Opinion
No. 04 Civ. 4050 (HB).
June 9, 2004
OPINION ORDER
Petitioner General Maritime Management, LLC ("Genmar") moved by Order to Show Cause seeking a direction that would require respondent ST Shipping Transport, Inc. ("ST Shipping") to secure and forward to the Bureau of Customs and Border Protection ("CBP") an International Carrier Bond and a cargo declaration in electronic form. The ship, the M/T GENMAR HECTOR arrives in Corpus Cristi, Texas on the morning of June 12, 2004. The parties dispute whose obligation it is to supply the aforesaid documents. Said documents are required pursuant to Section 343(b) of the Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002, 19 U.S.C. § 1433, 1431a, and the regulations promulgated thereunder, 19 C.F.R. § 4.7 et seq. Because the Court lacks subject matter jurisdiction to decide this matter, the petition must be denied.
I. BACKGROUND
On September 24, 2003, ST Shipping executed a Time Charter Party Agreement ("Time Charter") with respect to M/T GENMAR HECTOR and several other vessels managed by Genmar for a minimum period of one year. At issue are the parties' respective obligations under a federal regulatory scheme for the documentation of cargo entering the United States so that the CBP can identify high-risk cargo and prevent smuggling. See 19 U.S.C. § 1433, 1431a; 19 C.F.R. § 4.7 et seq.; see also Required Advance Electronic Presentation of Cargo Information, 69 FR 68140-01, (Dec. 5, 2003), available at 2003 WL 22867493. The regulations became effective in April of this year and this motion is the first time the meaning of the language has been disputed. Genmar and ST Shipping each seek to have the Court declare that the other party is responsible for submitting the requisite information to CBP. The specifics of the regulatory framework and the parties' dispute are set forth below.
A. Regulatory Framework
Section 343(b) of the Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002, 19 U.S.C. § 1433, 1431a, requires all cargo shippers to provide cargo documents prior to the unloading of such cargo in a United States port. The statute empowered the Secretary of Agriculture to regulate the "time, manner, and form by which shippers shall transmit documents or information required under this subsection to the Customs Service." 19 U.S.C. § 1431 a(b)(4); 2401(6). Pursuant to this grant of authority, regulations were promulgated, which provide that CBP must receive the vessel's cargo declaration (former Customs Form 1302) from an incoming carrier twenty-four hours before the cargo arrives at port. 19 C.F.R. § 4.7(b)(2). This information must be transmitted through the Vessel Automated Manifest System, id., and must include, inter alia, the carrier's Standard Carrier Alpha Code, the last foreign port visited and the date departed, the date the vessel is scheduled to arrive at the first United States port, and information concerning the quantity and classification of cargo, the port where it was loaded, the identity of the shipper and consignee. 19 C.F.R. § 4.7a(c). Finally, all carriers are required to maintain an International Carrier Bond.
As noted, these regulations became effective on January 5, 2004, but it was not until March 4, 2004 that carriers were required to submit an electronic cargo declaration to CBP. 19 C.F.R. § 4.7(b)(5) ("Within 90 days of December 5, 2003, all ocean carriers . . . must be automated on the Vessel [Automated Manifest System] at all ports of entry in the United States.");see also CBP, "FREQUENTLY ASKED QUESTIONS, Inbound Only (All Modes) — Trade Act of 2002 Final Rule (Revised May 25, 2004)" ("CBP FAQ"), at 1-2. CBP further allowed a 30 day grace period beyond the March 4, 2004 compliance date for all bulk and break bulk vessels, after which time it would commence enforcement action, including the denial of preliminary entry, the issuance of penalties at each port of arrival, and denial of unlading. Id. at The Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002, provides for additional civil and criminal penalties. These penalties include fines ranging from $1,000 to the total value of the cargo, as well as seizure of the entire cargo and up to one year imprisonment (5 years if the cargo was prohibited from being imported into the United States). E.g., 19 U.S.C. § 1431a(e) ("Whoever is found to have violated [ 19 U.S.C. § 1431a(b)] shall be liable to the United States for civil penalties in a monetary amount up to the value of the cargo, or the actual cost of the transportation, whichever is greater."); 19 U.S.C. § 1448(a) ("The Secretary shall by regulation prescribe administrative penalties not to exceed $1,000 for each bill of lading for which notice is not given."); 19 U.S.C. § 1436(b) ("Any master . . . who commits any violation [of 19 U.S.C. § 1431 or 1433] . . . is liable for a civil penalty of $5,000 for the first violation, and $10,000 for each subsequent violation, and any conveyance used in connection with any such violation is subject to seizure and forfeiture."); 19 U.S.C. § 1436(d) ("If any merchandise . . . is imported or brought into the United States in or aboard a conveyance which was not properly reported or entered, the master . . . shall be liable for a civil penalty equal to the value of the merchandise and the merchandise may be seized and forfeited unless properly entered by the importer or consignee."); 19 U.S.C. § 1426(c) ("[A]ny master . . . who intentionally commits any violation [of 19 U.S.C. § 1431 or 1433] . . . is . . . liable for a fine of not more than $2,000 or imprisonment for 1 year, or both; except that if the conveyance has . . . any merchandise . . . the importation of which into the United States is prohibited, such individual is liable for an additional fine of not more than $10,000 or imprisonment for not more than 5 years, or both.").
Available athttp://www.cbp.gov/ImageCache/cgov/content/import/communications 5fto 5ftrade/mandatory 5fadvanced 5felectr onics/tpa 5ffaqs 2edoc/v3/tpa 5ffaqs.doc (last visited June 9, 2004).
B. The Parties' Dispute
Genmar and ST Shipping disagree on the definition of "carrier" under 19 C.F.R. § 4.7 et seq. and thus who is responsible for securing the International Carrier Bond and Standard Carrier Alpha Code and for the transmission of the cargo declaration to CBP. According to Genmar, ST Shipping is the carrier because it, as the charterer, has control over the vessel and its cargo and the most knowledge of the cargo contents. Specifically, Genmar avers that ST Shipping determines the ports of loading and discharge and amount and type of cargo. In addition, ST Shipping controls the loading and discharge of the cargo, issues the bills of lading for such cargo, and is responsible for preparing the Customs Form 1302 cargo declaration. ST Shipping, however, maintains that the owner of M/T GENMAR HECTOR and/or its agents, namely, Genmar, the owner's manager, are the carriers. ST Shipping argues that because it sub-charters the vessel to other parties, it has no knowledge of or control over the vessel's cargo and should not be compelled to submit this information to CBP. ST Shipping argues that the master is the vessel owner's agent who has immediate access to the requisite information. Genmar counters that in a time charter agreement, as opposed to a voyage charter, the vessel's master acts as the charterer's agent with respect to cargo.
Genmar repeatedly requested that ST Shipping transmit the requisite information via the Vessel Automated Manifest System, which ST Shipping refused to do. In an effort to resolve this dispute, on May 17, 2004, Genmar wrote to CBP and requested clarification of the meaning of the term "carrier." In response, CBP wrote:
CBP is unable to dictate responsibilities between private parties in this regard. To this end, under 18 U.S.C. § 1431(b), in pertinent part, the owner or operator of the vessel remains principally responsible for presenting the vessel's cargo declaration to the CBP. And in this connection, under 19 U.S.C. § 1436(b), a civil penalty that results from failure to comply with the requirement to present the advance electronic cargo declaration to CBP would be assessed against the master of the vessel. . . . Nevertheless, it would be entirely appropriate for the owner or operator to contractually arrange to . . . render the time charterer the acceptable "carrier" . . . [and to] allow for indemni[fication of] the owner or operator for any loss or liability resulting from any act or omission on the part of the charterer in this respect.
Letter from CBP to Kelley of May 18, 2004 at 1.
