit an

d reaff irmed the origina l classif ication o f these s eparat

e items. ( Id .) Customs rejected AAI’s e ntire argument as to the Value Advance issue and stated that the 1995 Headquarters Ruling controlled. ( Id . at 3-4.) Accord ingly, Customs re liquidate d the entr ies on Oc tober 27, 2000. (Pl. ’s Summons, Form 1-1.) At reliquidation, Customs changed the classification of most of the subjec t merchandise in accordance with AAI ’s proposed multiple functional units classification approach which resulted in a recalculation of the total duties owing. ( Def.’s Br. at 4; Pl.’s Br. at 6.) Howeve r, Customs d

id not cha nge the classifi cation of

certain items, suc

h as the sa

fety fences , material handling jigs, and gaug es. (Def.’s Br. at 5; Pl.’s Br. at 5.) F urther, Customs applied the Value Advance as it had in the original liquidation. ( Id .) AAI filed a protest to the re liquidation (“Reliquidation Protest”) on January 25, 2001. (Pl.’s Compl. Ex. F.) AAI argued in the Reliquidation Protest that Customs should have classified all of the merchandise as a single functional unit or that Customs should have includedCourt No. 01-01070 Page 5

the safety f

ences, gauges, mate

rial handling jigs, etc. in the classification as parts of f unctional units of welding equipment or material handling equipment. ( Attachment B in Support of Reliquidation Protest No. 1101-01-100053 at 2-3, Pl.’s Compl. Ex. F at 8-9.) Further, AAI reasserted its argument that Customs improperly applied the Value Advance to the entries. ( Id . at 4-8, Pl.’s Compl. Ex. F at 10-14.) Customs denied AAI’s Reliquidation Protest on June 12, 2001. (Pl.’s Summons, Form 1- 1.) Although filed within the requisite 90 day s after reliquidation, Customs did not address the merits of AAI’s Reliquidation Protest; rather, Customs denied the protest as “ Untimely Filed.” (Pl.’s Summons, Form 1-2.) AAI then filed a summons in this Court on December 6, 2001 challenging the denial of the Reliquidation Protests. The summons was filed within 180 day s of the denial of the Reliquidation Protests and almost 14 months after Customs issued its decision on the Initial Protests. S TAND ARD O F R EVIEW The burden of establishing jurisdiction lies with the party seeking to invoke this Court’s jurisdiction. Old Republic Ins. Co. v. United States , 741 F. Supp. 1570, 1573 (Ct. Int’l Trade 1990) (citi ng McNutt v. General Motors Acceptance Corp. , 298 U.S. 178, 189 (1936)) . In th is case, A AI be ars the b

urden of establish ing juri sdiction. If a

Rule 12(b )(1) moti on to dismiss challen ges sub ject matt er jurisd iction ba sed on the

sufficie ncy of a par ty’ s pleadin

gs, then those pleadings are construed in a light most favor able to that party. Scheuer v. Rhodes , 416 U.S. 232, 236 (1974) . However, if the Rule 12(b)(1) motion challenge s the factual allegations of jurisdiction in the party’s pleading s, the movant is deemed to be questioning the factual basis for the court's subject matter jurisdiction. Trentacosta v. Frontier Pac. Aircraft Indus., Inc. , 813Court No. 01-01070 Page 6

F.2d 1 553, 1 558-5 9 (9th Cir. 1987) (refere ncing C HARLES A. W RI GHT & A RTHUR R. M ILL ER , F EDERA L P RACTI CE AND P ROCEDURE § 1563, at 653-54 (1969)). In su ch a cas e, the al legati ons in th e c om pl ai nt ar e n ot co nt ro ll in g a nd on ly t he uncontroverted facts are ac cepted as true. Id .; see also Power-One, Inc. v. United States , 83 F. Supp. 2d 1300, 1303 (Ct. Int’l Trade 1999) (quoting Cedars-S inai Med. Cntr. v. W

alters , 11 F. 3d 1573, 1583-84 (Fed. Cir. 1993)). All other facts underly ing the c ontrover

ted jurisd iction ar e in disput

e and ar e subject to fact- finding

by t his Court. Power-One, Inc. , 83 F. Supp. at 1308

. In the present case , Defendant’s Rule 12(b)(1) motion to dismiss challenges the basis of AAI ’s alleg ations of

jurisdict ion. Spec ifically

, Customs is q

uestionin g AAI ’s asser

tion that th

is action is timely and properly before this Court. Only the unc ontroverted facts will be accepted as

true. If, a

fter a r eview of the plea dings an d extrinsic

evidenc e, any

doubt remains whether this Court has j urisdicti on to hear this action, the Cour

t will refrain from granting De fendant’s motion to dismiss. See Hamlet v. United States , 873 F.2d 1414, 1416

(Fed. Ci r. 1989) ( stating

that a complain t should onl

y be dismissed i f the pla

intiff ca nnot prove

any set of fa cts that w ould entitle the plaintiff to relief (citi ng Conley v. Gibson , 355 U.S. 41, 45-46 (1957))).

