INTERCARGO INSURANCE COMPANY f/k/a International Cargo & Surety Co., (Surety for M. Genauer) v. The UNITED STATES
No. 95-1344
United States Court of Appeals, Federal Circuit
May 2, 1996
Rehearing Denied; Suggestion for Rehearing In Banc Declined July 25, 1996
83 F.3d 391
AFFIRMED.
Wayne James Jarvis, Hodes & Pilon, Chicago, Illinois, argued for plaintiff-appellee. With him on the brief were Michael G. Hodes and James L. Sawyer.
Joseph I. Liebman, Civil Division, Department of Justice, International Trade Field Office, New York City, argued for defendant-appellant. With him on the brief were Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, and Amy M. Rubin, Civil Division, Department of Justice, International Trade Field Office. Of counsel was Sheryl A. French, Office of Assistant Chief Counsel, International Trade Litigation, United States Customs Service.
Before RADER, Circuit Judge, COWEN, Senior Circuit Judge, and BRYSON, Circuit Judge.
Opinion for the court filed by Circuit Judge BRYSON. Dissenting opinion filed by Circuit Judge RADER.
BRYSON, Circuit Judge.
This dispute over import duties turns on whether the Customs Service obtained a valid extension of time within which to liquidate an importer‘s entries. The Court of International Trade held that Customs’ extension notices were defective, and that the importer‘s surety was therefore entitled to judgment with respect to the disputed duties that Customs sought to impose. Intercargo Ins. Co. v. United States, 879 F.Supp. 1338 (C.I.T. 1995). We reverse and remand for further proceedings.
be too late to complain.” Wilderness Soc‘y v. Alcock, 867 F.Supp. 1026, 1041 (N.D.Ga.1994).
M. Genauer was the importer of a series of shipments of merchandise that entered this country at the Port of Seattle, Washington, between September and November of 1989. Appellee Intercargo Insurance Company served as Genauer‘s surety in connection with those imports. Upon the arrival of Genauer‘s merchandise, the Customs Service began its standard procedure for liquidating the entries, i.e., determining the duty to be assessed on the imported items. As part of the liquidation process, Customs sought information relating to the entries.
Under
In July of 1990, Customs had not completed its liquidation of the entries at issue in this appeal. Therefore, in order to avoid liquidation by operation of law under
The Secretary may extend the period in which to liquidate an entry by giving notice of such extension to the importer of record in such form and manner as the Secretary shall prescribe in regulations, if—
- (1) information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer;
- (2) liquidation is suspended as required by statute or court order; or
- (3) the importer of record requests such an extension and shows good cause therefore.
Under
THIS IS A COURTESY NOTICE. THE LIQUIDATION OF THIS ENTRY HAS BEEN EXTENDED; ADDITIONAL TIME IS REQUIRED BY CUSTOMS TO PROCESS THIS TRANSACTION. NO ACTION IS NECESSARY ON YOUR PART UNLESS INFORMATION IS SPECIFICALLY REQUESTED BY CUSTOMS.
A year later, in July of 1991, Customs liquidated the entries at a higher duty than that claimed by Genauer upon entry. Intercargo, as Genauer‘s surety, paid the liquidated duties for the entries and protested Customs’ decision, but its protest was denied.
In December of 1992, Intercargo filed suit in the Court of International Trade challenging the assessed duties. Intercargo claimed that the liquidation extensions were invalid and that the entries therefore should be deemed liquidated by operation of law, which would result in a reduction of the duties to the rates claimed by the importer at the time of entry.
The Court of International Trade agreed that the one-year extensions for liquidating Genauer‘s entries were invalid. In the court‘s view, the extension notices were not effective to extend the statutory liquidation period unless they recited one of the three statutory reasons for obtaining additional time for the liquidations. The reason given in the extension notices at issue in this case—that “additional time is required by Customs to process this transaction“—was not one of the listed statutory reasons for an extension. Accordingly, the court held that the extension notices did not extend the time to complete the liquidations; the court therefore granted summary judgment to Intercargo on its challenge to the assessed duties.
II
A
Our analysis begins with this court‘s decision in St. Paul Fire & Marine Ins. Co. v. United States, 6 F.3d 763 (Fed. Cir.1993). The St. Paul court held that under
Intercargo‘s argument in this case is based on St. Paul and is straightforward. The argument proceeds as follows: (1) St. Paul requires that Customs’ extension notices articulate one of the three statutory reasons for the extensions; (2) the only applicable statutory ground for obtaining extensions in this case is that “information needed for the proper appraisement or classification of the merchandise is not available to the appropriate customs officer“; (3) the notices in this case did not articulate that statutory ground, but merely stated that Customs needed “additional time” to process the transaction; therefore (4) the extension notices were invalid; and (5) each entry was liquidated by operation of law one year after the date of entry of that merchandise, at the duty rate claimed by Genauer at the time of entry.
That conclusion, however, does not decide this case. There remains the question of what consequence should flow from the defect in the notices, to which we now turn.
B
It is well settled that principles of harmless error apply to the review of agency proceedings. The harmless error rule is incorporated in the judicial review section of the Administrative Procedure Act, which governs the review of the Customs Service‘s decision in this case. Thus, Section 10(e) of the Administrative Procedure Act,
1
The first question presented by the harmless error inquiry is whether the error at issue in this case is of the sort that is amenable to harmless error analysis. Intercargo argues that it is not, inasmuch as the statute and the regulation dictate that the consequence of a defect in the extension notice is that the extension is not obtained. In essence, Intercargo‘s argument is that a notification reciting a statutory reason for the extension is a condition precedent to an extension of the one-year liquidation period, and that if that condition is not met, the extension never takes effect.
At the outset, we note that neither the statute nor the regulation dictates that the necessary consequence of a defect in the extension notice is to render the extension void. The statute requires Customs to inform the importer of the extension in the form and manner dictated by regulation, and the pertinent regulation provides that “if the district director extends the time for liquidation,” he “promptly shall notify the importer and surety” of the fact of and reason for the extension. Neither speaks to the consequence of a defect in the notice.
With respect to Intercargo‘s contention that strict compliance with the statute and regulation is required because it is the notice that effects the extension, the courts have rejected the same argument in the analogous context of notices of appeal. Rule 3 of the Federal Rules of Appellate Procedure directs that a notice of appeal must contain particular matters. Nonetheless, while it is the filing of the notice of appeal that confers jurisdiction on the appellate court (just as it is the service of the notice of extension that
Moreover, Intercargo‘s “strict compliance” argument sweeps too broadly. The regulation governing liquidation extensions provides, for example, that the district director shall notify the surety of an extension “on Customs Form 4333-A.”
On this point, the Supreme Court‘s opinion in Brock v. Pierce County, 476 U.S. 253, 106 S.Ct. 1834, 90 L.Ed.2d 248 (1986), is instructive. The Court in that case held that an agency‘s failure to satisfy a statutory timing requirement did not deprive the agency of its authority to act. The Court explained that it “would be most reluctant to conclude that every failure of an agency to observe a procedural requirement voids subsequent agency action, especially when important public rights are at stake.” Id. at 260, 106 S.Ct. at 1839.
Subsequently, in United States v. James Daniel Good Real Property, 510 U.S. 43, 114 S.Ct. 492, 126 L.Ed.2d 490 (1993), the Supreme Court considered the effect of various statutory requirements governing the timing of forfeiture actions brought by Customs officers. The Court declined the invitation to hold that a violation of those timing requirements compelled it to dismiss the underlying forfeiture action. As the Court explained,
We have held that if a statute does not specify a consequence for noncompliance with statutory timing provisions, the federal courts will not in the ordinary course impose their own coercive sanction.... “[There] is no presumption or general rule that for every duty imposed upon the court or the Government and its prosecutors there must exist some corollary punitive sanction for departures or omissions, even if negligent.”