While the CBP's response did little to clarify matters with respect to the definition of a carrier under 19 C.F.R. § 4.7 et seq., it did suggest in a later paragraph that whoever transmits the information must obtain their own Standard Carrier Alpha Code and International Carrier's Bond. Id. at 2. Genmar subsequently moved by Order to Show Cause against ST Shipping for an Order that would require ST Shipping to comply with the recently promulgated regulations, and any other relief, including attorneys' fees and costs, the Court deems proper. ST Shipping opposed and oral argument was held on the motion on June 8, 2004.
II. DISCUSSION
ST Shipping opposes Genmar's motion on a number of grounds, including: (1) this Court lacks subject matter jurisdiction; (2) Genmar lacks standing to bring suit; (3) the dispute is subject to the arbitration clause contained in the Time Charter; and (4) Genmar is not entitled to the relief it seeks because the parties' roles vis-à-vis the cargo, the statutory and regulatory language, and the May 18, 2004 advisory letter from CBP all indicate that Genmar is responsible for transmitting the requisite information to CBP. ST Shipping's jurisdictional argument is persuasive and therefore, I need not — indeed, I cannot — address its remaining arguments.Genmar bases federal jurisdiction for its claim on 28 U.S.C. § 1331, which provides that "[t]he district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." Citation to this statute alone, however, is insufficient to confer subject matter jurisdiction upon the Court. Karan v. McElroy, No. 02 Civ. 6678, 2003 WL 21209769, at *2 (S.D.N.Y. May 23, 2003). The Declaratory Judgment Act, 28 U.S.C. § 2201, 2202, is similarly unavailing, as this statute is purely procedural and does not create any substantive rights or confer federal jurisdiction.Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 (1950). Indeed, a pre-requisite to declaratory relief is that there already exist "an actual controversy within [the Court's] jurisdiction." 28 U.S.C. § 2201. Genmar's claim must therefore "arise under" some other Constitutional or statutory provision.Karan, 2003 WL 21209769, at *2. It may not rely on its blanket assertion that "[t]he Court demonstrably has jurisdiction over an action involving an interpretation of 19 C.F.R. § 4[.]7(b)," Pl. Mem. at 4, because the mere fact that the issue presented involves the interpretation of a federal regulatory scheme does not automatically confer jurisdiction upon the Court. As the Supreme Court has explained, 28 U.S.C. § 1331 jurisdiction is considerably narrower than the full scope of Constitutionally permissible jurisdiction under Article III. Merrell Dow Pharm., Inc. v. Thompson, 478 U.S. 804, 807 (1986). It is therefore insufficient that a federal question "form an ingredient" of the cause of action. Id. (citing Osborn v. Bank of United States, 9 Wheat. 738, 823 (1824)). Instead, federal question jurisdiction under 28 U.S.C. § 1331 exists if "(1) the federal regulations create a private, federal cause of action, [or] (2) the case poses a substantial federal question sufficient to confer federal subject matter jurisdiction." Eugene Iovine, Inc. v. City of New York, No. 98 Civ. 2767 (HB), 1999 WL 4899, at *2 (S.D.N.Y. Jan 5, 1999) (citing Merrell Dow Pharm., Inc., 478 U.S. at 808-09; W. 14th St. Commercial Corp. v. 5 W. 14th Owners Corp., 815 F.2d 188, 192 (2d Cir. 1987)). Genmar does not argue that either the Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002, creates a private right of action. Rather, it contends that the matter at hand involves a substantial federal question.
