The Federal Circuit Stumbles: U.s. Customs Gets "green Light" for Indefinite Indecision on Importer Protests

• Publication year: 2013

The Federal Circuit Stumbles: U.S. Customs Gets "Green Light" for Indefinite Indecision on Importer Protests

Damon V. Pike

THE FEDERAL CIRCUIT STUMBLES: U.S. CUSTOMS GETS "GREEN LIGHT" FOR INDEFINITE INDECISION ON IMPORTER PROTESTS

Damon V. Pike^*

Introduction

In 2012, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) issued two precedent-setting decisions that essentially removed the obligation of U.S. Customs and Border Protection (CBP or Customs) to make timely decisions on Protests filed by importers challenging the assessment of duty on imported merchandise. Unlike most other federal agencies that are required to make certain decisions within a "reasonable" time period under the Administrative Procedures Act (APA),¹ CBP's statutory two-year time limit to render a decision is now considered a "directory" obligation—not a mandatory one. As a result, CBP can effectively choose to delay indefinitely any decision with respect to Protests. This "indefinite indecision" extending beyond the two-year statutory period can hardly be considered "reasonable."²

This outcome stems from the Hitachi³ and Norman G. Jensen⁴ cases, in which the Federal Circuit affirmed decisions of the U.S. Court of International

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Trade (CIT) that ignored the plain language of the Protest statute and misread the corresponding legislative history, including important changes enacted in 1970 to ensure a quicker and less costly option in securing administrative review and decision rather than invoking automatic review by the judiciary. Due to the Federal Circuit rulings, CBP now has an indefinite, unspecified period of time to issue a final decision on a Protest. These rulings ultimately deprive importers of their right to timely administrative review of CBP decisions and instead force importers to follow a useless "expedited appeal" procedure that allows the agency to abdicate its decision-making responsibility and forces the judiciary to make the initial decision instead. In turn, businesses cannot gain the certainty they need to make informed decisions, investments, etc.—which detrimentally impacts global trade and hinders economic growth. This unfortunate state of affairs for importers needs to be addressed, and Congress should act to remedy this unfair approach to "non-decision-making" by the agency that collects more revenue for the federal government than any other, except the IRS.⁵

This Article will begin by reviewing the two cases: Hitachi and Norman G. Jensen. It will then proceed to evaluate 19 U.S.C. § 1515, which prescribes the time limit for Customs to issue a decision on a Protest. Then, the Article will examine how these rulings fit within the judiciary's methods of interpreting time limits and the other options to compel CBP to issue a decision. Finally, the remedies for importers post-Hitachi will be evaluated, but the Article will conclude that the only real option is legislative intervention and a re-write of the applicable statute.

I. Entries, Liquidation, and Protests

Before turning to an analysis of the subject cases, some background about the entry process, liquidation, and Protests is required. Protests are filed when an importer challenges an administrative decision by CBP resulting from a liquidated entry.⁶ When a shipment reaches the United States, the importer of

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record must complete the entry process for CBP to authorize the release of the imported goods into the United States.⁷ Broadly, the entry process consists of the filing of forms and documents that allow CBP officials to determine whether the merchandise is admissible into the United States and, if so, to assess the proper amount of duties owed, collect trade statistics, and verify whether the laws and regulations of other governmental agencies have been met.⁸ Entry documents that must be filed within fifteen calendar days of the arrival of a shipment at a U.S. port of entry include: (1) CPB entry forms,⁹ (2) evidence of the right to make entry including a bill of lading, a carrier's certificate, or shipping receipt, commercial or a pro forma invoice, (3) packing lists, (4) any other documents required to determine the admissibility of merchandise including documents required by CBP, federal, state, or local agencies, and (5) an appropriate customs bond.¹⁰ Upon entry, the importer must declare the tariff classification of the merchandise pursuant to the Harmonized Tariff Schedule of the United States (HTSUS), the value of the subject merchandise, and the country of origin, which largely determine the calculation of duties owed to CBP for each shipment.¹¹

Once an Entry Summary is filed, CBP (at the local port of entry) generally has 314 calendar days to examine the information reported and determine the correctness of that information.¹² CBP can either: (1) make no changes to the reported information; (2) make changes on its own initiative; or (3) propose changes and allow the importer the opportunity to respond. Once the entry information has been finalized, CBP performs the ministerial act of "liquidation" that closes out the entry and determines the final assessment of duties, fees, and other import-related taxes.¹³