P ARTIES ’ C ONTENTI ONS
A. Defendant’s Contentions Defendant argues that this Court lacks subject matter jur isdiction under 28 U.S.C. § 1581(a) because AAI ’s claim is untimely. (Def.’ s Br. at 5.) Defendant asserts that this Court lacks jur isdiction b ecause

AAI failed to commenc e an act

ion within 1 80 days after C ustomsCourt No. 01-01070 Page 7

partially denied the I

nitial Protests in HQ 960755. ( Id .) Defe ndant emphasizes the

langua ge in 28 U.S.C. § 2 636(a)( 1) which states tha t “[a] civil a

ction con testing the denia l, in whole

or in part, of a protest under section 515 of the Tariff Act of 1930” must be “commenced within one hundred and eighty

days afte r the date of mailing of notice of denial of a pr otest.” ( Id . at 6-7.) Defendant contends that Customs “denied in part” the I nitial Protests on October 10, 2000. ( Id

. at 7.) The

refore , Defen

dant arg ues, Plain tiff waiv ed any

objection to that pa

rtial den ial beca use Plaintiff did not file a summons with this Court within 180 after Customs ruled on the Initial Protests. (

Id .) Defendant concludes that because more than 180 days ha

ve elapsed since October 10, 2000, Customs’ decision in HQ 960755 is final and this Court is without jurisdiction to hear Plaintiff’s claims. (

Id .) Additionally, Defenda

nt argues that even if AAI properly wa

ited until after reliquidation to file an action with this Court, AAI’s Reliquidation Protest is invalid. ( Id . at 11.) Defendant

asserts t hat withou

t a valid protest, A

AI ha s no basis u

pon which

to file a s ummons to invoke this Court’s jurisdiction. (

Id . at 12.) D efenda

nt asser ts that AAI ’s Reliqui dation Pro test is inva lid because : 1) the Re liquidation Protest c onstitutes an invali d re-pr

otest of the same iss

ues rais ed in the Initial Protests; and 2) the Reliquidation Protest raises issues that were not involved in the reliquidation. (

Id . at 11-12.) First, Defendant cites to 19 U.S.C. § 1514(c)(1) which states that “[o]nly one protest may be filed for eac h entry of merchandise . . . .” Def endant a lleges that Plaint

iff viola tes § 1514(c) (1)’s one protes t rule by reasse rting th e same a

rgumen ts contained in the I

nitial Prot

ests in the Reliquidation Protest. ( Id . at 7, 11. ) Defen

dant cont ends that AAI ’s Reliqui dation Pro test merely re peats the same arguments that Customs denied in the I nitial Protests and therefore, theCourt No. 01-01070 Page 8

Reliquidation Protest is invalid under § 1514(c)(1). ( Id . at 13.) Second, Defendant argues that the Re liquidation Protest raised issues that were not involved in the reliquidation. ( Id . at 7, 11.) Defendant contends that under 19 U.S.C. § 1514(d), “[t]he reliquidation of an entry shall not open such e ntry so that a protest may be filed . . . upon any question not involved in such reliquidation.” (D ef.’s Br. at 7, 11.) Defendant a lso references Customs Regulation § 174.16 which states that “a protest shall not be filed . . . on reliquidation upon any question not involved in the reliquidation.” (De f.’s Br. at 7) (citing 19 C.F.R. § 174.16. (2000).) According to Defenda nt, the reliquidation only involved the approve d aspects of the Initial Protests and left untouched the denied aspe cts of the Initial Protests. ( Id . at 11.) Defend ant claim s that unde

r § 1514(d

), a prot est follow ing the r eliquida tion could

only raise issues regarding the parts of the Initial Protests that were approved. ( Id . at 11-12.) Defendant insists that Plaintiff did just the opposite in the Reliquidation Protest and instead challenged the parts of the Initial Protests that were de nied. ( Id . at 12.) Defendant maintains that AAI ’s Reliquidation Protest invalidly raised issues that were de nied in the Initial Protests. ( Id .) Accordingly , Defendant argues, AAI ’s Reliquidation Protest fails to meet the statutory and regula tory require ments and

is an inva

lid basis up on which A

AI c ould file a

summons in th

is Court. ( Id . at 11.)
Defend ant also e xplains Custo ms’ reje ction of th e Reliquid

ation Prot est as “u ntimely filed.” ( Id . at 12-13.) According to Defenda nt, Customs rejected the Reliquidation Protest as untimely because the

protest “only objecte d to the issues denied in [the] first protests.” ( Id .) Defendant reasons that since these issues wer e not involved in the reliquidation, AAI could not timely raise them in a protest to the re liquidation. ( Id . at 13.)Court No. 01-01070 Page 9

