Friday, February 21, 2014

Protests Must be Filed in the Correct Port

The U.S Court of International Trade has sent an important reminder (or three) to importers who hope to have their liquidations reviewed administratively by Customs and Border Protection and then judicially in the CIT. Follow the rules. And, follow them the way Customs interprets the rules.

In Netchem, Inc. v. United States, the plaintiff imported something known as lanthanum oxide. Originally, Customs classified the merchandise as certain rare-earth oxides of 2846.90.20, which are duty free. Subsequently, Customs reclassified the merchandise under 2846.90.80 as other compounds or mixtures of rare-earth metals, which has a duty rate of 3.7%. Clearly, this did not please Netchem, which filed a protest with the Port of Buffalo.

Of the 56 entries covered by the protest, only 26 had liquidated when the protest was filed. Further, some fraction of the entries were filed at ports other than Buffalo. The Port of Buffalo denied the protest noting that it included entries from other ports.

After 30 days, Netchem filed suit in the Court of International Trade seeking review of the protest. Apparently, Netchem had requested accelerated disposition and did not realize that the protest had been affirmatively denied. On the basis of what it believed to be a deemed denial, it went to Court challenging the deemed denial of 43 entries. At the time of the summons, Netchem had paid the liquidated duties on 18 of the 43 entries. According to the Court, only one entry was both protested after liquidation and had liquidated duties fully paid at the time of the summons.

The United States moved to dismiss the case on the ground that the Court of International Trade lacks jurisdiction to review the otherwise final liquidations.

The Court broker the importer's problems down as follows:

1.     17 of the Entries Were Protested Prior to Liquidation

Protests must be submitted to Customs within 180 days following the date of the contested liquidation. A protest is not valid if it is filed prior to liquidation. Without a valid protest, the Court held it had no jurisdiction to review the liquidation.

2.     25 of the Entries Were Unpaid

The law requires that an importer seeking to challenge a denied protest pay all liquidated duties, charges, or exactions at the time the suit is commenced. 28 USC 2637(a). The courts have held this requirement is jurisdictional, meaning that failing to pay the amounts owed keeps an importer out of court. Therefore, there was no valid case before the Court of International Trade for these entries.

3.     One Protest was Filed at the Wrong Port

Customs' protest regulations require that the protest be filed "with the port director whose decision is protested." 19 CFR 174.12(d). Netchem apparently included entries from Detroit, Port Huron and New York in a protest filed with CBP in Buffalo. Hence, the United States argued that the protest was not validly filed and the Court of International Trade lacks jurisdiction to review.

This was a closer question for the Court. There is an important legal distinction in play. If the place of filing the protest is jurisdictional, then the case should be dismissed as not having been properly brought. If it is not jurisdictional, then the Court can review the case and decide whether CBP properly denied the protest for having been filed at the wrong port. The results might (or might not be the same) but the process is different in a meaningful way.

Reviewing the current statute and its history, the Court found an "unbroken" chain of authority linking the place of filing the protest to the Court's grant of jurisdiction. But, there is also a case called Avecia, which appears to be contrary. In Avecia, the Court held that the regulations cannot trump the statutory grant of authority. The Court here found that because Customs had denied the protests in Avecia on their merits rather than simply denying them as filed at the wrong port, Customs waived the place of filing requirement. Since that did not happen here, Avecia, does not control.


I hate to fall into the lazy habit of suggesting that we will have to wait to see what the Federal Circuit does with the decision. But, the reality is that most of these cases get appealed. I think this is a reasonable decision, but Avecia is also reasonable and I doubt that a port director's delegation of authority to someone to deny a protest counts as a waiver for purposes of sovereign immunity. But, it is not up to me. I like Avecia; it does some equity in these kinds of cases. But, we may find that it is not the law because the law tells Customs to make regulations and the regulations include the place of filing requirement.

Wednesday, February 19, 2014

President Obama: Finish ITDS

Today, the White House published an Executive Order designed to streamline trade by completing the International Trade Data System. This system, when completed, is intended to provide a single electronic window for importers and exporters to provide all the data necessary to process shipments for all the participating agencies. Here is a link to the White House announcement.

