International Custom Products, Inc. v. United States
791 F.3d 1329
Fed. Cir.2015Background
- International Custom Products (ICP), an importer, obtained a Customs ruling classifying its “white sauce” as a sauce (lower tariff) but Customs later issued a 2005 Notice reclassifying it as a dairy spread (much higher tariff), allegedly without required notice-and-comment.
- Multiple waves of entries were liquidated under the 2005 Notice; some protests were timely filed and suspended pending related litigation, while 13 entries (Oct 2003–Oct 2004) produced a final denial of protest and were not suspended.
- ICP sued in the Court of International Trade (CIT) without prepaying roughly $28 million in duties for those 13 entries, arguing among other things that the 2005 Notice was void for failure to comply with 19 U.S.C. § 1625(c) and that the prepayment requirement (28 U.S.C. § 2637(a)) is unconstitutional as applied.
- The CIT dismissed Counts 1–8 for lack of subject-matter jurisdiction because ICP had not paid duties as required to invoke 28 U.S.C. § 1581(a), and held § 1581(i) unavailable because § 1581(a) was not manifestly inadequate.
- The CIT found it had jurisdiction under § 1581(i) to consider Count 9 (constitutionality of prepayment) but dismissed Count 9 for failure to state a claim, concluding the prepayment requirement is a valid condition on the government’s waiver of sovereign immunity and that ICP had no protected property interest in a particular tariff classification.
- The CIT denied ICP’s motion to reconsider or to amend to assert a deemed-liquidated theory; the Federal Circuit affirmed both the dismissal and denial of reconsideration/amendment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CIT had jurisdiction under 28 U.S.C. § 1581(a) for Counts 1–8 despite ICP not prepaying duties | ICP argued its claims (including that the 2005 Notice was void) could be heard without prepayment because prepayment would put it out of business | Government argued § 2637(a) prepayment is a strict jurisdictional prerequisite to suit under § 1581(a) | Held: § 2637(a) is a valid condition; failure to prepay bars § 1581(a) jurisdiction; § 1581(i) cannot be used because § 1581(a) was available and not manifestly inadequate |
| Whether ICP could invoke residual jurisdiction under § 1581(i) | ICP contended § 1581(i) applies because § 1581(a) was effectively inadequate given its financial inability to prepay | Government maintained mere financial hardship does not render § 1581(a) manifestly inadequate | Held: Financial hardship alone does not make § 1581(a) inadequate; § 1581(i) unavailable |
| Whether the prepayment requirement (28 U.S.C. § 2637(a)) is unconstitutional as applied (Count 9) | ICP argued prepayment creates an insurmountable financial barrier to judicial review and violates due process/property rights | Government argued prepayment is a longstanding condition on waiver of sovereign immunity and constitutionally permissible; ICP lacks a protected property interest in a particular classification or rate | Held: Prepayment is a valid condition on the waiver of sovereign immunity; ICP has no constitutionally protected property interest in a classification/rate; Count 9 dismissed for failure to state a claim |
| Whether the CIT abused its discretion by denying leave to amend to assert a deemed-liquidation theory or by denying reconsideration | ICP argued the deemed-liquidation doctrine could provide an alternate jurisdictional basis and that amendment would not prejudice the government | Government argued the deemed-liquidation theory was raised too late, amendment would be futile and unduly delay the case | Held: No abuse of discretion; reconsideration denied as relitigation; amendment denied as unduly delayed and futile |
Key Cases Cited
- United States v. Mitchell, 445 U.S. 535 (sovereign immunity waiver must be unequivocal)
- Cheatham v. United States, 92 U.S. 85 (government may condition resort to courts on prepayment of taxes/duties)
- Flora v. United States, 362 U.S. 145 (taxpayer must fully pay before refund suit; no constitutional infirmity)
- United States v. Clintwood Elkhorn Mining Co., 553 U.S. 1 (upholding prepayment condition in tax context)
- Lehman v. Nakshian, 453 U.S. 156 (waiver of sovereign immunity must be strictly observed)
- Int'l Custom Prods., Inc. v. United States (ICP I), 467 F.3d 1324 (Fed. Cir.) (financial hardship alone does not make § 1581(a) manifestly inadequate)
- Int'l Custom Prods., Inc. v. United States (ICP IV), 748 F.3d 1182 (Fed. Cir.) (2005 Notice was an interpretive ruling subject to § 1625(c); failure to follow notice-and-comment rendered it void)