Award of Relief Not Precluded by Issuance Of Seizure Notice, Court of Int'l Trade Rules

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• Case Summary: The U.S. Court of International Trade denies the United States's motion for judgment on the pleadings in an exclusion of goods and denial of protest case.

 Key Takeaway: A toy company's protest challenging the exclusion and denial of protest falls within the subject matter jurisdiction of the CIT and because an award of appropriate relief, if warranted, is not precluded by the issuance of a seizure notice by the U.S. Customs and Border Protection.

The U.S. Court of International Trade ruled June 27 that it has subject matter jurisdiction over an action involving the exclusion of toys, and that a deemed denial of the protest to the exclusion and the court's ability to order relief, if warranted, was not precluded by the issuance of a seizure notice ( CBB Group Inc. v. United States, Ct. Int'l Trade, No. 10-00383, 6/27/11).

Denying the government's motion for judgment on the pleadings, the court also ruled that its ability to order relief was not precluded by the prospect that the adjudication of a toy importer's claim will involve the application of copyright law. The issuance of a seizure notice, which took place after the case was brought and the court's jurisdiction over the claim attached, was no bar to the future ability of the court to order a remedy to which the toy importer may be entitled, the court ruled.

Toys Seized by Customs

CBB Group Inc. is a toy wholesaling and importing business.

On Sept. 7, 2010, CBB imported 785 cartons of plush toys at the port of Newark, N.J. (Entry No. 735-0096303-5). The U.S. Customs and Border Protection refused to release 574 of the 785 cartons, determining that the toys were “piratical” copies that infringed a registered copyright and were subject to protest.

CBB filed its protest on Nov. 19, 2010, challenging the alleged exclusion of the goods from entry. The Court of International Trade granted precedence to the action. On Jan. 11, Customs issued to CBB a notice stating that it had seized the merchandise, described the imported merchandise by quantity of pieces and value, but did not indicate how many cartons of each product were seized and did not identify the entry number of the imported merchandise.

CBB also informed the court that Customs, subsequent to the filing of this action and the issuance of the seizure notice, issued a document purporting to be a denial of CBB's protest.

The United States filed a USCIT Rule 12(c) motion for judgment on the pleadings, arguing that entry of judgment dismissing this action for failure to state a claim on which relief can be granted is required because, Customs having seized the merchandise at issue as piratical, the court lacks power to review the seizure determination or to order effective relief.

Court Has Subject Matter Jurisdiction

Looking first at the subject matter jurisdiction of the court, Judge Timothy C. Stanceu said that CBB's claim arose under Sections 515 and 499(c) of the Tariff Act, 19 U.S.C. §§ 1515 and 1499, which applies except in the case of merchandise with respect to which the determination of admissibility is vested in an agency other than the Customs service.

The court said that the determination of admissibility of CBB's merchandise turned on the question of whether copyright violations occurred upon importation, a determination not vested in any agency other than Customs. Under the Tariff Act, a protest may be filed to contest a “deemed exclusion” of merchandise when Customs failed to make a final determination with respect to the admissibility of detained merchandise within 30 days after the merchandise has been presented for examination.

Salient facts gathered from pleadings show that both a deemed exclusion and a deemed protest denial occurred in this case, the court said. The merchandise was submitted for examination in September 2007, the court said, and thus Customs failed to reach an admissibility decision within the subsequent thirty days and the exclusion occurred in October 2007.

CBB, the court said, filed a protest on Nov. 19, 2010, and it ripened into a deemed denial on Dec. 20, 2010. As this action commenced the day after the deemed denial, the court said that the action falls within the jurisdiction granted to the court, 28 U.S.C. § 1581(a).

Seizure Notice Does Not Bar Ultimate Remedy

USCIT Rule 12(c) requires that a court review the pleadings under the same standard as it would a motion to dismiss under USCIT Rule 12(b) for failure to state a claim.

The United States argued that CBB cannot obtain effective relief in the CIT because release can only be secured at this point through a challenge to the seizure, over which the court lacks jurisdiction. Thus, the United States argued that the only relief CBB could obtain on its challenge to the deemed protest denial was the release of the merchandise from a deemed exclusion which could not entail the court-ordered release of the seized merchandise.

