Saturday, November 17, 2007

Cool Hand Customs

Sometimes the law turns on the strangest of details. Samuel Aaron, Inc. v. United States, a Federal Circuit decision affirming the Court of International Trade is a good example.

The issue here was whether protests were timely filed. The case is more complicated than most because the relevant liquidation was a reliquidation and the only notice of reliquidation was an off-line binder in the customhouse that was separate from the normal binder of printouts generated by ACS. Later, after generating bills for unpaid duties, Customs placed ACS notices in the binder of bulletin notices. What we have here is a first liquidation notice separate from the electronic status report, separate from the paper courtesy notice, separate from the binder of regular liquidation notices, and then a second notice in the regular binder with an icorrect reliquidation date. Is that a failure to communicate?

The Court of International Trade dismissed the plaintiff's challenge to its denied protest finding both that the reliquidation was valid and that the first liquidation notice, while sloppy, was legally adequate notice.

On appeal, the plaintiff's first argument was that reliquidation did not really occur until Customs and Border Protection ran the entries through ACS and corrected the amounts to be billed. This was later than the liquidation date noted in the bulletin and within 90 days of plaintiff's protest. Specifically, there were two errors in the notice. First, one entry that was entitled to GSP was listed as needing to be reliquidated. Second, the amount of duty owed on a second entry was corrected at the time of billing. The CAFC found that these correction of minor discrepancies after liquidation did not amount to liquidation.

If you are interested in this part of the decision, you need to read the case in detail. I have some doubts about whether Customs had finally determined anything until it prepared bills for the importer. But, the CAFC found that liquidation had occurred and the protest clock was running.

I think the more interesting issue is the question of notice. The law has long been clear that the official notice of liquidation is the posting in the customhouse at the port of entry. The notice must be in a place conspicuous to a prudent importer. The question here is whether the second "off-line" binder of notices was conspicuous particularly given that the regular ACS binder did not provide notice to check the other binder. The CAFC found that the reasonable importer would know that off-line liquidations occur and would have looked for that binder.

The next question was whether the off-line notice needs to be on or designated as Custsoms Form 4333. The CAFC found that the binder contained all the necessary and relevant information regarding the reliquidations. Thus, the failure to designate the form as such did not invalidate the notice.

This is one of those unfortunate cases where the law does not help the sympathetic plaintiff. It is hard to tell from the case as published, but it seems safe to assume that had the protest been filed on time, the plaintiff would have been entitled to refunds. Customs made a hash of communicating with the importer. Part of the blame for that goes to Congress, which routinely lets the GSP lapse and the renews it retroactively. But what is the outcome? The U.S. received duties to which it is not entitled as a result of a liquidation and re-liquidation that many reasonably importers might have misunderstood.

Maybe it is time to replace paper bulletin notices with electronic notices of liquidation. At least that would eliminate arguments on whether a notice was conspicuous, on the proper form, or delivered to the correct address. There is, however, a much bigger question of whether individual entries should really be the basis for all subsequent dealings with the importer. A common analogy goes that if the IRS worked like Customs, you'd have to file a tax return after every pay check and fight the taxes collected on each pay check individually. Given the number of entries at issue for most importers, it seem like CBP's activity summaries, reconciliation, and similar programs are just nibbling around the margins of the problem. Maybe Congress needs to take the big bite and revamp the law to permit post importation reporting without individual liquidations.

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