Monday, August 20, 2012

CAFC: Drawback Claims Must Be Complete

Just when I though I had some breathing room, things are getting busy again. Not that I am complaining. The Courts have been busy too. The Federal Circuit just issued a decision in a drawback case called Shell Oil Company v. United States in which is affirmed the Court of International Trade's decision. Oddly, I can't find  a post on the earlier case. You can read the opinion here.

Shell involves drawback claims for Harbor Maintenance Tax and Environmental Tax Shell paid on petroleum imports that were then exported or substitute merchandise was exported. Shell made the claims but, because the ability to claim drawback on HMT and ET were being hotly contested at the time, it did not include those amounts in its calculation of the amount claimed. Subsequently, in 1999, Congress amended the drawback law to clarify that any duty, fee, or tax imposed under federal law because of importation could be the subject of refunds under drawback. To facilitate this, Congress also created a six-month period in which claims could be made despite the normal three-year period having run. Then, in 2004, Congress further amended the law to clarify that any duty, tax, or fee imposed upon entry. This amendment was applicable to claims made after the effective date or claims not final on that date.

After the three-year period for filing drawback claims had expired, Customs liquidated the claims and did not refund HMT or ET (presumably because it had not been requested). Shell protested and in the protest asserted that HMT and ET should also be refunded. In 1997, Customs denied the protests, in part on the grounds, later reversed by Congress, that HMT is simply not subject to drawback. In 1998, Shell filed a summons in the Court of International Trade.

Unfortunately for Shell, the Federal Circuit found that the effort to include HMT and ET in the claims was too late. A party seeking drawback must make a claim for an "amount certain." It cannot put the burden on Customs to determine the correct amount to be paid the claimant. The six-month window for filing a claim did not correct or complete the previously filed claim and Shell did not assert those claims until it filed protests more than three years after the date of export. Further, the fact that Customs would likely have denied the claims, making them subject to protest, did not (in this case) excuse Shell from filing the protest. Finally, the subsequent amendment in 2004 applied only to unliquidated claims. Because Shell's claims were liquidated, it had no impact on the case.

Thursday, August 16, 2012

Lobsters, Take 3

I should read my own blog.

Apparently, I know all about how lobsters are processed at Canadian plants. See this post for background.

Image via Amazon. Go buy a can of Maine Goodness.

Wednesday, August 15, 2012

Request to Void a Protest Does Not Toll Summons Date

A statute of limitations is a tough thing. Miss filing within the provided period and you most likely lose your ability to have the case reviewed at all. This is particularly true in customs cases where an importer is trying to sue the United States. As a general principal, the U.S. government is immune from suit unless it has waived that immunity. A party that tries to take advantage of a waiver of sovereign immunity needs to satisfy the legal requirements of the waiver.

At its heart, that is what Sears Holdings Management Corp. v. United States is about. Sears filed a protest concerning the tariff classification of some footwear. Customs and Border Protection then denied the protest. At that point, the limitations period began to run giving Sears 180 days (until May 15, 2010) to file a summons in the Court of International Trade, unless something stopped the clock. Lawyers call that "tolling the period." Sears exercised its rights under 19 USC 1515(d) by requesting that Customs void the denial of the protest. Customs did not deny that request until August of 2010, at which point Sears filed a protest of that decision. Customs rejected the second protest stating that the decision not to void a denied protest is not itself protestable. Sears then filed a summons in the Court of International trade in February of 2011, within the 180-day limitations period from the date Customs rejected the second protest but after the 180-day period applicable to the first protest. The government moved to dismiss saying that the summons was time barred.

Unfortunately for Sears, Congress did not provide for tolling in section 1515(d). Rather, the law provides in section 1515(c) that "All denials of protests are effective from the date of original denial for purposes of [the statute of limitations]." According to the Court of International Trade, this language is applicable to requests for voidance, even though the language appears in the section relating to requests to set aside a protest.

And, the fact that Customs' rejection of the second protest is not itself subject to judicial review does not create a cause of action under the Court's residual jurisdiction. The Court reasoned that the decision not to void the protest was simply an unreviewable action, leaving Sears without a remdedy.