Wednesday, February 12, 2014

Prejudment Interest Awarded Against Surety

I wrote this a few days ago and thought I published it. Sorry about that.

I have been sitting on two decision from the Court of International Trade for a while. I will now act like a grownup and get one of them off my virtual desk.

United States v. American Home Assurance Co. is, as you might guess from the names of the parties, an action by the government to recover unpaid antidumping duties from a customs bond surety. In addition, the government is trying to collect both equitable prejudgment and interest pursuant to 19 USC 580.

The case involves unpaid antidumping duties on crawfish tail meat form China. As the surety, AHAC is jointly and severally liable for unpaid duties up to the amount of the bond, which in this case was $600 thousand. At the time the importer entered the merchandise, it declared a zero percent rate in the dumping case. Subsequently, Commerce determined that the applicable liquidation rates was 223%, ad valorem.  Customs and Border Protection demanded $1.15 million from the importers. Customs initially liquidated the relevant entries in in June of 2004. The importer protested those liquidations. However, at the conclusion of other unrelated litigation involving crawfish tail meat in June of 2005, while the protests were pending, Customs reliquidated the entries. When the importer failed to pay, Customs brought this action to collect from the surety.

In its defense, AHAC argued that the demands were legally void and the it is not obligated to pay under the bond. The reasoning for this is that the erroneous reliquidations in June of 2005 cancelled the 2004 liquidation and because the 2005 reliquidations were void, they do not bind the importer. That leaves an initial liquidation that was cancelled and a void subsequent reliquidation. According to AHAC, that means the entries should be deemed liquidated by operation of law as entered; that is, without dumping duties.

The Court of International Trade did not buy this argument. The problem for AHAC is that the original liquidations were not final because the protests remained pending with Customs and Border Protection. The reliquidation, therefore, voided the original liquidation and became final when not protested. Further, the Court noted that AHAC's argument depends on the inconsistent premises that (1) the reliquidation was effective enough to void the original liquidation but (2) not effective enough to require a protest to prevent it from becoming final and conclusive. The Court rejected that interpretation. Note also that the Court referred to prior decisions in which importers were held responsible for protesting even erroneous liquidations.

With respect to interest, the Government had two theories. First, 19 USC 580 provides that when the government sues to collect duties on a bond, interest shall be allowed from the time the bond became due. According to the Government, "duties" in the statute includes antidumping duties. The Court disagreed on the basis of the historical record.

The interest statute at issue was first enacted in 1799, well before the first antidumping law of 1921. Thus, the (nearly Continental) Congress, not being psychic, could not have meant to include antidumping duties in the scope of the law. However, in other contexts, the unmodified term "duties" has been held to include antidumping duties. But, the Court noted that Commerce, not Customs administers the dumping laws and determines the rate of dumping duties deposited and assessed. Further, customs duties and dumping duties serve different purposes. Customs duties are largely rooted in revenue generation while antidumping duties are intended to remedy unfair competition. Based on this analysis, the Court held that the 1799 Congress did not clearly intend section 580 to apply to all forms of duties, no matter how distinct from regular customs duties. Consequently, no interest was applicable under the statute.

The Government's second theory was that it is entitled to interest as a matter of equity. Under this theory, a Court can award pre-judgment interest on the ground that it would be inequitable (read that as "unfair") for the government to have made an interest-free loan of the money from the date of the demand to the date of the judgment. This is an important point because sureties are usually only liable up to the bond limit. But, sureties may be subject to interest beyond the bond cap where the surety unjustly withholds payment after the principal defaults. In prior cases, the Court has limited this to situations in which the surety exhibits some misconduct in delaying payment. However, in this case, the Court held that unjust delay does not mean bad faith.

Given that, the last question was whether an award of prejudgment interest was warranted. That, according to the Court, had been considered to depend on balancing of the relative equities. But, a review of Supreme Court authority, indicated to the Court of International Trade that prejudgment interest is now awarded "as a matter of course." Finding no fault on the part of the government (despite this case resulting from erroneous liquidations), the Court found that equity favored awarding interest to the Government.

