The Court of International Trade's denied protest jurisprudence in 2012.

Author:Friedman, Lawrence M.
Position::2012 International Trade Review
 
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  1. INTRODUCTION II. QUESTIONS OF LAW, "EVIDENCE," AND EXPERTS IN TARIFF CLASSIFICATION DISPUTES III. PRINCIPAL USE IV. AMICI, INTERVENTION, AND PATENT JURISPRUDENCE V. DECISIONS INVOLVING QUESTIONS OF JURISDICTION DUE TO THE PROTESTABILITY OF THE AGENCY'S DECISION A. Challenging Customs' Effectuation of Commerce's Liquidation Instructions. B. Valid Protests Must Also Meet the Statute's Technical Requirements C. There are Exceptions to the One Entry, One Protest Rule, but the Decision Challenged in Court Must be the Decision Protested D. All Duties and Exactions Owed Must be Tendered Before a Summons is Filed VI. DECISIONS INVOLVING QUESTIONS ABOUT THE TIMELINESS OF CLAIM A. The Civil Action Must Be Commenced Within 180 Days After of the Issuance of the Challenged Decision B. Timing of Customs' Seizure Determines Where Jurisdiction Lies C. Commerce's Liquidation Instructions Will Apply Only as Directed and Will Not Trigger Reliquidation of Entries VII. CONCLUSION I. INTRODUCTION

    In "customs cases" (1) where importers and others seek judicial review of decisions made by U.S. Customs and Border Protection (Customs), the questions presented to the Court of International Trade often revolve around how Customs has treated imported goods. Most important in the commercial context is the amount of customs duties the importer owes to the United States. The final calculation of duties owed turns on three determinations. First, what is the legal classification of the merchandise under the Harmonized Tariff Schedule of the United States (HTSUS)? (2) The tariff classification determines the duty rates that may be applicable to the imported goods. Second, what is the customs value of the merchandise? Under U.S. law, that value is most commonly, though not always, the price paid or payable for the merchandise when sold for export to the U.S. with certain statutory adjustments. (3) In most cases, the duties owed will be the ad valorem rate multiplied by the entered value. Consequently, Customs is always concerned about misstated values, and unscrupulous importers have a theoretical incentive to understate value. Legitimate traders who believe Customs has appraised merchandise at too high of a value have an incentive to challenge that determination. Third, does a special program apply to reduce the rate of duty? For example, goods that qualify as "originating" under the North American Free Trade Agreement (NAFTA) or as products of designated Beneficiary Developing Countries may be entitled to enter the United States free of duty. (4)

    When an importer disagrees with the treatment of the goods with respect to certain specified decisions, the importer (or, in some cases, other parties) may file a protest with Customs. (5) Absent a timely protest, Customs' decision becomes final and not subject to review. (6) However, under 28 U.S.C. [section] 1581 (a), a denied protest is subject to review under the exclusive jurisdiction of the U.S. Court of International Trade. This Article reviews the 2012 decisions of the Court of International Trade in cases challenging Customs' denial of a protest. (7)

  2. QUESTIONS OF LAW, "EVIDENCE," AND EXPERTS IN TARIFF CLASSIFICATION DISPUTES

    Tariff classification cases always involve two distinct analytical steps. The first step is to determine the proper meaning of the relevant tariff provisions. (8) This step is an exercise in statutory interpretation and is decided as a question of law. (9) The second step is to determine whether the imported merchandise falls within the properly understood scope of the tariff language. (10) The second step requires that the Court of International Trade make findings of fact as to the nature of the merchandise. (11)

    The practical reality of customs litigation is that the second step of the process is often non-controversial. This is because the nature of the merchandise is not usually subject to material dispute. (12) Thus, the parties may stipulate to uncontested facts describing the nature of the merchandise. This leaves the Court to address only the question of law in the context of a motion or cross-motion for summary judgment.

    In 2012, the Court of International Trade decided several tariff classification cases in which it addressed interesting aspects of the first step: how to determine the proper meaning of the relevant tariff language. In Cl BA Vision Corp. v. United States, (13) the underlying dispute was over the classification of "Nelfilcon" polymer solution, which is used in the production of soft contact lenses. (14) The importer contended that the merchandise should be classified as a polyvinyl alcohol under (PVA) subheading 3905.30.00. (15) The government took the position that the proper classification was under 3905.99.80, which covers "[p]olymers of vinyl acetate or of other vinyl esters, in primary forms: other vinyl polymers in primary forms: Other: Other: Other." (16) The parties to the case agreed that Nelfilcon is a PVA that has been chemically modified and that it is classifiable in HTSUS Heading 3905. (17) Thus, the dispute was over whether it was classifiable in subheading 3905.30.00 or in subheading 3905.99.80.