Defend ant conc ludes by

assertin g that th e 180-da

y time limit unde

r § 2636(a

)(1) be gan to run when Customs issued its ruling on the Initial Protests. ( Id . at 14.) Therefore, AAI ’s waived its right to judicial review by failing to commence an action within 180 day s of Customs’ ruling on the Initial Protests. (

Id .) Customs a sserts tha

t becaus e an act

ion was no t commenc ed within that time period, under 19 U.S.C. § 1514(a), the liquidation of the entries has become final a nd conclusive against AAI . ( Id . at 11-12.) Customs maintains that because AAI f ailed to file a summons after the original liquidation, this Court lacks subject matter jurisdiction to review the valuation and classification of the subject entries. ( Id .)

B. Plaintiff’s Contentions Plaintiff argues that this Court has subject matter jurisdiction under 19 U.S.C. § 1581(a) which grants exclusive jurisdiction to this Court over any civil action commenced to contest the denial of a protest in whole or in part. (Pl.’s Br. at 8.) First, AA I contends tha

t case la w requir es an importer to f

ile a pro test to a r

eliquida tion in order to invoke this Court’s jurisdiction. ( Id . at 1, 8.) Plaintiff reasons that the reliquidation vacated the entire original liquidation and theref ore the only Customs action from which A AI was able to file a summons in this court was the denial of the Reliquidation Protest in June 2001. ( Id . at 10.) AAI asserts that unde r case law, an importer is required to file a pr otest to a reliquidation before filing a summons in this Court. ( Id . at 9.) A ccordin

g to Plain tiff, Customs reliquidated the entries in their entirety and thus the reliquidation vacated and extinguished the origina l liquidati on of the s

ubject me rchandi se and the

reliquida tion beca me the final prote stable action by Customs. (

Id . at 10.) Pl aintiff a

rgues t hat the Re liquidation Protest w as a jurisdictional prerequisite to AAI’s filing a summons in this Court. (Id .)Court No. 01-01070 Page 10

Secondly, AAI

refutes Customs’ argument that the Reliquidation Protest is invalid under 19 U.S.C. § 1514(d). (

Id . at 10.) Se ction 1514 (d) state s that “[t]he reliquida tion of an entry shall not open such entry so that a protest may be filed a

gainst the decision of the Customs Service upon any question not involved in such reliquidation.” AAI argues that the defendant misinterprets § 1514(d) and that the statute should not be applied to the facts of this case. ( Id .) Under Plaintiff’s interpretation, § 1514(d) only applies in cases of “serial protests.” ( Id . at 11.) In other word s, AAI

contends that § 1514 (d) appl ies in ca ses wher e the importer is a

ttempting to use the reliquidation protest as a means to challenge a new aspect of the initial liquidation. ( Id . at 11-12.) Plaintiff contends that § 1514(d) merely prevents importers from filing a protest to a reliquidation that raises issues that should have been raised in the initial protests. ( Id . at 12.) AAI contends that § 1514(d) ha s no application because its Reliquidation Protest does not attempt to raise any ne

w issues that were not previously raised in the Initial Protests. ( Id . at 14.) Thus, § 1514(d) does not invalidate AAI’s c laim. ( Id .) Plaintiff maintains that even if § 1514(d) applies to the present case, the re liquidation “involved” the issues of classification and the Value Advanc e such that the entire entry was open to re-protest. (

Id . at 14-15.) Specifically , AAI notes that Customs reclassified almost all of the subject merchandise and reapplied the Value Advance in the recalculation of the total amount of duties owing on the entries. ( Id . at 15.) AAI decla

res that Customs’ actions in the reliquidation nullified every aspect o f the orig

inal liquid

ation such that the

Reliquida

tion Prote st satisfie s § 1514(d)’s requirement that a protest only raise questions “involved in such reliquidation.” ( Id .) Plaintiff asserts that as a matter of law, the Reliquidation Protest was necessary to vest subject matter jurisdiction with this Court. ( Id .)Court No. 01-01070 Page 11