Tuesday, August 14, 2012

Sorry Sarah

I have noticed an uptick in comments that do not relate to the topic at hand or which relate just a bit but remain simultaneously devoid of content and yet filled with irrelevant links. 

So, I am turning on Comment Moderation. That means, I will read and approve comments before they are posted. I hope this is not inconvenient for you or for me.

Matt, please keep those excellent snarky comments coming.

Monday, August 13, 2012

Lobster Fight

I am just back from a week in Boston with a side trip to Portland, Maine. A few lobsters gave their lives for me and my family. Ditto a few dozen clams and sundry other sea creatures.

While we were in Maine, the local news was covering a dispute between Maine lobster-men and their New Brunswick, Canada counterparts. Because of the glut of lobsters, prices have fallen. The New Brunswick industry wants to keep low priced Maine lobsters out of the market and protested by literally blockading the Maine lobster boats from dropping their haul at New Brunswick processing plants.

This raised several questions in my head. First, what "processing" is done to lobsters? Most are pegged or banded in the boat and then live out the remainder of their lives in tanks waiting to be steamed or otherwise prepared. I suppose there are also industrial producers making frozen tails, lobster meat salad, and other goodies.

The second question I had was whether anyone was taking any legal action as a result. It turns out that the Maine industry did get an injunction against further protests. Also, Maine Senator Olympia Snowe has asked the State Department to help resolve the dispute. Her press release and letter to Secretary of State Clinton is here.

In my mind, this looked like a potential NAFTA Chapter 11 issue. I wondered whether the actions of the Canadian industry might count as a "measure" that is in violation of the national treatment provisions of the agreement. Certainly, the U.S. product is being treated in a manner that is less favorable than the local industry in similar circumstances because only the U.S.-origin lobster is being prevented from entering the processing plants. In intent and effect, the blockade hinders only the U.S. industry.

Second, I wonder whether there is an investment in Canada that is being harmed. Probably not. The Maine industry, as I understand it, just drops its catch in New Brunswick for processing. But, the recent NAFTA panel decision involving Cargill's sales of high fructose corn syrup to Mexico provided a very broad definition of an investment to include, in part, the development of a supply chain. So, may be there is an investment in the broader North American market that can be protected via NAFTA Chapter 11. 

But, this is a private action, not a measure adopted by the government, so that is a problem for my theory. The current lack of a governmental measure probably means there is no NAFTA case. That, of course, does not prevent me from musing on the topic, which might end up as an law school exam question at some point.

Sunday, August 12, 2012

Jensen follows Hitachi

Remember the Hitachi decision in which the Court of Appeals for the Federal Circuit upheld a Court of International Trade decision that Customs and Border Protection is under no legal obligation to decide a protest within the two-year period provided in the statute and regulations? We discussed it here.

A related issue was addressed in Norman G. Jensen, Inc. v. United States, which we discussed here.
The Federal Circuit has now decided the appeal in Jensen. And, in what is probably not a surprise, has affirmed the dismissal of the case. Jensen is different than Hitachi in that Jensen tried to force Customs to decide the protest via a legal tool known as a writ of mandamus. Jensen brought its case under 28 U.S.C. 1581(i), which is the residual provision giving the Court of International Trade jurisdiction to review decisions relating to the administration and enforcement of the collection of revenue on imports, provided there is no other adequate means of securing judicial review. In most customs cases, the other adequate means is via the review of a denied protest under 28 U.S.C. 1581(a). Because there has been no decision on the protest and the two-year period has expired, Jensen went to Court under (i) to force Customs to approve or deny the protest.

In response, the Government moved to dismiss the case. The government argued that 1581(i) was not the proper basis for jurisdiction. The Government would have Jensen wait for, or force, a decision on the protest. The Court of International Trade agreed and dismissed the action.

