Monday, March 11, 2013

A Non-Protestable "Exclusion"

Just because Customs and Border Protection rejected an importer's attempted entry of merchandise, that does not mean it was "excluded" for purposes of filing an administrative protest. That is the lesson of Sunshine International Trading v. United States.

Sunshine is an interesting case in that the plaintiff asked the Court of International Trade to review the denial of a protest concerning the rejection of an entry. Keep in mind that a rejection is not a liquidation, meaning that it is basically Customs telling the importer to resubmit the (usually virtual) paperwork for some reason. In this case, it was because the invoices did not properly describe the merchandise and Customs believed that the reported value was incorrect.

Sunshine filed a protest challenging the rejection of its entry of women's jeans. Apparently, the focus of the protest was on the reappraisal of the jeans from $2.70 per pair to over $6 per pair. Customs denied the protest in full and also stated that it had been erroneously filed. Customs also referenced an unrelated regulation as the basis for denying the protest. Sunshine brought the denied protest to the Court of International Trade for judicial review.

As with all federal cases, an initial question is whether the Court has subject-matter jurisdiction to review the case. In this case, that means whether there was a proper protest that was, in fact, denied. Importers may protest the "exclusion of merchandise from entry or delivery" under 19 U.S.C. § 1514(a)(4). Sunshine claimed this to be an exclusion from entry or delivery.

It turns out that "exclusion" is not defined in the law. However, the Court found that an "exclusion" is a final determination by Customs that the merchandise may not enter the United States for some serious policy reason, which is usually codified in a law or regulation. The Court relied, in part, on a prior cases called Tak Yuen Corp. v. United States, in which the entry was rejected when the importer failed to deposit estimated antidumping duties. There, the Court found no exclusion because the importer was able to correct the papers and resubmit the entry. In this case, the Court found that the rejection of the entry was not a final determination. Rather, it was a notification to Sunshine of defects in the papers and was coupled with an invitation to resubmit the entry. Consequently, the Court of International Trade held that there was no exclusion from entry.

Sunshine made a second technical and interesting argument. According to Sunshine, this was an exclusion from delivery, which is distinct from an exclusion from entry. The Court agreed that an exclusion from delivery is a separate legal determination. Nevertheless, because the goods had not been entered and Sunshine did not have a legal right to immediate delivery, there was no right of delivery that had been subject to exclusion.

Because the rejection of the entry is not the legal equivalent of an exclusion, Sunshine did not have the right to file a protest under 19 U.S.C. § 1514(a)(4). Consequently, there was no valid protest for Customs and Border Protection to deny. That means, there was no jurisdiction for the Court of International Trade to exercise its role of reviewing actions by CBP. Thus, the Court dismissed the case.

On the way to dismissing the case, the Court of International Trade let Customs know that it mishandled the protest. According to the Court, Customs sent several confusing messages when it denied the protest, gave a spurious reason for the denial, and noted that the protest was made in error. The better approach would have been for Customs to reject the protest (as it had the entry) as not having been addressed to a protestable event. That would have notified the party of the problem and possibly provided an opportunity to perfect the entry and make a valid protest of the liquidation.

This makes me wonder what an importer would do if faced with a situation in which Customs and Border Protection incorrectly deemed a protest to have been filed in error and, therefore, to be in valid. Would the rejection date count as a de facto denial for purposes of judicial review? There would have to be some mechanism by which the importer can get to Court to show that the protest was, in fact, valid. Otherwise, Customs could avoid judicial review by declaring protests to be invalid. Perhaps, faced with that circumstance, jurisdiction would attach not from the denial of the protest but under the Court's residual jurisdiction provided for in 28 U.S.C. § 1581(i). That will have to wait for an appropriate case to be resolved.

In the end, this case should sound familiar to students of administrative law. It mean, effectively, that an entry rejection is not a final determination subject to protest. The most likely consequence of this case is that future importers who receive rejection notices will know to correct the papers to get the entry processed and then to file a protest of the liquidation of the entry. That protest, if timely and sufficiently detailed, will be subject to judicial review.

No comments: