Importer Holds Customs' Feet to the Fire, Gets Singed
SEE UPDATE AT BOTTOM OF POST:
Welcome to the U.S. Court of International Trade, Judge Kelly. You get to start out with an odd case.
The issue here is the status of a ruling (N187601) issued to Best Key regarding the tariff classification of metalized yarn imported from China. In the ruling, Customs and Border Protection classified it in tariff item 5605.00.9000, which has a rate of duty of 13.2%. Subsequent to the ruling, Customs consulted trade publications and industry experts. Customs then determined that this merchandise did not come within the common and commercial meaning of the term metalized yarn. The reason for this was that although the yarn had been treated with metal powder, it contained only trace amounts of metals and did not exhibit a metallic look or feel. Consequently, in the April 24, 2013 Customs Bulletin, Customs and Border Protection proposed to revoke that ruling and reclassify the merchandise in 5402.47.90 as synthetic filament yarn, which has a duty of 8%. So, to keep things in perspective, understand that the plaintiff wants the revocation implemented.
Under 19 USC 1625(c), Customs must give the public at least 30 days to comment on the proposal. According to the Bulletin notice, that period ended May 20, 2013 (you do the math). Next, Customs and must publish a final decision within 30 days of the close of the comment period. That would have been about June 19, 2013. That final decision becomes effective 60 days after the date of publication, which would have been about August 18, 2013. Unless CBP doesn't do anything, which is what happened here.
As a result, 70 days after the close of the comment period, the plaintiff went to the Court of International Trade seeking an order forcing CBP to implement its decision. But, things are more complicated than they seem because the shutdown of the U.S. government caused some delays and Customs eventually did publish its decision in the October 2, 2013 issue of the Customs Bulletin.
That means the first question for the Court was whether the eventual publication made this whole affair moot. Looking at the complaint broadly, the Court determined that the issue before it was not just whether Customs eventually issued a decision. Rather, it was the broader question of whether Customs and Border Protection complied with the statutory requirements for publishing its revocation determination in a timely manner.
In this case, publication on October 2 was really only effective for those people who receive the Customs Bulletin by mail from private contractors. That is not "easy and continuing access," which is what the law requires to count as publication. The web version of the publication was not accessible until after the government restarted on October 17. As a result, the Court found that it would be inequitable to allow the government to rely on October 2 as the publication date and effectively shorten the notice period. Thus, the Court ordered that the notice period began to run on the 17th and that the notice will become effective 60 days thereafter.
So, the upshot is that the plaintiff wanted to force Customs to publish its notice and start the 60 day clock running no later than around August 18. But, because CBP eventually did get around to making the publication on October 2 and then the nastiness of the government shut down, the Court held that the publication was not really effective until October 17, meaning that the revocation does not become effective until December 16, 2013, which is even later than CBP expected.
UPDATE:
This case has been dismissed. This is sort of technical and does not have much to do with the actual tariff classification issue, so I will be brief. If you are interested in the details, read the opinion. The bottom line is that the plaintiff is a Chinese yarn company. According to plaintiff, the revocation of the subject ruling on the classification of a garment will harm it by creating a disincentive for apparel manufacturers to use its yarn on imported products. But, because the plaintiff is not an apparel importer, it is not in a position to challenge the ruling on the garment. To do so, it should import a garment and, if it disagrees with the liquidation, file a protest and challenge the garment classification in court. That, my friends, is what we call a decision on standing.
Welcome to the U.S. Court of International Trade, Judge Kelly. You get to start out with an odd case.
The issue here is the status of a ruling (N187601) issued to Best Key regarding the tariff classification of metalized yarn imported from China. In the ruling, Customs and Border Protection classified it in tariff item 5605.00.9000, which has a rate of duty of 13.2%. Subsequent to the ruling, Customs consulted trade publications and industry experts. Customs then determined that this merchandise did not come within the common and commercial meaning of the term metalized yarn. The reason for this was that although the yarn had been treated with metal powder, it contained only trace amounts of metals and did not exhibit a metallic look or feel. Consequently, in the April 24, 2013 Customs Bulletin, Customs and Border Protection proposed to revoke that ruling and reclassify the merchandise in 5402.47.90 as synthetic filament yarn, which has a duty of 8%. So, to keep things in perspective, understand that the plaintiff wants the revocation implemented.