This result will make sureties very unhappy. As a result, we can expect to see whether the Court of Appeals agrees with this analysis.

White House Strategy on Traffic in Elephant Ivory

The White House has announced new measures to protect elephants by clamping down on trade in ivory. The announcement and links to the details are here.

Apparently, this is a preemptive announcement to show leadership on the issue in advance of an upcoming international meeting on the subject. On that front, the White House says:

At this week’s London Conference on the Illegal Wildlife Trade, we hope other countries will join us in taking ambitious action to combat wildlife trafficking.  In the coming months, we will take further steps to implement the National Strategy, and will work with the Congress to strengthen existing laws and adopt new ones to enhance our ability to address this global challenge.

Tuesday, February 04, 2014

Federal Circuit is Messin' with Sasquatch

You may not know that I am endlessly fascinated with cryptozoology, the hunt for creatures heretofore unrecorded by professional scientists yet ardently chased by mostly amateur adventurers. Of the big three such creatures, the Loch Ness Monster seems to be fading from the zeitgeist. That leaves the Himalayan Yeti (and all of its Asian cousins) and the North American  Bigfoot. Recent DNA research by an apparently reputable professional scientist indicates that at least some alleged Yeti material may actually come from a sort of absurdly rare hybrid polar bear previously thought to be extinct. That's a fascinating possible discovery by a real scientist and stands in stark contrast to the decided lack of success by so-called professional Bigfoot hunters.

Bigfoot, AKA Sasquatch, is absurdly camera friendly, at least in the form of fleeting thermal spikes, pixilated blobs, tree knocks, and hoots recorded by numerous "documentary" television programs. My newest favorite such show is the $10 Million Bigfoot Bounty on Spike TV. The show has given me two new heroes of science: Dr. Todd Disotell and Primatologist Natalia Reagan; both of whom should make poor Ranae Holland weep. The great thing about Dr. Todd and Natalia is that they know what they are doing and are not afraid to tell the amateur "squatchers" that it is not legitimate field work to collect moss and call it a "hair sample." Nor is it anatomically acceptable to assert that an allegedly upright hominid is also a gorilla-style knuckle walker. The reason they can do that with both class and authority is that they know what they are talking about. It turns out that science works and it can be entertaining to watch science work. Unfortunately, in this case, it happens at the expense of well-intentioned, if uninformed, people. At least they knew what they were getting into when they agreed to try to win the $10 million bounty.

Dr. Todd Disotell and Natalia Reagan

I am hoping that Bigfoot Bounty is a giant success for Spike TV and that the network becomes the home to other skeptical reality shows. I envision a Penn & Teller vehicle in which a dozen mediums (or is that "media"?) try to convincingly contact the dead for cash. Or, a show in which alternative medicine gurus, homeopaths, and anti-vaccination advocates agree to forgo science-based medicine while Dr. Steven Novella exposes them to various pathogens. The last one to seek medical attention wins (or dies).

Why am I thinking about this? Mainly because I just read Links Snacks, Inc. v. United States. As you may recall from the Court of International Trade decision discussed here, the issue in the case was the proper tariff classification of dehydrated cured beef sold by Sasquatch as beef jerky. The question comes down to whether the fact that the cured meat is also dehydrated makes it something other than cured or pickled bovine meat of HTSUS item 1602.50.09, where it was classified by U.S. Customs and Border Protection. Consistent with the prior decision from the CIT, the Federal Circuit held that the Tariff Schedule does not take into consideration the dehydrated nature of the meat. As a result, under General Rule of Interpretation 1, the cured jerky stays classified in 1602.50.09.

And, unfortunately for the Big Guy, is that.

Sunday, February 02, 2014

Piranhas Importer Guilty

A New York man has pleaded guilty to importing piranhas into New York in violation of state law. To make matters worse for him, he instructed his supplier in Hong Kong to mislabel the fish as benign silver tetras, a common aquarium fish. That created a Lacey Act violation as well. Here are the details.

And, while I have your attention, I know I am already behind by a few court decisions. I will catch up soon. It's been a hectic few weeks.