A substantial federal question is most commonly found "where the vindication of a right under state law necessarily turn[s] on some construction of federal law." Merrell Dow Pharm., Inc., 478 U.S. at 808 (quoting Franchise Tax Bd. v. Contr. Laborers Vacation Trust, 463 U.S. 1, 9 (1983)). This, however, is not the only basis for federal question jurisdiction under this portion of 28 U.S.C. § 1331's jurisdictional grant. "[F]ederal jurisdiction may still lie if the ultimate disposition of the matter by the federal court `necessarily depends on resolution of a substantial question of federal law.'" Greenberg v. Bear, Stearns Co., 220 F.3d 22, 26 (2d Cir. 2000) (quoting Barbara v. New York Stock Exch., Inc., 99 F.3d 49, 54 (2d Cir. 1996)). Under this inquiry, the Court must examine the nature of the federal interest at stake to determine whether the federal question is sufficiently substantial. W. 14th St. Commercial Corp., 815 F.2d at 193. There is no "bright-line test [that] governs the inquiry." Greenblatt v. Delta Plumbing Heating Corp., 68 F.3d 561, 570 (2d Cir. 1995). "Rather, in determining federal question jurisdiction, courts must make principled, pragmatic distinctions, engaging in a selective process which picks the substantial causes out of the web and lays the other ones aside." Id. (internal quotation marks and citations omitted).
In the instant matter, to support the existence of a substantial federal question, Genmar relies solely on the fact that the Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002, and the regulations promulgated thereunder involve issues of national security. I disagree. This case does not present the question of whether the cargo declaration should be provided; instead, the parties have asked the Court to determine who between them must supply this information. The responsibility for compliance does not go to the heart of the federal regulatory scheme or otherwise involve a weighty issue of border control, law enforcement, or prevention of smuggling or terrorist threats. This is simply a dispute between private parties regarding their obligations under federal law, which in and of itself does not support a finding of a substantial federal question. Eugene Iovine, Inc., 1999 WL 4899, at *4 (ruling that a dispute regarding a contract that referenced Environmental Protection Agency regulations did not "involve the rights or responsibilities of the federal government . . . [but] rather . . . the obligations of private litigants").
The cases upon which Genmar relies to support a finding of substantial federal question are inapposite. In Greenberg, the Second Circuit found that an arbitration award rendered in manifest disregard of federal law presented a sufficiently substantial federal question to confer subject matter jurisdiction on the court. 220 F.3d at 27. The Greenberg court based its decision on the fact that the arbitrators' alleged misconduct was a key element of the petitioner's complaint about the award and the "federal courts['] . . . strong interest in ensuring that arbitrators interpret and apply federal law properly." Id. Likewise, in Schaeffer v. Cavallero, this court concluded that federal question jurisdiction was appropriate where "plaintiff's right to relief on most of his claims [was] governed by a provision of the Federal Aviation Act," coupled with the "federal government's paramount interest in regulating aviation." 29 F. Supp.2d 184, 185 (S.D.N.Y. 1998).
Here there is no corresponding strong federal interest that would compel a finding of jurisdiction. The federal government undoubtedly has a strong interest in ensuring compliance with the Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002. It does not, however, have a strong interest in who specifically is responsible for compliance. The mere presence of a federal statute or regulation in a dispute between private parties is insufficient to support a finding of subject matter jurisdiction. Greenblatt, 68 F.3d at 571 (deciding that the mere presence of a federal issue as an element in the construction of a collective bargaining agreement involving a surety bond agreement was "too thin a reed to support federal jurisdiction"). My two prior decision to which Genmar referred during oral argument are similarly unavailing, as in both cases I ruled that there was no substantial federal interest. Rivera v. Phipps Houses Svcs., Inc., No. 01 Civ. 2324 (HB), 2001 WL 740779, at *4 (S.D.N.Y. June 29, 2001) (ruling that the incorporation of federal housing standards into Housing Assistance Payments contracts between defendants and the Department of Housing and Urban Development did not confer federal question subject matter jurisdiction); Eugene Iovine, Inc., 1999 WL 4899, at *4 (holding that there was no substantial federal interest in a dispute about contractual obligations that referenced an Environmental Protection Agency regulation).