Lastly , Plaintiff argues that the notions of fairness and equity estop Customs from arguing that this action is barred. ( Id .) AAI contends that Customs purposefully delayed r uling on the Reliquida tion Prote st alleg edly

making “ it virtual ly im

possible” for AAI to file a t imely summons in this case within 180 days of Customs’ ruling on the I nitial Protests. (

Id .) Alt hough Customs decided the Reliquidation Protest well within the 2-year r ecommended time frame, AAI argues that Customs acted in an “arbitrary and unreasonable” manner by not ruling on the Reliquidation Protest until the time for filing a summons on the Initial Protests had run. ( Id . at 16.) AAI claims tha

t filing a summons pr

ior to Custo ms’ ruling

on the Reli quidation

Protest would have been premature and a fa ilure to exhaust its administrative remedies. ( Id .)

AAI conclude s that it wa s requir ed to prot est the re liquidation and bas ed upon Cus toms’ allegedly dilatory conduct, AAI

could not have invoked this Court’s jurisdiction within the 180- day period the G overnment claims the suit should have been brought. ( Id . at 16-17).

A NAL YSIS The issue before this Court is whether the Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(a). Under 28 U.S.C. § 1581(a), this Court “has exclusive jurisdiction of any civil action commenced to contest the denial of a protest, in whole or in part, unde r section 515 of the Tariff Act of 1930 [the Act].” Codified at 19 U.S.C. § 1515(a) (1994), section 515(a ) of the Act provides, “the appropriate customs officer , within two years fr om the date a protest was filed in accordance with section 514 of this Act, shall review the protest and shall allow or deny such protest in whole or in part.”
It is well settled that the United States is immune from suit unless it consents to be sued.Court No. 01-01070 Page 12

United Sta tes v. Mit

chell , 445 U .S. 5 35, 53 8 (198 0) (qu otin g United States v. Sherwood , 312 U.S. 584, 586 (1941)). Such a waiver of sovereig n immunity “must be unequivocally expressed” in the statute and will be “strictly construe d . . . in favor of the sovereign.” Sherwood , 312 U.S. at 590; see also Lane v. Pena , 518 U.S. 187, 192 (1996).
The Unite d States’ soverei gn immuni ty is abrog ated unde

r 28 U.S.C. § 2636(a

)(1) to provide t his Court with jurisdi ction ove r any “civil ac tion conte sting the

denial, i n whole or

in part, of a protes t under se ction 515 o f the Tar iff Act o f 1930” so

long as t he action is “commenced . . . within one hundred and eighty days afte r the date of mailing of notice of denial of a prot est under section 5 15(a) of

such Act .” I

n order t o bring s uit aga inst the Un

ited State s, AAI must meet the terms of § 2636(a) and file a summons in this Court within 180 days of a denial, in whole or in part, of their protest. The facts are uncontroverted as to the series of protests and decisions that took place between AAI and Customs. There is no dispute between the parties that AAI did not file a summons in this Court with respect to Customs’ ruling on the Initial Protests. The argument c enters around whether or not Customs’ ruling on the I nitial Protests was a denial “in whole, or in part” of AAI protests within the meaning of § 2636(a) such that AAI should have filed a summons in this Court after the ruling . Applying the la nguage of § 2636(a), if the Initial Protests were denied in whole or in part, AAI was required to commence suit within 180 days after Customs’ ruling on those pr otests. When determining jurisdiction under 28 U.S.C. § 1581(a) over “any civil action

commenc ed to cont

est the de nial of a protest, whole or

in part,” this Court has held that Customs’
response on the pro test form

is not dispo sitive and

“[t]he cour

t must look to

what Custo ms actually did.” Board of Trs. of Leland Stanford Junior Coll. v. United States , 948 F. Supp. 1072,Court No. 01-01070 Page 13

1074 (Ct. Int’l Trade 1996). I n order to determine if a protest has been denied or approved, the Court must examine “the extent to which the protest has resulted in a change of the protested decision.” Sanyo Elec., Inc. v. United States , 81 Cust. Ct. 114, 115 ( 1978). Ad ditionally , this Court has held that Customs leaves the substance of a protest open if Customs does not specifically de

ny it. See Wolff Shoe Co. v. United States , 861 F. Supp. 133, 134 (Ct. Int’l Trade 1994). If a denied pr

otest is not properly challeng ed in this Court, § 1514(a) states that the decision of Customs including “the liquidation or reliquidation of an entry . . . shall be final and conclusive upon all persons.” 19 U.S.C. § 1514(a). This Court finds that AAI’s I nitial Protests were denied in part as to the issues of the Value Advance and the classification of the sa fety fe nces, material handling jigs, ga uges, etc. as parts of functional units. AAI failed to f ile a summons in this Court within 180 days after Customs’ r

uling on t he I nitial Prot

ests, and thus, unde

r the man date of § 2636(a) , AAI ’s suit as t o the above issues is barred. However, this Court is not completely persuaded by