On appeal, Jensen argued that forcing a decision via a request for accelerated disposition is not an adequate remedy because it will inevitably lead to a denied protest and further litigation. Rather, its goal in seeking a writ of mandamus is to force Customs to consider the protests and issue a reasoned decision.
The Federal Circuit did not agree. According to the Court, a request for accelerated disposition under 19 U.S.C. 1515(b) would result either in a reasoned decision from Customs or in a deemed denial. Assuming the protest was not approved, either a deemed denial or a denied protest would provide the Court of International Trade with jurisdiction to review the protested liquidations under 1581(a).

Jensen also argued that it had a statutory right to an immediate decision because of the passing of the two-year period. This argument, however, did not hold up following Hitachi, which held that the two-year period was not a meaningful deadline. The fact that Jensen was only seeking a decision from Customs—as opposed to Hitachi, which asked the Court to hold that the protests were automatically approved—was not a meaningful distinction. As a result, the Federal Circuit affirmed the decision to dismiss the case.

All of which is interesting background given that Hitachi has filed a petition for review in the U.S. Supreme Court. As in all cases, the chances of the Supreme Court granting review are slim. That may be exacerbated by the fact that this issue can only come up in the Court of International Trade and Federal Circuit. On the other hand, Supreme Court watchers tell me that the Court may look more closely at Federal Circuit decisions because the issues raised there cannot be worked out in other circuits. We shall have to wait and see.

Ford Jurisdiction Ruling Reversed at Federal Circuit

The Court of Appeals for the Federal Circuit has reversed a decision from the Court of International Trade concerning Ford's effort to secure refunds of allegedly excessive duties paid. The complication in this case is that Customs and Border Protection had not yet liquidated the entries and also had not sent Ford a notice of the suspension of the liquidation. After Ford filed a suit in the Court of International Trade challenging the duty payments, Customs liquidated and reliquidated the entries via the Reconciliation process. As might be expected in the ordinary case, Ford then protested the liquidations and the protests were denied. For our purposes, the important thing to note is that the court case was initiated prior to liquidation and, therefore, did not challenge a denied protest (although Ford did initiate separate litigation following the denials).

If you understood all of that, you can guess that the government moved to dismiss the claims because Ford could have waited for the denied protests rather than ask the Court to recognize its jurisdiction under 28 USC 1581(i), the residual jurisdiction provision. Unless 1581(a) is manifestly inadequate, importers generally (but not always) need a denied protest to get into Court. In contrast 1581(i)(4) gives the CIT jurisdiction to review actions involving the administration and enforcement of the collection of revenue from tariffs, among other things. But, as was mentioned above, 1581(i) usually only applies when the importer cannot challenge a denied protest and get the same or other adequate relief.

The problem for Customs is that whether a court has jurisdiction is usually tested based on the facts present at the time the case was filed. At the time this case was filed, Customs had not liquidated the entries and there was no denied protest to challenge. The Federal Circuit recognized this rule and wrestled with various exceptions to it. However, it found that while the subsequent liquidation and denied protests created a second avenue for litigation, the government's post-summons actions did not destroy the Court of International Trade's subject-matter jurisdiction that existed at the time of the summons.

Having reached that conclusions (and deciding against the government on some other technical points), the Federal Circuit next had to decide whether Ford abandoned some of its claims. The argument was that Ford challenged the lack of liquidation without proper notice of suspension. However, Ford acknowledged in a brief that Customs subsequently extended the liquidations. This led the Court of International Trade to conclude that Ford abandoned these claims. The Federal Circuit disagreed and held that the statement in the brief was not sufficient to find the claims were either moot or abandoned.

Lastly, the Federal Circuit also reversed the Court of International Trade's remaining decision to dismiss other claims brought by Ford. This was a discretionary decision by the CIT and seems to have relied in large part on the fact that the 1581(a) case was available to get the same relief. Despite that, the Federal Circuit vacated on the grounds that the CIT's exercise of its discretion was closely connected to its other rulings in the case and those rulings were reversed.

This is not one of those cases that has obvious and immediate applicability for day-to-day compliance. It does, however, illustrate the complexity of customs litigation and the important interplay between liquidation, protests, and properly getting a case before a judge. The belt and suspender approach applied by the lawyers in this case was worthwhile as was continuing with the (i) litigation so that the rest of the importing community knows that the time of filing rule applies in these cases.