Sunday, August 12, 2012

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.


2 comments:

Sarah said...

I wonder how this decision will affect Ford’s car sales. I doubt prices will go down, but one can dream.

Mr. Micawber said...

Thanks, Larry for the post. For Ford, this was a big win. I do have a different take on one of your points: I think this case does have potential benefits for "day to day" Customs activities. The real legal theory was whether the subject entries had been deemed liquidated under sec. 1504. Under a CIT case, Fujitsu, and now Fed Cir. law in Ford, an importer can have a court decide that question before Customs liquidates. At Ford we think that's a big deal.