Defendant’s position. This Court finds that AAI’s protest to the reliquidation as to the alternative ar gument for a single “macro” functional unit classification approach was proper. AAI is able to invoke this Court’s jurisdiction to review Customs’ denial of the Reliquidation Protest as to AAI’s alterna tive clas sificati on appro ach cla im. There fore, a s to that limi ted issue , AAI ’s suit is properl y be fore this

Court. For the p urpose of analy sis, this Cou

rt will exam

ine Defe ndant’s M otion to Dis miss in the context of the two issues raised by AA I in its protests: 1) the application of the Value Advance; and 2) the classification of the subject merc handise. This approach is supported by the fact that in the series of protests and decisions, both Customs and AAI treated each issueCourt No. 01-01070 Page 14

separately

. A. Value Advance It is clear from the lang

uage of the Headquarte

rs ruling accompany

ing Customs’ decision on the Initial Protests that the I nitial Protests were specifically denied as to the Value Advance issue. Alt

hough Cu stoms che cked the APPROVED b oxes on the f orms, Customs added i

n handwriting that the protests were “Denied in Par t see att’d HQ ruling 960755.” I n examining the language that Customs used in HQ 960755, it is clear that Customs did not change any aspec

t of its orig inal dec ision to ap

ply the Value

Advance in the re liquidation. Customs sp ecifica lly stated, “[p]ursuant to [the 1995 Headquarters Ruling], the value advance for re search and development cost is proper. With regard to this issue, the protest is denied.” (HQ 960755, Pl.’s Compl. Ex. E at 15.) AAI admits that “Customs denied the [I nitial Protests] in their entirety as to the value advance issue.” (Pl.’s Br. at 5.) Additionally, AAI concede s that Customs’ ruling on the Initial Protests “allowed the protests in part and denied the protests in part.” (Pl.’s Mot. for Ora l Argument at 3.) Plaintiff remarks that in Customs’ decision on the I nitial Protests, “with respect to the application of the value advance, Customs denied the protests in their entirety , holding that the 1995 Ruling governed this issue.” ( Id .) AAI fails to reconc ile its seemingly contra dictory positions. Although AAI admits in its briefs that I nitial Protests were denied as to the Value Advance, AAI a

lso states that it was required to wait to file a summons until Customs had ruled on the Reliquidation Protest. AAI arg ues that an importer is required to protest a reliquidation as a jurisdictional
prereq uisite to se eking r

eview in t his Court. (

Pl.’s Br. at 7-10.)

AAI ’s interpretation

of thisCourt No. 01-01070 Page 15

2 The plain

tiff cite s to the fo llowing c ases in su pport of i ts position: SSK Indus., Inc. v. United States , 101 F. Su

pp. 2d 825 ( Ct. In

t’l Trad e 2000); Mitsubishi Elec. Am., Inc. v. United States , 865 F. Su

pp. 877 (Ct . Int’ l Trade 1 994); Transflock, Inc. v. United States , 765 F. Supp. 750 (Ct. Int’l Trade 1991).

3 In SSK Industries , the orig inal liquid

ation was complete ly n

ullified w hen Customs chang ed the cl assifica

tion of all of the sub

ject mer chandise from 8804 .00.00 HT SUS to 8479.89.95. SSK Indus. , 101 F. Supp. 2d at 826-827. In Mitsubishi , Customs completely nullified the original liquidation when Customs ruled that the merchandise should be reclassified from 8517.81.00 to 8541.40.95 HTSUS. Mitsubishi Elec. Am. , 86 5 F. Su pp. at 8 78- 879 . In Transflock , Customs nullified all aspects of the original liquidation when it reclassified the merchandise under item 256.87 of the Tariff Schedule s of the United States. Transflock , 765 F. Supp. at 751. Court’s pr

eceden t is too nar

row. AAI

cites to a series o f cases

to support

its arg ument. 2 How eve r, t he c ase s t o wh ich Pl ain ti ff c it es a re f act ual ly di st in gui sha bl e fr om th e ca se a t b ar. In the cited cases, t he importe

rs prote sted the origina

l liquidati on as to onl

y one aspect: classification. Therefore, when Customs reclassified the merchandise at reliquidation, necessarily

the entire original liquidation as to classification was nullified. 3 In order t o chal lenge the classification in those cases, the importer was required to pr otest the reliquidation. However, in the present case, AAI protested two aspects of the original liquidation: valuation and classification. In this case , at reliquidation, Customs only change d the classification of the merchandise under a func tional units approach. Customs did not change the application of the Value Advance in the reliquidation. AAI arg ues that Customs nullified the entire original liquidation by cha nging the classification of most of the entries. (Pl.’s Br. at 15.) Howeve r, this Court held that under § 1514(c), “the original liquidation [i]s nullified only as to the question with which the reliquidation dealt . . . [a]s to all other matters, not the subject of reliquidation, the original liquidation remain[s] in full effect.” Ataka Am. v. United States , 79 Cust. Ct. 135, 137 (1977)Court No. 01-01070 Page 16

(referencing H. Rep. No. 7, 71 st Cong., 1 st Sess. at p. 179 (1929 )). Her e, the re liquidation dealt only with the qu

estion of classifi cation. A s to valua tion, the origina

l liquidati on remai

ned in ful l effect. Therefore, Customs did not nullify the original liquidation as to the application of the Value Advance. Because the original liquidation remained in full effect as to valuation, AAI was required under § 1514(a) to file a summons in this Court within 180 day s of Customs’ ruling on the Initial Protests in order to obtain judicial review of Customs’ application of the V alue Advance. AAI improperly

re-protested its Value Advance claim in the Reliquidation Protest. Subsection 1514(d)states tha t “[t]he re liquidation of an en try shall not o

pen such entry so that a protest may be filed a

gainst the decision of the Customs Service upon any question not involved in such reliquidation.” As stated before, the question of the application of the Va lue Advance was not involved in the reliquidation. Statutes abrogating the United States’ sovereig n immunity must be strictly construed. Sherwood , 312 U.S. at 590. Subsection 2636(a)(1) states that if a protest is denied “in whole or in part” the importer must file a summons with this Court within the required time limit. A strict

construc tion of the

statute r equires this Court to

pay heed to the “in par

t” lang uage. Customs’ partial denial of AAI’ s protests, specifically as to the Value Advance issue, warrants a finding that this Court lacks jurisdiction as to AAI’s Value Advanc e claim. Therefore, AAI ’s valuation claim is severed and dismissed. B. Classification In the Initi al Protes ts, AAI

present ed two ba sic alter

native c lassific ation ar

guments against Customs’ original liquidation:Court No. 01-01070 Page 17

1. All items should be classified as one “macro” functional unit of welding machinery or

apparatus. (

Attachment B in Support of Initial Protest No. 1101/95/100704 at 2, Pl.’s Compl. Ex. D at 4.) 2. The items should be classified by g roupings or job numbers as functional units of welding equipment or functional units of material handling equipment. ( Id . at 4, Pl.’s Compl. Ex. D at 6.) Customs did n

ot acce pt either alterna tive appr oach co mpletely . Rather, Customs accepted most of the second alternative, but partially denied that approach as to certain items. Customs approved most of AAI’s alternative a rgument that the subject merchandise should be classified as functional units of welding equipment or material handling equipment. However, Customs spe cifical ly s tated tha t certai n items suc

h as safe ty f ences, gauges , etc. did

not consti

tute parts of functional units and as to these items, AAI’ s alternative classification argument was denied. (HQ 960744, Pl.’s Ex. E at 8-14.) In apply ing the standard set forth in Sanyo Ele ctric , “the onl

y lo gicall y c onsistent way

to determine whether a protest has been denie d in part is to see whether any part of the protested decision remains i n effec t.” 81 Cust. Ct. at 115. If a ny p art of the

proteste d decision remain s in effec t, then the

protest h as been d

enied in p art. Her

e, the or iginal c lassific ation of the safet y fences , materia

l handling jigs, g auges , etc. re

mained in effec t and thus, the prote st was den ied in part. Customs stated in HQ 960755 that the classification arguments in the I nitial Protest were “ALL OWED in PART and DENIED in PART.” (HQ 960755 at 15, Pl.’s Compl. Ex. E at 15.) Customs specifically detailed which a spects of AAI’s propose d classifications were accepted andCourt No. 01-01070 Page 18

which aspects were denied. When denied, Customs stated that the classifica tion was to remain “unchanged” from the cla ssification in the original liquidation. ( Id . at 4-15, Pl.’s Compl. Ex. E at 4-15.) In the Reliquida

tion Prote st, AAI

challen ged Cust oms’ ref usal to inc lude saf

ety fences , gauges, etc. as par

ts of functional units: “all items not classified as functional units under the Customs approach as enunciated in [HQ 960755], should be reclassified as either parts of welding equipment or parts of material handling e quipment.” ( Attachment B in Support of Reliquidation Protest No. 1101-01-100053 at 4, Pl.’s Compl. Ex. F at 10.) The classification of these ite ms was unc

