Monday, May 03, 2010

No Deemed Protest Denial

What happens if Customs and Border Protection sits on your protest for two years or more? There has been a notion among importers that the protest is automatically denied and can be challenged in Court. I think the basis for this is three fold. First, both the statute and the regulation are clear that Customs "shall" act on the protest within two years. See 19 USC sec. 1515(a) and 19 CFR sec. 174.21(a). Second, in cases where the importer requests accelerated disposition of the protest, a failure to act is deemed to be a denial. And third, there just should be some sort of consequence for Customs' failure to act.

In Hitachi Home Electronics (America), Inc. v. United States, the Court of International Trade settles the question. Basically, it comes down to the fact that neither the statute nor the regulation imposes any consequence for Customs' failure to meet the two-year deadline. Absent some consequence, the law treats the apparent deadline as a directory guideline rather than as mandatory. While that seems to be contrary to the English understanding of the word "shall," it is a pretty well-established legal principal. After all, if Congress did not bother to specify a consequence, why should the Court bother to create one?

That is the upshot of the decision. In practice what that means is that Hitachi was not able to invoke the Court's jurisdiction to review a denied protest (because the protests has not yet been denied). Instead, Hitachi needs to wait for Customs to act, which is not a great place for Hitachi to be. Because Hitachi will have a remedy available if and when the protest is denied, the Court also held that it could not review the case on the basis of the Court's residual jurisdiction. As a general proposition, you can't invoke residual jurisdiction if you are going to have a denied protest in the future. There are exceptions to this rule including where the protest will be futile or the relief available inadequate, but those do not apply.

So, Hitachi is back to twiddling its metaphorical thumbs waiting to see what Customs will do. And, in case you are wondering, the protest was filed in May of 2005.


Mr. Micawber said...

Didn't see mention of a key difference between the protest statute and, say, the liquidation statute (sec 1504). As the Hitachi Court observed, a protestant does not have wait until or whenever Customs acts on a protest; a protestant can seek accelerated disposition. If Customs fails to act on the protest where accelerated disposition has been requested, then the protest is deemed denied, opening the door to the CIT.

In 1504, Congress did provide the consequence: if Customs does not properly extend or suspend the liquidation of an entry or in any event does not liquidate within 4 years, the statute says the entry is deemed liquidated by operation of law as entered. Moreover, the CIT has said (Fujitsu 2000) that it has "(i)" jurisdiction where an importer wants to know whether an entry was deemed liquidated or not. That's the issue in two Ford Motor Company cases 09-151 and 09-375.

Peter S Herrick PA said...

The decision by Judge Restani failed to take into account that for the court to take jurisdiction all outstanding duty bills must first be paid in full.

It is quite possible that a pending protest may be meritorious and should be approved so that an importer is not forced to pay outstanding duty bills and the need to engage in expensive litigation.

The law should be changed so that a protest is deemed approved if Customs fails to act within 2 years.