The fairly extensive penalty scheme for violations of the Acts and the regulations promulgated thereunder detailed above indicates that Congress has amply provided the federal government with a means by which it can vindicate its interest in compliance with the statute. Genmar's desire to avoid such enforcement actions is understandable, but beside the point. Genmar has the option of complying with the regulations, negotiating an amendment to the Time Charter to allocate responsibility between the parties, or bringing suit (or a demand for arbitration) against ST Shipping for damages should it be assessed with any civil or criminal penalties. The Trade Act of 2002, as amended by the Maritime Transportation Security Act of 2002, does not appear to provide Genmar with a privately enforceable remedy for non-compliance given that express enforcement provisions are directed towards the federal Government. E.g., 19 U.S.C. § 1431a(b)(4) (providing that the Secretary of Agriculture will promulgate regulations for the compliance with the statute); 1431 a(e) (holding violators of the statute "liable to the United States for civil penalties"); 1426(c) (defining a criminal penalties for intentional violations of the statute). This, together with the fact that Genmar's state law claims, if any, are not yet ripe as Genmar has not yet suffered an injury, strongly counsel against a finding of federal question jurisdiction. In short, there does not even appear to be a justiciable case or controversy. Genmar failed to obtain guidance from the CBP and now seeks an advisory opinion from this Court, but in its simplest form, I have no jurisdiction. It is firmly established that "[c]laims based merely upon assumed potential invasions of rights are not enough to warrant judicial intervention." Public Serv. Comm'n of Utah v. Wycoff Co., Inc., 344 U.S. 237, 242 (1952) (internal quotation marks and citation omitted).
Genmar contends that CBP's May 18, 2004 Letter advises that it is prohibited from making the necessary declarations. However, I read the letter to say that "[t]he charterer may not use the international carrier's bond and Standard Carrier Alpha Code . . . of the vessel owner." Letter from CBP to Kelley of May 18, 2004 at 2 (emphasis supplied). This language indicates that the party that submits the cargo declaration must use its own bond and code. Contrary to Genmar's contention that the letter prohibited it from making the cargo declaration, the CBP expressly stated that it was for the parties to allocate responsibility for compliance with the statute and corresponding regulations. Id. at 1.
ST Shipping argues that any such claim would be subject to the Time Charter arbitration clause. As the issue is not presently before me, I make no decision regarding the applicability of that clause to the present matter.
Finally, the fact that these regulations been newly promulgated and involve an issue that touches on international commerce and our nation's borders does not alter the analysis. In Merrell Dow Pharm., Inc., the Supreme Court expressly rejected the petitioner's arguments that federal question jurisdiction could be based on the need for interpretation of a "novel federal question relating to the extraterritorial meaning of the [Federal Food, Drug, and Cosmetic] Act." 478 U.S. at 816-17. As the Supreme Court observed, "the interrelation of federal and state authority and the proper management of the federal judicial system . . . would be ill served by a rule that made the existence of federal-question jurisdiction depend on the district court's case-by-case appraisal of the novelty of the federal question asserted." Id. at 817 (internal quotation marks and citation omitted). The CBP ought to have an opportunity to provide clarification on the content and implementation of these regulations, which only came into effect a few short months ago. Genmar complains that the CBP's May 18, 2004 letter did little to clarify the regulatory language, but a quick perusal of the information provided to the public indicates that the CBP is endeavoring to offer guidance to the trade community. See, e.g., CBP "Delay in CBP Enforcement of the Data Element `Shipper' as it is defined in the Trade Act of 2002 Final Rule," ("This notice is to announce that CBP will allow for the current definition of `shipper' as outlined in the 24-Hour final rule until further notice . . . The purpose for this delay is to allow CBP time to review a petition submitted by trade representatives challenging the definition of shipper.") Without a basis for subject matter jurisdiction, the instant petition must be denied.
Available athttp://www.cbp.gov/xp/cgov/import/communications to industry/advance info/ta02 delay shipper.xml (last visited June 9, 2004).
III. CONCLUSION
For the foregoing reasons, the Genmar's petition is denied. The Clerk of the Court is instructed to close this motion and any remaining open motions and remove this case from my docket.