Thursday, June 11, 2009

Heartland Retroactive

Heartland By-Products is a case that has generated more controversy and new law than most.

To make sense of what follows, you need to understand how appeals work at the Court of Appeals for the Federal Circuit. After all the briefing and oral arguments, the CAFC announces its decision, usually in a written opinion. After that, either side has a period of time in which to seek a rehearing. If no rehearing is requested, seven days after the last day a request might have been made, the Court issues a mandate. If a rehearing is requested, the mandate issues seven days after that process ends. So, basically, the mandate comes after the decision and is when the CAFC says it is officially done with a case.

When last we discussed Heartland, the Court of International Trade had held that its decision in a 1581(h) declaratory judgment action was effective until finally and officially overturned on appeal. Consequently, Customs and Border Protection could not, while the case was not finally on appeal, liquidate entries contrary to the CIT's decision. It is important to note, the decision on the classification was ultimately reversed, so at issue was whether the Federal Circuit's decision has retroactive effect, making those liquidations valid despite the then technically in force CIT decision to the contrary. The CIT held that it did not and that any liquidation or reliquidation contrary to its decision, regardless of the ultimate CAFC decision, was invalid.

This decision from the Federal Circuit reverses that aspect of the CIT decision. The CAFC pointed out that, as a basic legal proposition, its decisions have retroactive effect on all non-final cases. Thus, once it announced a decision, all subsequent liquidations had to be consistent with that decision.

Heartland argued that 1581(h) creates a special circumstance that is an exception to the general rule. Looking at the statute, the CAFC found no basis for such an exception. That raises the possibility that a successful litigant in a 1581(h) challenge to a CBP ruling might win at the CIT, enter merchandise, and then have the classification retroactively changed by the CAFC. The Court of Appeals agreed that such a situation might arise and noted that an appropriate protection is to seek an injunction against such a liquidation until the classification is finally decided. Moreover, since the whole purpose of 1581(h) is usually to challenge a pre-importation ruling, it would be unusual for there to be actual entries at issue. Liquidations of actual entries would normally be challenged under 1581(a) on the basis of a denied protest. In this case, because the underlying ruling was a revocation notice, things were a little squirrely from the start.

There was a second issue raised about liquidations or reliquidations after the Federal Circuit announced the decision on the classification but before the mandate issued to make that decision final. This issue, however, became moot when Customs agreed that its policy is to abide by the CIT decision until it is officially reversed. Thus, the CAFC did not have to decide whether its decision has any legal impact between the decision being announced and the mandate.

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