hange d in reliqu

idation fr om the orig

inal clas sificati on. As § 151 4(d) sta tes, “[t]he reliquidation of an entry shall not open such e ntry so that a protest may be filed against the decision of the Customs Service upon any question not involved in such reliquidation.” The question of including these items in a functional units approach was not involved in the reliquida tion. I f AAI

wanted to

challen ge Custo ms refusa

l to classi fy

the safe ty f ences, gauges , etc. under the functional units approach, AAI ’s remedy w as to file a summons in this Court after Customs’ decision on the Initial Protests. AAI failed to do this. Therefore, this Court lacks subject matter jurisdiction to review Customs’ denial to include such items as parts of functional units of welding equipment or material handling equipment. However, AAI

was correct to wait to file its Reliquidation Protest as to the argument that Customs should have classified the subject merchandise as a single mac ro functional unit. As set forth earlier, AAI

presented two alternative classification arg uments to Customs in the Initial Protests. This Court has held that when Customs accepts one of an importer’s proposed alterna tive clas sificati ons, that a ccepta nce is an approva l of the pr otested c lassific ation tha

t mustCourt No. 01-01070 Page 19

be protested after reliquidation. See Sanyo Elec. , 81 Cust. Ct. at 115; see also Bd. of Trs. Of Leland Stan

ford Junio r Coll. , 948 F. Su pp. at 107 5; Transflock , 765 F. Supp. at 751. As an
approva l, the impor

ter must pr

otest the r eliquida tion and w ait for Cu stoms to den y its reliquidation protest before the importer can seek judicial re view. See Sanyo Elec. , 81 Cust. Ct. at 115. As this Court reasoned in Sanyo Ele ctric , “[i]f a party’s pref

erence for a rejected alternative claim is so strong that it wishes to pursue the claim even following the granting of another alterna tive clai m, then . . . [t]he prope

r proce dure wou

ld be for the part y to advanc e its preferred alternative claim in a ne w protest . . . following the reliquidation of the entry .” Sanyo Elec. , 81 Cust. Ct. at 115. In HQ 960755, Customs rejected AAI ’s proposed alternative classification of the subject merchandise as a single macro f unctional unit. (HQ 960755 at 7, Pl.’s Compl. Ex. E at 7.) At the same time, Customs accepted, with limitations, AAI’s other alter native approach to treat the subject merchandise as multiple functional units. ( Id .) Customs’ acceptance of this alternative
approac h was an a

pproval o f the pro tested c lassific ation. Thi s Court ag rees wit h Customs’ statement that “the reliquidation concerned only that part of the ruling which allowed the protests.” (Def.’s Reply

to Pl.’s Br. at 2.) However, Customs argues that AAI ’s Reliquidation Protest is invalid because it protests the denied aspects of the I nitial Protests. (Def.’s Br. at 7.) Customs is incorrect in its analysis. As stated above, Customs’ approva l of one alternative classification argument is an approval of the c lassification claim that must be protested after reliquidation. In the Reliquida

tion Prote st, AAI

argue d that it is “ logica

lly a nd lega lly a ppropria te toCourt No. 01-01070 Page 20

treat every

thing imported as a single functional unit.” ( Attachment B in Support of Reliquidation Protest No. 1101-01-100053 at 3, Pl.’s Compl. Ex. F at 9.) Further, AAI arg ued that “the entire imported merchandise is a body assembly line kit” and should be cla ssified as a single functional unit. ( Id .) Under this Court’s precedent, it was proper for A AI to protest the reliquidation and wait for Customs to deny the Reliquidation Protest before f iling a summons in this Court seeking review of Customs’ chosen classification approach. The Court finds that AAI properly filed a protest to the reliquidation as to Customs’ choice between AAI ’s proposed alternative classifi cation a

pproaches. Ther

efore, this Court has jurisdi ction to de cide if Cu stoms prop erly classified the subject merchandise as functional units. The Court’s holding today is consistent with the Court’s holding in Novell, Inc. v. United States , 985 F. Supp. 121 (Ct. Int’l Trade 1997). I n Novell , the impor

ter prote sted Custom s’ original liquidation on two grounds: appraisement and duty -free treatment. Id . at 122. The importer presented two alternative appraisement a pproaches to Customs in the protest. Id