    Relevant to this dispute was Subheading Note 1 to Chapter 39 of the HTSUS, which provides that where a subheading includes a provision for "Other," chemically modified polymers are to be classified as "other," provided they are not more specifically covered by another subheading. Thus, the issue presented was solely whether Nelfilcon, despite being chemically modified, is more specifically provided for as a polyvinyl alcohol.

    The Court of International Trade started its detailed analysis by noting that tariff terms are to be construed according to their "common and commercial meanings." (18) The Court then stated that it "may rely both on its own understanding of a term and on lexicographic and scientific authorities." (19) The plaintiff presented a number of examples of usage consistent with its interpretation that Nelfilcon is commonly and commercially understood to be polyvinyl alcohol. These references included:

    * Regulatory filings with the Food and Drug Administration;

    * References to Nelfilcon as PVA in journal articles;

    * A prior ruling by U.S. Customs and Border Protection; (20)

    * An American Medical Association listing for Nelfilcon as a polymer of poly (vinyl alcohol) partially acetalized;

    * Antidumping duty order scope determinations listing types of PVA. (21)

    The government did not concede that these references establish that Nelflicon is commonly and commercially known as a form of PVA. Rather, the government asserted that nothing from the parties' Joint Statement of Material Facts or the exhibits thereto established that Nelfilcon is commonly known as PVA. (22) Based on this disagreement, the Court concluded that neither side had established that the meaning of the term polyvinyl alcohol was an undisputed material fact. Consequently, the Court denied both motions for summary judgment. (23)

    This analysis, however, bears further consideration by practitioners seeking to understand the summary judgment process at the Court of International Trade and, in particular, the treatment of questions of law as compared to questions of fact. The above discussion establishes that the only question before the Court of International Trade was the proper definition of the term polyvinyl alcohol. Further, the Court correctly noted that it may construe that term based on its own understanding of the meaning, as well as on lexicographical and scientific authorities. In furtherance of that analysis, the plaintiff provided a number of technical and regulatory references illustrating the meaning of the term. The government, on the other hand, appeared to have merely asserted its disagreement with the conclusions plaintiff asked the Court to draw from the cited references.

    Given that the legal interpretation presented the Court with only a question of law, it seems reasonable to ask what more the Court could have needed to resolve the matter. Other 2012 classification cases from the Court of International Trade illustrate how the Court has addressed the same analytical question and the kinds of references it has deemed adequate to define tariff terms. The cases discussed below illustrate the Court's use of dictionaries and other "lexicographical" sources, international legal interpretations, expert testimony, and samples to resolve tariff classification disputes.

    For example, in Deckers Outdoor Corp. v. United States, (24) the Court had to determine whether a boot that is put on using two hands to pull it over the foot is "footwear of the slip-on type." (25) As in CIBA, the only dispute was over the meaning of the relevant tariff terms (i.e., "footwear of the slip-on type"). Similar to the position taken by the government in CIBA, Deckers contended that this dispute constituted an issue of material fact to be resolved at trial. (26) On this point, the Court was emphatic: "Plaintiff is mistaken." (27)

    In contrast to the conclusion in CIBA, the Deckers court held that:

    Determining the correct classification of merchandise requires the Court to first "construe the relevant classification headings," which is a purely legal question, and then to determine "under which of the properly construed tariff terms the merchandise at issue falls." Bausch & Lomb, Inc. v. United States, 148 F.3d 1363, 1365 (Fed. Cir. 1998). Where the nature of the merchandise is not at issue, the question "collapses entirely into a question of law" ripe for disposition on summary judgment. Cummins Inc. v. United States, 454 F.3d 1361, 1363 (Fed. Cir. 2006) (citations omitted). As Jarvis Clark instructs, the Court bears the obligation to determine the correct classification of the merchandise. 733 F.2d at 878.... The parties do not dispute any relevant characteristic of the hoots, but dispute only the proper construal of the [tariff] terms.... There being no...

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