Wednesday, September 18, 2013

Link Maintenance

I am not sure how often readers of this blog might use the suggested links on the right margin. I have noticed that a few of the blogs listed there have gone dormant and other URLs have been co-opted by other sites. So, I have done a little curating and removed dead or bad links. I also added a link to the Cultural Heritage Lawyer blog, which I recommend you visit. Cultural heritage law is focused on the restrictions on the trade in antiquities and important artifacts of cultures and ethnic groups. Often, the primary enforcement agencies are Department of Homeland Security Investigations (of ICE for us old timers) and U.S. Customs and Border Protection. As a result, these issues often become issues of customs law, and something I try to follow. You should too, it is interesting stuff.

Also, while I do not tweet often, I remind readers to subscribe to my Twitter feed to catch short updates and links to interesting articles.

Tuesday, September 17, 2013

Big Tuna Loses Appeal

The U.S. Court of Appeals for the Federal Circuit has affirmed the decision of the Court of International Trade in Del Monte Corporation v. United States. For my post on the underlying case, see here. The decision is here.

You may recall that the classification issue in this case boiled down to whether tuna meats packed in pouches with sauces containing small amounts of oil are deemed to be "in oil" for purposes of tariff classification. Two prior decisions are at play in this argument. A 1915 case called Strohmeyer & Arpe holds that fish cooked in oil then partially drained and packed in another liquid, which subsequently absored a portion of the cooking oil remaining in the fish, is fish packed in oil. A subsequent case called Richter Bros. found that fish that had been fried in oil, drained, and then packed in in a non-oil liquid, was not "packed in oil" because the oil was not used in the packing process. While these cases appear to be somewhat at odds, the Federal Circuit distinguished both on the grounds that neither case involved oil used in the packing materials. In this case, the oil was in the pouch, not the fish, and, therefore, neither case contradicts Customs' classification.

The second issue had to do with valuation and I gave it short shrift in my first post. The value question can be reduced to whether post-entry price adjustments were actually part of a formula for purposes of an acceptable transaction value. The adjustments here were made by the producer in Thailand to account for decreased production costs and the recovery of useful tuna meat by the packer. After making entry, Del Monte paid the supplier's invoices for these adjustment. In Court, Del Monte said that there was a fixed formula used to calculate those adjustments and, as a result, the adjustments could be included in the transaction value.

The Federal Circuit agreed with Customs and Border Protection that the arrangement constituted a formula. According to the Court, a formula must be clear and definite. In this case, there was no written contract, formal policy or other "hallmark" of a formal agreement with the processor. Based on those facts, there was not enough evidence of a formula to overcome the presumption that Customs should disregard post-importation decreases in the price actually paid for merchandise.

Battle Over White Sauce Continues

I have been sitting on the latest decision in International Custom Products v. United States for a while now. This stems from a combination of being busy and also some white sauce fatigue. It appears that we are nearing the end of this very long-running dispute. If you need background, start with this post.
Also, the background section of this latest opinion from the Court of International Trade does a good job of setting the stage. The entirety of the dispute revolves around U.S. Customs and border Protection's classification of white sauce in 99 entries. CBP suspended the liquidation of most of those entries pending the results of the litigation. However, Customs liquidated 13 entries and denied the resulting protests. As a result of that denied protest, International Custom Products owes the United States $28,000,000 (I'll pause to let that sink in.)

The interesting thing about this decision is that it is purely procedural but entirely important. Usually, before an importer can get into the Court of International Trade to challenge a denied protest, the importer must pay all of the duties, charges, or exactions. See 28 U.S.C. 2637(a). In other words, denied protest cases are designed to allow the importer to secure a refund of overpaid duties, not to provide a way of avoiding the payment of duties. In this case, the plaintiff has not paid the $28 million Customs says is owed.

The problem here is that the plaintiff is suing the United States government. In the long history of English common law, it was generally impossible to sue the King. The sovereign is immune from most law suits. That followed over to the colonies and continues to be part of U.S. law. Today, sovereign immunity means that the U.S. government can only be sued when it consents and only within the terms of that consent. The U.S. has consented to a refund of duties suit in the United States Court of International Trade (it even created the Court, in part, for that very reason). But, the terms of that consent require the payment of the duties.

Because of this, the Court held that it lack denied protest jurisdiction (28 USC 1581(a)).

This left the plaintiff with one Hail Mary argument: the entire requirement that it pay $28 million as the price of admission to court is, in this case, unconstitutional. The requirement infringes the first amendment right to access the Court and violates the fifth amendment right to due process. That makes good practical sense, although the Court finds it to be legally wrong. In fact, the Court describes the claim as seeking "unprecedented and startling relief."

According to the Court, this requirement for pre-payment has been consistently upheld and applied for over 200 years. Nevertheless, the magnitude of the duty difference applicable in this case (2400%) makes it unique. In fact, the Court notes that the pre-payment requirement appears to give Customs and Border Protection an incentive to reclassify merchandise into the highest possible rate of duty to create an insurmountable barrier to judicial review. However, that harsh result does not, according to the Court, render the requirement unconstitutional. Thus, the case was dismissed.

Given the history of this case, I am certain we will be hearing more about white sauce and this issue from the Federal Circuit.