Saturday, November 05, 2011

Hitachi: Shall = Should

Sometimes, people complain that lawyers can't speak or write in simple English. Usually, I am sympathetic to this complaint. But, there are time when lawyer language has to be complicated to anticipate and avoid later arguments about what some text means. If your argument in a contract dispute is "We all know I was not supposed to paint the house in the rain," but you can't point to that in the contract, you are in a weak (but not untenable) position. If you have a contract that covers when, how, and in what conditions you are supposed to paint, it will be easier to resolve the dispute. So, up to a point, legalese has a place. Hitachi Home Products is all about how courts grapple with bad drafting and important points left out of laws.

Here is the regulation relating to how Customs and Border Protection is supposed to decide protests (19 CFR 174.21):
Except [for protests relating to exclusions], the port director shall review and act on a protest filed in accordance with section 514, Tariff Act of 1930, as amended (19 U.S.C. 1514 ), within 2 years from the date the protest was filed.
There is a similar use of "shall" in the statute, which also says that Customs "shall allow or deny such protest . . . ."

The issue in Hitachi Home Products was what happens when the two-year period runs out. The Court of International Trade previously held that nothing happens. There were two main reasons for this decision. First, neither the statute nor the regulation say what happens when the two years expires. As a general principal, the Courts will not step in and create a consequence when neither Congress nor the relevant agency have bothered to do so. Second, the protestant can force Customs to act by requesting accelerated disposition under 19 USC 1515(b). This will usually result in a denied protest, which can be reviewed by the Court in the ordinary course.

The Federal Circuit has now affirmed Hitachi and, for all intents and purposes, the decision is in line with the CIT decision. The Court of Appeals held that there is no rule in the law that makes a protest older than two years automatically approved. According to the Court, that is in part evident from the opportunity to request accelerated disposition.

The more interesting part to read is the dissent by relatively new Federal Circuit Judge Reyna, who comes to the Federal Circuit with a background in trade law. According to Judge Reyna, protests not decided within the two year period are deemed approved. The dissenting opinion is based largely on the fact that the statute and the regulation both impose a two year period in which Customs is to act and that the majority opinion effectively turns that limitation into a meaningless nullity. The dissent was also impressed by the fact that that the cases on which the majority relied all involved much shorter periods in which the agency was to act. The longer period given to Customs and Border Protection, according to the dissent, was intended to ensure that Customs acted on the protest. Also, when the protest law was amended in 1970, Congress changed the operative word from "may" to "shall." This indicates a Congressional intention that "shall" means "must."

But, that still leaves the pesky question of what happens when Customs and Border Protection fails to meet the requirement. According to the dissent, the answer is there in the statute. After two years, Customs must allow or deny the protest. A denial, the dissent notes, requires a written notice be sent to the protestant. An allowance, on the other hand, need not be the subject of a notice. Thus, the default result, which happens without action by CBP, is the allowance of the protest. The ability of the protestant to effectively force a denial through accelerated disposition should not, according to Judge Reyna, be used as the "escape valve" because it can result in cases being sent to the CIT without adequate review by Customs in a manner similar to the pre-1970 automatic referral process.

Overall, I think the dissent is interesting in that it pulls together a number of meaningful threads from the text, the legislative history, policy, and the history of customs litigation. On the other hand, as a general matter, I hate to do that when the answer might be right in the statute. In this case, the majority found the Congress provided no consequence. That usually means that "shall" really means "should." That is also a reasonable result.

Of course, the best result would be for Congress to take note and fix this. Protests should be decided within two years or be deemed approved. What, I wonder, should happen when a ruling request is more than two years old?

1 comment:

Jordan Kahn said...

I enjoyed Judge Reyna's strong dissent. He is clearly passionate and knowledgeable about CIT cases. We can expect more trade firepower from the CAFC after Judge Wallach gets sworn in.