. Customs “granted in part and denied in part” the importer’ s protest. Id . at 122. Customs agreed that the merchandise should be reappraised under one of the importer’s alternative appraisement approaches but refused duty -free treatment. Id . Before reliquidation, the importer filed a summons in this Court reasserting its original arguments as to appraise ment and duty-fre e treatment. Id . at 123. Cu stoms arg ued that t his Court la

cked sub ject matt er jurisd iction be cause the importer failed to protest the reliquidation. Id . The Court held that the duty-fr ee claim was properly within the Court’s jurisdiction beca use that claim had been denied by Customs decision on the importer’s initial protest. Id . However, the Court determined that it lacked subject matter jurisdiction over the appraisement claim. Id . at 124. The Court held that because the importerCourt No. 01-01070 Page 21

offered Customs two alternative appraisement approa ches in its protest and Customs granted one of the alternative approaches, the protest wa s considered approved as to appraisement. Id

. Therefore, the importer should have waited to file a protest to the reliquidation as to the appraisement approach used and then the importer should have filed a summons in the Court. Id

. at 123-125. Novell is analogous to the present case. Here , AAI protested the original liquidation on two grounds: classification and valuation. I n its protest, AAI offered a lternative classification approaches. Customs clearly denied AAI’s protest as to va luation, just as Customs denied the duty-free claim in Novell . Likewise, AAI should have filed a summons in this Court as to the valuation issue after Customs’ ruling on the I nitial Protests as the importer did in Novell

. Further, as the Co

urt rea soned in

Novell , when Customs approved one alternative classification approach, as to that issue, the protests were approve d and thus AAI was corr ect to wait to file a summons until after it had protested the reliquidation. Last ly, AAI argue s in its brie fs that the principle s of equit

y r equire t he Court to

exercise jurisdiction over the reliquidation entries. (Pl.’s Br. at 15-17.) The Court is unable to consider AAI ’s equity

argume nt. In suits ag ainst the U

nited State s, “jurisd

ictional s tatutory

require ments cannot be waived or subjected to excuse or remedy based equitable principles.” Mitsubishi Elec. Am. , 865 F . Sup p. at 8 80 (ci ting NEC Corp. v. United States , 806 F.2d 247, 249 (1986)). However, AAI

rightly dra

ws this Court’s attention to the fact that our ruling today mandates a complex issue-splitting job for the importer in determining the proper a dministrative or legal action to take in response to Customs’ decisions. To assure that its claim can be heard by this Court, the importer is forced to e xamine its protests to the original liquidation andCourt No. 01-01070 Page 22

examine even closer Customs’ ruling on those protests in order to decipher wha t has been denied and what has been approve d. Althoug

h there a re simple boxes on the

Customs pro test form s indicating DENIED, D ENIED I N PART, APPROVED, etc., the importer cannot take Customs at its word (or box as it may be) and must look bey ond what Customs has checked and examine what Customs actually did in its ruling. Customs does a disservice to the importers when it does not follow its own regulations that mandate that notice of denial of a protest “ shall include a statement of the reasons for the denial, as well as a statement informing the protesting party of the right to

file a civ il action c ontesting the denia l of the pro test .” 19 C.F.R. § 174.30(a) (2000) (emphasis added). In the pr esent case, this Court found no indication that Customs, in its ruling on the Initial Protests, informed AAI of its right to file such an action contesting the partial denia l of the pr otests. The Court

invites Con

gress, Commerce , and Custo ms to reexa mine prote st, prote st denial, l iquidation , and rel iquidation procedu res in or der to mod

ify those pro cedure s by

statute and or regulation with a view toward the elimination of hy per-technical traps for unwary importers that impose unproductive, improper, and unnecessary burdens on the free flow of

commerce. This Court denies Plaintiff’s Motion for Oral Argument because the f acts and legal contenti ons are a

dequate ly presente d in the ma terials b efore t

he Court a

nd oral a rgumen t would not aid the Court’s decisional process.

C ONCLUSI ON Upon consideration of Defendant’s Motion to Dismiss for L ack of Subject Matter Jurisdiction, Plaintif

f’s Memor

anda in O pposition thereto, a

nd Defe ndant’s Re

ply Memoran

dum,Court No. 01-01070 Page 23

Plaintiff ’s valua tion claim

is sever ed and dismissed and Plaintiff ’s claim a s to classi fication is limited to consideration of Customs’ classification of the subject merchandise as functional units. Upon cons ideration of Plaint iff’s Mot ion for Or al Arg ument, or in the Alte

rnative , Lea

ve to File a Sur-Re ply and Def endant’ s Memora

nda in Opp osition the

reto, an d other pe rtinent pa pers, Plaintiff’s motion is denied.

______________________________ Gregory W. Carman, Chief Judge Dated: November , 2002 New York, New York