Under 19 USC 1625(c), Customs must give the public at least 30 days to comment on the proposal. According to the Bulletin notice, that period ended May 20, 2013 (you do the math). Next, Customs and must publish a final decision within 30 days of the close of the comment period. That would have been about June 19, 2013. That final decision becomes effective 60 days after the date of publication, which would have been about August 18, 2013. Unless CBP doesn't do anything, which is what happened here.
As a result, 70 days after the close of the comment period, the plaintiff went to the Court of International Trade seeking an order forcing CBP to implement its decision. But, things are more complicated than they seem because the shutdown of the U.S. government caused some delays and Customs eventually did publish its decision in the October 2, 2013 issue of the Customs Bulletin.
That means the first question for the Court was whether the eventual publication made this whole affair moot. Looking at the complaint broadly, the Court determined that the issue before it was not just whether Customs eventually issued a decision. Rather, it was the broader question of whether Customs and Border Protection complied with the statutory requirements for publishing its revocation determination in a timely manner.
In this case, publication on October 2 was really only effective for those people who receive the Customs Bulletin by mail from private contractors. That is not "easy and continuing access," which is what the law requires to count as publication. The web version of the publication was not accessible until after the government restarted on October 17. As a result, the Court found that it would be inequitable to allow the government to rely on October 2 as the publication date and effectively shorten the notice period. Thus, the Court ordered that the notice period began to run on the 17th and that the notice will become effective 60 days thereafter.
So, the upshot is that the plaintiff wanted to force Customs to publish its notice and start the 60 day clock running no later than around August 18. But, because CBP eventually did get around to making the publication on October 2 and then the nastiness of the government shut down, the Court held that the publication was not really effective until October 17, meaning that the revocation does not become effective until December 16, 2013, which is even later than CBP expected.
UPDATE:
This case has been dismissed. This is sort of technical and does not have much to do with the actual tariff classification issue, so I will be brief. If you are interested in the details, read the opinion. The bottom line is that the plaintiff is a Chinese yarn company. According to plaintiff, the revocation of the subject ruling on the classification of a garment will harm it by creating a disincentive for apparel manufacturers to use its yarn on imported products. But, because the plaintiff is not an apparel importer, it is not in a position to challenge the ruling on the garment. To do so, it should import a garment and, if it disagrees with the liquidation, file a protest and challenge the garment classification in court. That, my friends, is what we call a decision on standing.
Comments
Best Key has suffered tens of millions of dollars in damage from Customs' inconsistent rulings and its revocation (which, the record will disclose, was based on numerous falsified Customs laboratory reports and some rather unusual shenanigans in the Section 625(c) proceeding. [Such as the off-the record, out-of time hearing given to domestic interests who didn't bother to comment on the record].
The notion that one of Best Key's customers, in a case involving different merchandise, a different record and a different standard of review can raise a challenge to the revocation proceeding is preposterous. The effect of the CIT's decision is to render the decision unreviewable. It sets the CIT's jurisdictional grant back 30+ years, to the age when protest actions were the only cases the courts could hear.
Today, Customs has so many more ways to hit importers -- 592(d) assessments, audits, seizures, revocations of various privileges, it's ridiculous to believe, as the CIT seems to, that importers can only hit back through protest actions. Importers have been rendered largely helpless against an agency that's increasingly out of control. That's got to change, and our firm intends to lead that charge.
If your readers want to listen to a story about how Customs' rashness and the courts' dithering on the CIT's jurisdiction can ruin a company, have them listen to the Federal Circuit oral argument last Thursday in International Custom Products v. US (available on the CAFC website). We argued the appeal immediately preceding and stayed to watch the ICP argument. Here's a company that was driven out of business, wrongfully, by over $300 million in erroneous Customs assessments. The Courts refused to give them quick access to justice, and the business was destroyed. The owner and his wife, an older couple, were in the courtroom for the argument, and it was heartbreaking. "So this [the company being driven out of business] was all for nothing" Judge Reyna said toward the end of the argument. Tragic.
This has to end: when Customs breaks the rules, importers shouldn't be forced to jump through archaic procedural hoops to get relief. The Customs Courts Act worked well for 30 years, but its age is showing and it needs to be reformed.
John Peterson
NEVILLE PETERSON LLP
New York, NY