114 S.Ct. at 506 (citations omitted).
This court recently applied the Supreme Court‘s analysis from Pierce County and
The same principle applies here. The public interest in the administration of the importation laws should not “fall victim” to the failure by the Customs Service to use the requisite language in its extension notices, if the oversight has not had any prejudicial impact on the plaintiff.
2
That brings us to the second question arising under the harmless error analysis in this case: whether the defect in the extension notices was prejudicial to Intercargo. On this point, we think it clear that Intercargo suffered no prejudice.
Intercargo was informed that Customs was extending the liquidation period by one year. The purpose of the notice—to increase certainty in the customs process by apprising the importer and its surety of the precise period within which final action would be taken on the liquidation—was therefore satisfied. See S.Rep. No. 778, 95th Cong., 2d Sess. 32 (1978). Moreover, if Intercargo believed that Customs did not have a valid statutory reason for the extensions, it was open to Intercargo to seek to have the extensions invalidated on that ground. See St. Paul, 6 F.3d at 768-70. The omission of the requisite language from the extension notices had no effect on Intercargo‘s right to challenge the extensions on the ground that Customs did not in fact need additional information from Genauer in order to complete the liquidation. We are thus unable to discern any prejudice Intercargo may have suffered as a result of the defect in the extension notices that would justify forfeiture of the public‘s rights against the importer or its surety.
Intercargo does not make a serious effort to demonstrate prejudice of the pertinent kind. It asserts in passing that the prejudice it faces is that it may be forced, at the end of this litigation, to pay additional duties. As Intercargo puts it, “the prejudice flowing from this circumstance is the ultimate prejudice—the wrongful imposition of customs duty.” But that is not what is meant by prejudice as used in this context. A party is not “prejudiced” by a technical defect simply because that party will lose its case if the defect is disregarded. Prejudice, as used in this setting, means injury to an interest that the statute, regulation, or rule in question was designed to protect. See, e.g., Hernandez-Luis v. INS, 869 F.2d 496, 498 (9th Cir.1989); State of Texas v. Lyng, 868 F.2d 795, 799-800 (5th Cir.1989); United States v. Cerda-Pena, 799 F.2d 1374, 1377 (9th Cir.1986); Aero Mayflower Transit, Inc. v. ICC, 711 F.2d 224, 232 (D.C.Cir.1983); see generally Diaz v. Department of the Air Force, 63 F.3d 1107, 1109 (Fed.Cir.1995).
Intercargo was advised of the extensions, and it was not deprived of its opportunity to challenge the extensions in court on the ground that they were not obtained for a statutorily valid reason. There is therefore no apparent prejudice to Intercargo of the type that would be required to justify terminating the government‘s right to assess import duties that may properly be due. For that reason, the Court of International Trade should not have held that Intercargo is entitled to relief simply because of the defect in the language of the extension notices.
III
In addition to appealing from the decision that the extensions were invalid because of the defect in the extension notices, the gov-
REVERSED AND REMANDED.
RADER, Circuit Judge, dissenting.
This court‘s decision in St. Paul Fire & Marine Ins. Co. v. United States, 6 F.3d 763 (Fed.Cir.1993), governs this dispute over whether the United States Customs Service (Customs) obtained a valid extension of time for liquidation of Intercargo‘s entries.
In St. Paul, this court held that
Customs’ notices to Intercargo did not give a statutory reason for the extension. The statutory reason that Customs intended to invoke was that “information needed for the appraisement or classification of the merchandise is not available to the appropriate customs officer.”
This court, however, treats Customs’ defective notices as harmless error. This court inaccurately analogizes Customs’ defective notices to procedural errors in notices of appeal. In a defective notice of appeal, the opposing party is not prejudiced by the defect. Any procedural defect can be easily cured without harm to the opposing party. In this case, however, Customs’ defective notices have prejudiced Intercargo. Intercargo was prejudiced by the delays that
Thus, the Customs’ extension notices were improper because they did not give a statutory reason for the extension. These notices did not satisfy the requirement of the regulation as interpreted in St. Paul. I would thus affirm the Court of International Trade‘s holding that the Customs’ extension notices were defective.