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If an importer is dissatisfied with any CBP administrative decision, then the importer may file a Protest on Customs Form 19.¹⁴ Protests must be filed within 180 days of the date of liquidation or re-liquidation, but not before.¹⁵ Once a Protest is filed, CBP is statutorily obligated under 19 U.S.C. §1515 to either allow or deny a protest within two years of the date of filing.¹⁶ However, if an importer perceives that CBP intends to deny the Protest and wishes to "force the issue" to a decision sooner than the two-year statutory period, it may request an accelerated disposition procedure under §1515(b).¹⁷ However, the accelerated disposition mechanism does not normally prompt CBP to actually review the Protest and render a decision; it simply allows CBP to "wait out the clock" for thirty days, after which the statute specifically provides for a "deemed denial" of the Protest.¹⁸ Because a denied Protest is a jurisdictional prerequisite for obtaining jurisdiction in the CIT, the accelerated disposition procedure essentially gives importers a quicker way to get to court than does the normal Protest procedure.¹⁹ If a Protest is denied under the normal, i.e., non-accelerated, procedure, CBP must provide notice of denial with the

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reasons for denial, as prescribed by statute.²⁰ Denied protests may be appealed to the CIT pursuant to 19 U.S.C. § 1581(a). Without a denied protest, the importer must find another statutory jurisdictional provision to obtain judicial review in the CIT.²¹

A. Hitachi

In Hitachi, the Federal Circuit determined that an importer had to wait for CBP to issue a decision on a Protest (despite the statutory time limit for issuing such decision having expired) before being able to challenge that decision in court. Hitachi began with the importation of plasma flat panel televisions made and/or assembled in Mexico into the United States.²² When the televisions were imported, they were liquidated at the Normal Trade Relations rate of duty under HTSUS subheading 8528.12.72.²³ However, Hitachi filed Protests beginning in May 2005 with supporting documentation to claim duty-free treatment under the North American Free Trade Agreement (NAFTA).²⁴ Hitachi requested an Application for Further Review (AFR) for Hitachi's first Protest to have CBP Headquarters rather than the local port rule on its NAFTA claim.²⁵ The port granted the AFR and sent the Protest to CBP Headquarters, which was designated as the "Lead Protest" for Hitachi's other Protests, i.e., the other Protests were suspended pending the issuance of a response to the AFR, the outcome of which would govern the outcome of all other suspended Protests.²⁶

CBP did not deny or allow any of the Protests nor did it take any other action.²⁷ The Agency and Hitachi differed on the reasons for the inaction; Hitachi claimed that CBP had put Hitachi's Lead Protest on hold pending a final decision on whether to issue a revocation of two prior classification

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rulings.²⁸ Also, CBP replaced its attorney-advisor handling the Protest in January of 2007, who then requested further information from Hitachi.²⁹ The importer responded with the requested information in March 2007.³⁰ CBP claimed that it did not intend to rule on Hitachi's Protest until it had considered all the information submitted by Hitachi and also by Samsung, which had submitted a Protest and AFR for substantially similar or identical merchandise.³¹ Samsung submitted additional information in August of 2007.³² Hitachi then filed summonses in the CIT in November of 2007 while CBP was still assessing the AFRs—over two years since Hitachi's Lead Protest had been filed.³³ Hitachi contended that its Protests were denied by operation of law under § 1515(a) because CBP had not taken action during the two-year period of review. The CIT dismissed the actions, concluding that it lacked jurisdiction under § 1515(a) and finding that the statute neither imposed an automatic denial nor an automatic allowance if the two-year period of review had elapsed without a decision.³⁴

In May of 2009, Hitachi filed another action in the CIT contending that its Protest was denied or deemed denied under § 1515(a) because CBP took more than two years to act on its Protest.³⁵ The importer then argued that jurisdiction was proper under § 1581(i) because Hitachi was entitled to recover the amounts protested via the "deemed allowance" of its Protests by operation of law. CBP moved to dismiss for lack of jurisdiction.

The CIT granted CBP's motion.³⁶ The Court's decision found that it lacked "residual" jurisdiction under § 158(i) because Hitachi's protests were not "deemed allow[ed]" by operation of law after the two-year period expired.³⁷ In addition, the Court ruled that Hitachi could have...