The court said that the question presented was whether the action taken by Customs to seize the merchandise under the customs laws deprives the court of the power to order an effective remedy in this litigation such that the case must now be dismissed. “Deciding this question requires the court to determine how sections 499(c) and 596(c) of the Tariff Act apply in the circumstances of this case, in which Customs issued the Seizure Notice under section 596(c) after judicial review of the deemed protest denial under section 499(c) had commenced and the court had thereby obtained subject matter jurisdiction over CBB's cause of action,” the court said.

The court determined that Section 499(c)(5)(C)—which requires that the court shall grant the appropriate relief which may include, but is not limited to, an order to cancel the detention and release the merchandise—must apply in the circumstances of this case, in which Customs made no admissibility determination prior to commencement of this action.

The United States said there was a distinction between an agency decision to seize the merchandise and an agency decision to exclude the merchandise, arguing that because Customs determined that CBB's merchandise was clearly piratical and subsequently seized it, the statutes and regulations related to seized goods now apply to CBB's merchandise and CBB's claim must be dismissed because the court cannot grant CBB the relief it seeks in its complaint.

“Defendant's argument fails to address the consequences of the failure by Customs to make an admissibility determination prior to the institution of this litigation,” the court said. “As section 499(c)(5)(C) directs, the court ‘shall grant appropriate relief,' which may include release of the merchandise, if the good cause showing contemplated by that provision is not made.” The court added that, in the circumstances of this case, the determination of admissibility and the determination of whether the merchandise is piratical are the same determination, and Customs is not free to usurp the court's power to make and effectuate that determination.

The court also rejected the United States's argument that 28 U.S.C. § 1356—which states that the district courts shall have original jurisdiction, exclusive of the courts of the States, of any seizure under any law of the United States on land or upon waters not within admiratly and maritime jurisdiction—applies, because the cause of action here did not arise as a result of the issuance of a seizure notice, but under Sections 515 and 499(c) of the Tariff Act as a result of the deemed exclusion and deemed protest denial.

The court ruled:


For the various reasons discussed above, the court concludes that the court's jurisdiction has attached to plaintiff's claim and that Customs, through actions taken subsequent to the commencement of this litigation, may not usurp the court's power to decide this case and to order an appropriate remedy. As a result, Customs is not free to take actions affecting the status or disposition of the merchandise at issue in this case, either through proceedings initiated by the Seizure Notice or otherwise, for such actions have the potential to deprive the court of the ability to order a remedy, contrary to congressional intent. The issuance of the Seizure Notice, which took place after this case was brought and the court's jurisdiction over the claim attached, is no bar to the future ability of the court to order a remedy to which plaintiff ultimately may be entitled.

CIT May Decide IP Questions

Finally, the court found meritless the United States's argument that judgment on the pleadings was appropriate because to resolve the case the court would need to decide questions of copyright law that cannot be decided by the court.

“That this case presents issues of copyright law cannot defeat jurisdiction or preclude a remedy,” the court said. “Defendant cites no binding authority under which the court could not decide this dispute on the merits, and nothing in … the Tariff Act contains the restriction on the court's powers that defendant supposes to exist.”

Moreover, the court said that the power of the CIT to decide questions of intellectual property law has been implicitly recognized by the U.S. Court of Appeals for the Federal Circuit, which has upheld, in at least one instance, a decision of the Court of International Trade deciding questions of patent law, citing Jazz Photo Corp. v. United States, 439 F.3d 1344, 78 USPQ2d 1180 (Fed. Cir. 2006) (46 PTD, 03/9/06).

Thus, the court denied the United States's judgment on the pleadings and ordered the government to take no action affecting the status or disposition of the merchandise subject to the case and no action with the potential to affect the nature or scope of any remedy that may be ordered.

CBB was represented by Elon A. Pollack of Stein Shostak Shostak Pollack & O'Hara, Washington, D.C. The United States was represented by Assistant Attorney General Tony West.

By Nathan Pollard

Opinion at